Set Up Business in Japan

Japan Expansion Guide

Global Upside helps companies set up, hire, and operate in Japan. Set up a legal entity quickly and easily with our solutions for branch, subsidiary, and rep office. Looking for an alternative to permanent establishment? Hire and pay employees in Japan without a legal entity by using our PEO & employer of record services. Once your business is set up, our teams can support with recruitment and staffing, human resources, employee benefits, payroll, accounting, and tax.

Capital City



Japanese Yen (JPY)




Parliamentary Constitutional Monarchy

Country Overview

Japan is located in the Northern Hemisphere, west of the Pacific Ocean, and has a diverse geography and cultural heritage. Japan is a commercial center with several high-tech and specialized hubs, such as the electronic and automotive industries. The electric bullet trains that connect the islands represent technological advancement and progress.

Options for setting up a legal entity in Japan include:

Registered Branch

A registered branch is the most commonly used setup by overseas corporations that are interested in expanding their business in Japan without forming a subsidiary. The company must appoint at least one delegate in Japan.

Kabushiki-Kaisha (KK)

A Kabushiki-Kaisha (KK) is a legal entity setup that closely resembles a C-corporation. The stockholders’ obligations in a KK are limited, and it is a well-established arrangement regardless of the presence of a board of directors.

Godo-Kaisha (GK)

A Godo-Kaisha (GK) is a legal entity setup that closely resembles an LLC. This form of setup allows for greater freedom in terms of management decisions and corporate legislation.

In Japan, a labor contract can either be in writing or verbal. Written employment contracts are not mandatory in Japan, however, the Labor Contracts Act advises employers to enter into written agreements whenever possible. 

Some of the details typically mentioned in the written contract include: 

  • Employment rules 
  • Other working conditions 
  • and more 

The different types of employment relationships are: 

  • Permanent Employment – Per Japan’s Labor Contracts Law, employment contracts concluded indefinitely are considered permanent. 
  • Fixed-Term Contracts – Fixed-term contracts in Japan cannot be longer than three years unless the employee has the expert knowledge, advanced skills, or experience, or is 60 years of age or older. The contract may be valid for up to 5 years in such cases. 
  • Temporary Employment – The Worker Dispatching Act governs temporary employment in Japan. Temporary employment contracts with the same employer in the same job can be valid for a maximum of 36 months. Employers can hire temporary workers through temporary staffing agencies, which set their wages. 

Probationary Period 

In Japan, a probationary period lasts up to 3 months. 

Work/Time Regulations 

Employers cannot allow employees to work more than 8 hours per day (or 40 hours per week), except for rest periods. These hours, however, may be extended in exceptional circumstances, up to a maximum of 10 hours per day. In such cases, the employer must first obtain permission from the appropriate government agency. 


Employees in Japan are entitled to the following leaves: 

  • Annual leave – Employees in Japan are entitled to at least ten days of paid annual leave if employed for a minimum of six months. Employees who have been with the same company for at least a year after the 6-month completion date are entitled to an additional day of statutory annual leave.
  • Maternity leave – Maternity leave in Japan is 14 weeks long, with six weeks of prenatal leave and eight weeks of postnatal leave.
  • Sick leave – Employees in Japan are only entitled to sick leave if they are ill or injured at work, and the employer is required to cover the costs of medical treatment. 

Public Holidays 

The following are the statutory national holidays observed in Japan: 

  • January 1 – New Year’s Day 
  • January 11 – Coming of Age Day 
  • February 11 – National Foundation Day 
  • February 23 – Emperor’s Birthday 
  • March 20 – Spring Equinox 
  • April 29 – Shōwa Day 
  • May 3 – Constitution Memorial Day 
  • May 4 – Greenery Day 
  • May 5 – Children’s Day 
  • July 22 – Sea Day 
  • July 23 – Sports Day 
  • August 8 – Mountain Day 
  • August 9 – Day off for Mountain Day 
  • September 20 – Respect for the Aged Day 
  • September 23 – Autumn Equinox 
  • November 3 – Culture Day 
  • November 23 – Labor Thanksgiving Day 


The National Pension Law governs Japan’s national retirement system. The National Pension Scheme is available to all residents of Japan, including foreigners, and divided into the following three categories: 

  • Category I consists of Japanese citizens aged 20 to 59 
  • Category II consists of people covered by Employees’ Pension Insurance or Mutual Aid Pensions
  • Category III consists of dependent spouses of Category II insured people 

Social insurance, often known as social welfare, is a government-mandated insurance program that provides financial help to the elderly, disabled, injured, and unemployed. 

Some examples of social insurance programs are: 

  • Dependents’/Survivors Benefit – If a person insured under the National Pension System dies, the surviving spouse who takes care of the deceased’s dependent children, as well as the dependent children themselves, are eligible for a survivor’s pension. To be eligible, children must be 18 years old or younger, or up to 20 years old if they have a disability. 
  • Life and Disability Insurance/Benefit – A person who suffers a work-related illness or injury and remains disabled after treatment and recovery is entitled to compensation under the Labor Standards Act.
  • Unemployment Insurance – In Japan, anyone who has been unable to find work may be eligible for unemployment benefits, including job applicant benefits (basic allowance, skill acquisition allowance, lodging allowance, injury, and disease allowance). 


Employers must offer at least 30 days’ notice prior to terminating an employee, or offer a severance payment in lieu of notice, regardless of the length of the employee’s service. Employees on probation who have worked for less than 14 days are exempt from the notice period requirement. 

Visa/ Work Permits 

There are typically the following categories of visas: 

  • Working visas 
  • Non-working visa 
  • Family-related visas 
  • Tourist visa 

In Japan, there are usually four types of work permits: 

  • Highly skilled professional visa  
  • General work visa 
  • Working holiday visa 
  • Specified skills work visa 

The payroll frequency is monthly.

Accounting standards must adhere to Japanese Generally Accepted Accounting Principles (GAAP). It is necessary to prepare annual financial reports. 

Corporate Tax 

The standard corporate tax rate in Japan is 23.2%. 

Value Added Tax (VAT) 

Consumption Tax (CT) is similar to the European-style value-added tax (VAT). 

The standard VAT rate in Japan is 10%. It applies to most goods and services. 

It is 8% and even 0% for certain items in certain circumstances (e.g., export transactions).

Filing Dates  

Typically, a branch or a corporation must file a final tax return and pay any outstanding taxes within two months of the financial year-end. 


If taxpayers underreport their total tax due and fail to submit tax payments and tax returns on time face various penalties. In Japan, punishments are not deductible for tax purposes.

The Act of Protection of Personal Information (APPI) regulates the protection of data privacy concerns.

Anti-Bribery & Anti-Corruption Law

Bribery of public officials (komuin) is regulated under Articles 197 and 198 of the Japanese Criminal Code. Penalties (for individuals and legal entities) include imprisonment for up to 3 years, a monetary fine of JPY 2.5 million, and cancellation of business license. 

The Penal Code does not identify bribery of private sector officials as a crime, though the presence of the Companies Act does punish both parties involved. The penalty for individuals includes imprisonment for up to 5 years and a monetary fine of JPY 500,000. 

There is no penalty for business and legal entities.