Japan is the world’s fourth-largest economy and a major economic power. The nation is among the world’s largest electronic equipment and motor vehicle producers. The service sector forms the biggest percentage of Japan’s economy in terms of employment and GDP. With supportive government policies, a streamlined process for setting up companies, and a stable economy Japan is an attractive market for foreign businesses and investors looking to expand into the Asian market.
Unlock growth opportunities in Japan with Cerity Global as your trusted partner. We offer end-to-end support for establishing your legal entity, navigating Japan’s often complex regulatory landscape with clarity and efficiency.
From company registration to ongoing back-office support, including HR, payroll, benefits, accounting, tax and compliance, Cerity Global simplifies the process so you can focus on growing your business.
Need to hire quickly before your entity is set up? We offer interim EOR services in Japan, enabling you to onboard talent fast. Once your entity is established, we ensure a smooth transition of your employees from the EOR Structure to your own legal entity, without disrupting payroll or compliance.
Our experts stay ahead of regulatory changes to keep your operations aligned with Japan’s employment and tax laws, helping you scale confidently and compliantly.
Also known as a joint stock company, a KK is the most popular and prestigious business structure for foreign investors in Japan. It is similar to a corporation and can issue shares, making it ideal for raising capital and establishing credibility with Japanese partners. It offers limited liability protection and is suitable for small to large businesses across all sectors.
Also known as a limited liability company, GK is a flexible business structure and was introduced in 2006. GK offers limited liability protection, simpler management structure, and lower incorporation costs compared to KK. It’s suitable for smaller businesses and subsidiaries of foreign companies, though it may have less recognition in the Japanese market.
A dependent entity of a foreign company that allows the parent company to conduct business in Japan. The parent company bears full liability for the branch’s activities. Suitable for established international companies looking for direct market presence without creating a separate legal entity.
A liaison office that can conduct market research, promotional activities, and business development but cannot generate revenue or sign contracts. Ideal for companies exploring the Japanese market before committing to full business operations.
At least one director must be a resident of Japan. The director must have a registered address in Japan and be available to fulfill legal obligations. Foreign nationals with Japanese residence status can serve as resident directors.
At least one representative member must be a resident of Japan. Similar to KK, the representative must have a Japanese address and be able to fulfill legal responsibilities.
A resident representative must be appointed who has a valid Japanese address and is authorized to represent the foreign parent company in Japan.
A resident representative is required to oversee the office operations and serve as the primary contact with Japanese authorities.
In Japan, corporate bank accounts can typically be opened during or shortly after company incorporation. Major banks require the company to have a valid business registration, office lease agreement, and proper documentation.
Bank Account Setup in Japan: What’s Possible and When
Before Incorporation:
After Incorporation:
Note:
Japanese banks have strict KYC/AML requirements and may require extensive documentation. Some banks may have restrictions on certain nationalities or business activities. Processing timelines can vary based on the bank’s internal procedures and the complexity of the business structure.
Required documents typically include a business registration certificate, articles of incorporation, resident director’s personal identification, business plan, office lease agreement, and company seal registration certificate.
Cerity Global supports companies in their global expansion plans and helps in legal entity setup, registration and ongoing support services. With us, you can quickly set up a legal entity, operate compliantly, and expand globally. The process typically takes a few days to a week, depending on the bank.
Employment in Japan is primarily governed by the following laws:
In Japan, employment contracts can be written or verbal, and written contracts are not mandatory. However, according to the LSA employers should enter into written agreements whenever possible.
Some of the standard details mentioned in the written contract include:
The different types of employment relationships are:
Regular Employment
Also known as permanent employment, this is the most common and stable form of employment in Japan. These contracts do not have a specified end date and provide significant job security, comprehensive benefits, and long-term career development opportunities.
Fixed-Term Employment
These contracts have a set end date and are typically used for specific projects or temporary positions. The maximum initial term is typically 3 years for specialized positions and 1 year for general positions, renewable by mutual agreement.
Part-Time Employment
A part-time contract is where the employee works hours as stipulated in the agreement, usually less than permanent employees, and with few benefits besides transportation and costs limited paid leave.
In Japan, a probationary period typically lasts up to six months.
