Capital Requirements

At the last legal reform the capital requirements were basically dropped. You can now start a share company with just 1 Yen share capital. (But of course you need to pay the legal registration fee).

Therefore the question is more, how much money you reasonably need to start a business. Let’s check the most important factors:

  1. setup costs
    (office and equipment costs)
  2. regular running costs
    (rent, office utilities, office staff, sales staff, promotion)
  3. inventory and bridge financing

Setup Costs

Deposit for you new office may amount to 6 month’s rental plus the estate agents commission. The total may be as high as 8 – 9 months rent. Make sure that you understand and agree with the suggested rental contract!

If you choose to go into a served business center the office will most likely have all the necessary basic furniture. Otherwise you need to budget for interior design and furniture. Then, costs depend also on the size of the office. It is almost impossible to give any figures. Best advise is to discuss your requirements and to obtain 2 or 3 quotations from local suppliers.

In addition to furniture you need PC’s, printers, internet connection, phone, fax etc. Bear in mind that you will need Japanese PC’s. If you plan to have non Japanese managers as well you probably also need English (Non-Japanese) PC’s. You may be able to ship some equipment from you home country to Japan but in most cases this is not worth the effort.

Costs for company and product brochures are likely to be a minor amount but still need to be taken into account.

Regular Running Costs

In addition to office rent and related costs you’ll have to pay for office staff. Annual costs for clerical staff are between 2.5 and 3.5 mio yen baut a sales manager may demand between 10 and 20 mio yen per year – depending on industry and experience.
In addition you may promotion costs e.g. for print media, Internet advertising, TV spots etc.

Inventory Costs and Bridge Financing

Japanese customers don’t like to wait for delivery. If the product is not available they will consider to cancel the order and buy from another supplier. If you supply production companies it is particular important to be able to deliver. Just-in-time importing may be the wrong strategy because it makes you vulnerable to unforeseen delays due to bad weather, strikes and other problems. Therefore it is important keep reasonable inventory levels. The necessary costs need to be taken into account.
Finally, payment conditions in Japan can a long as 4 – 6 months. You need sufficient funds to bridge this time!

Conclusion

Obviously, company capital and liquidity for the first 6 or 12 months are not the same. Independent of actual costs and sales the capital shows how serious you’re about doing business in Japan.
There used to be a minimum required capital of 10 mio yen for share companies and most people still regard this a sensible amount. For smaller companies 5 mio may be sufficient as well.