The regular working hours in Japan are eight hours a day and 40 hours a week.
Overtime
The overtime cannot be longer than 45 hours per month and 360 hours per year.
The notice period in Japan varies based on employment duration:
Employees may be entitled to severance pay based on:
Foreign nationals can live and work in Japan by securing appropriate work visas and residence permits. Japan offers various visa categories depending on the individual’s qualifications, job role, and investment level.
Work Visa & Permit Options in Japan
1. Engineer/Specialist in Humanities/International Services Visa
The most common work visa for skilled professionals in Japan.
Suitable for most skilled professionals, engineers, and business specialists.
2. Highly Skilled Professional Visa
Preferential visa for highly qualified professionals with a points-based system.
Points are awarded based on academic background, work experience, salary, and other factors.
3. Business Manager Visa
For individuals establishing or managing businesses in Japan.
4. Skilled Worker Visa
For individuals with specific technical skills in designated industries.
Key Notes:
Japan’s immigration system supports skilled professionals, business managers, and highly qualified individuals, with multiple visa pathways leading to long-term residency.
After working for at least six months, employees receive ten days of paid annual leave. The number of days increases with the employee’s tenure to a maximum of 20 days after six and a half years of service.
Female employees are entitled to 14 weeks of maternity leave:
Male employees receive flexible paid paternity leave within 8 weeks of childbirth, and it lasts up to one year until the child turns one.
Under Japan’s labor law, sick leave is not mandatory.
The following statutory national holidays are observed in Japan:
The payroll frequency is usually monthly, and employees are paid on the last working day.
A bonus is not legally mandated; however, some employers pay the bonus twice a year. Typically referred to as 13th and 14th-month pay, these are paid during June/July (summer bonus) and December (winter bonus).
The following are the various types of social security in Japan:
The mandatory benefits in Japan include:
Accounting standards must adhere to Japan's commercial Generally Accepted Accounting Principles (J GAAP) as issued by the Accounting Standards Board of Japan (ASBJ).
Companies in Japan must maintain proper accounting records and file financial statements based on their legal form and size.
Statutory audit requirements vary by:
Large companies (capital over ¥500 million or liabilities over ¥20 billion) must undergo statutory audits by certified public accountants.
The standard corporate tax rate is 23.2% for companies with capital over JPY 100 million.
Known as consumption tax, the rate in Japan is 10%, with a lower rate of 8% for essentials like food and beverages.
Typically, the tax return must be filed 2 months of the fiscal year end.
Penalties for late filing may result in 15% of unpaid tax (20% for significant delays) and additional penalties for fraudulent or grossly negligent behaviour.
Japan follows OECD Transfer Pricing Guidelines with specific local requirements:
Japan has implemented CbC reporting aligned with OECD BEPS standards.
Transfer pricing documentation is mandatory for entities exceeding certain thresholds:
Master File
Local File
Deadline: Documentation must be available by the tax return deadline (typically end of July) and submitted only upon request.
Japan’s data privacy regulations are governed by the Personal Information Protection Act (PIPA), which establishes comprehensive rules for handling personal data.
Japan’s AML framework is governed by the Act on Prevention of Transfer of Criminal Proceeds and related regulations administered by the Financial Services Agency (FSA) and other supervisory authorities.
Obligated entities: Banks, securities companies, insurance companies, money service businesses, real estate agents, precious metals dealers, and other specified businesses.
Key requirements:
Penalties: Administrative fines, business restrictions, and criminal prosecution for violations.
Reasons you should setup legal entity in Japan:
Cerity Global ensures your business expansion in Japan is fast, compliant, and future-ready, so you can focus on growth while we manage the back-office tasks.
Economic figures are subject to change based on quarterly reports and market conditions.
Cerity Global combines deep local knowledge with proven expertise to make your Japan business establishment effortless and compliant. Whether you’re looking for legal entity setup and registration or ongoing support, we’re your trusted partner for sustainable global expansion in Japan.
Disclaimer – The information provided is for informational purposes only and does not constitute legal, business, or tax advice. Entity setup requirements, tax rates, and economic data are subject to change and may vary by location.
To discuss your needs and how we can help you achieve a compliant and efficient expansion.