An interview with Mr. Kazuchika Iwata, Director of Economy, Trade and Industry Division at the Liberal Democratic Party (LDP)
Innovation is a driving force behind the success of any company, and in today's globalized world, it is more important than ever to tap into diverse ecosystems that can offer unique perspectives and solutions. Japan is a country that has always been at the forefront of innovation, with a strong emphasis on collaboration, humility, and a commitment to solving social problems. As such, Japan is an ideal place for global enterprises to co-create and develop long-term, stable projects with visionary people.
OVERVIEW OF JAPANESE STARTUP ECOSYSTEM: FACTS AND FIGURES The Japanese startup ecosystem has been experiencing a significant rise in recent years, making it a major player in the global innovation landscape. The number of startups increased by 10.3% in 2021, with investments reaching a record high of $13.5 billion. This growth has placed Japan at 7th in the world for the number of unicorns, with 15 startups (and 41 hidden unicorns) valued at over $1 billion. Japanese universities have also been contributing to the innovation scene, with many spin-off startups being created in recent years, particularly from the Tokyo, Kyoto, and Osaka Universities. Additionally, Japan has seen success in the field of research in physics, chemistry, and Physiology/Medicine, with 29 Nobel Prizes won by Japanese individuals or organizations, ranking third in the world behind the United States and the United Kingdom. Overall, Japan's startup ecosystem and the innovation scene are thriving, cementing the country's position as a leader in technological advancement and research.
We have invited to our office at CIC Tokyo, Mr. Kazuchika Iwata, member of the House of Representatives in Japan, who has been serving as the Parliamentary Vice-Minister of the Ministry of Economy, Trade and Industry (METI) since the fall of 2021, currently serving as the Director of Economy, Trade and Industry Division of LDP, being involved in all aspects of the Japanese economic policy. Mr. Iwata has had a conversation with Fariza Abidova, CEO and Founder of Trusted Corporation in which they shared insights about the startup ecosystem in Japan and all the initiatives undertaken to support and promote open innovation collaboration with global corporations.
THE IDEA BEHIND THE FIVE-YEAR PLAN: A COLLABORATIVE APPROACH After a conversation with Prime Minister Kishida, at the end of December 2021, Vice Minister Iwata expressed his desire to promote start-up businesses, which led to the creation of the Five-Year Plan, officially adopted at the end of last year.
The Five-Year Plan is aimed at promoting startups to drive innovation and economic growth. It includes measures to support startups, such as creating a favorable business environment, improving access to funding, promoting international partnerships, and supporting the development of tech transfer from universities and research institutions to startups.
The most recent approved budget allocated for startup support is 10 trillion yen (around 75 Billion USD) for startup support. The move comes as Japan seeks to boost innovation and entrepreneurship, particularly in the face of increasing competition from other countries. The plan focuses on areas such as deep tech, green innovation, and digital transformation, and will involve collaboration between government agencies, universities, and the private sector. The aim of this plan is to transform Japan into the largest startup hub in Asia.
“I have been involved in various ways, of course, but I also wanted to hear the different opinions from all stakeholders, from entrepreneurs to venture capitals and accelerators, so I set up a study group to talk over the issues and challenges related to startups, and to discuss how we can best work together and provide support. During the group's workshop, we had Fariza Abidova join us, who shared valuable insights about the challenges faced by international startups in Japan. Following this, the policy was finalized in June 2022, and the Five-Year Plan was officially adopted at the end of the year, with feedback from our study group being taken into consideration”.
THE IMPORTANCE OF OPEN INNOVATION IN THE FIVE-YEAR PLAN
“One of the most important pillars of this Five-Year Plan is open innovation. We believe that it is very important for startups to make full use of their know-how, ideas, technological capabilities, human resources, and financial resources and we have put a lot of effort into creating a framework for this. The other thing is, of course, to create a global ecosystem: we believe it is fundamental to attract overseas funds and human resources, including startup managers, to Japan. The fact that we have created this policy with these two things in mind, will make Japanese startups more attractive to global corporations as a place to invest, and as a partner in various open innovation projects”.
JAPAN’S UNIQUE RESOURCES AND EXPERTISE FOR STARTUP SUCCESS AND OPEN INNOVATION
“Although there haven't been enough startups established in Japan, the country possesses numerous resources and elements that can serve as the foundation for innovation. The universities in Japan, for example, have even so much potential to create strong spin-off startups based on the research work they are conducting, and we are supporting them with the commercialization tech transfer. It is vital to receive policy support to advance these areas through investment, collaboration with enterprises in open innovation, particularly with abroad. Additionally, Japan excels in material science and engineering, chemistry, energy, healthcare, and biotech-related manufacturing and can leverage its technological expertise in this field. Hence, I believe that Japan is the ideal location for investment or collaboration with organizations interested in this industry”.
JAPAN’S EVOLVING JOB MARKET: EMBRACING DIVERSITY AND NEW OPPORTUNITIES
“The job market in Japan has undergone significant changes in recent times. More people are now changing jobs, engaging in side projects, and exploring startup opportunities. This shift towards a more diverse job market has not been so common in the past and the willingness to take risks and explore new ventures is becoming increasingly attractive and normalized. The traditional lifetime employment system in Japan, where an individual would work for the same company from graduation to retirement, is almost non-existent now. A decade ago, the concept of workplaces such as CIC was unimaginable. As we move towards the future, I believe that startups, global corporations, and government offices will continue to diversify their workforce in various ways, giving rise to new energy and opportunities”.
TRANSFORMING JAPAN’S BUSINESS ENVIRONMENT: A STARTUP POLICY FAVORABLE FOR BOTH JAPANESE AND INTERNATIONAL ENTREPRENEURS
“Not only business, but the environment in Japan has changed considerably, and not just in Tokyo but in Japan as a whole, especially in terms of acceptance of international entrepreneurs. We also help them with visas, bank accounts, various government procedures, and several aspects of daily life. Shibuya Ward and Fukuoka are particularly notable for providing such an environment, and we aim to establish similar support systems in other locations as well.
Through this startup policy, we aim to elevate the ecosystem of various businesses in Japan to a higher level. Some people may have a perception of Japan as inflexible, with no mobility of people or slow decision-making processes. We aim to act as catalysts for this change. Our goal is not only to encourage the creation of new businesses but also to promote the development of human resources and organizational dynamism in large corporations involved in the startup business. Moreover, we would like to see increased startup activities and foreign investment in Japan and want to leverage Japan's technological capabilities and resources and encourage overseas participation in Japan's business scene”.
THE SANDBOX: ALLOWING BUSINESSES TO TEST NEW IDEAS WITHOUT REGULATORY COMPLIANCES As one example of Government incentives, under the sandbox system, businesses can request exemptions or modifications to regulations that may be impeding their ability to innovate, and if approved, can test their ideas with a reduced regulatory burden. This can help encourage experimentation and innovation while still maintaining necessary consumer protections and regulatory oversight. The Sandbox System of Regulations is a specific example of this type of framework implemented by the Japanese government. For more information on the Sandbox System of Regulations, please visit https://www.cas.go.jp/jp/seisaku/s-portal/regulatorysandbox.html.
“At JETRO, moreover, we offer consultation services to assist with regulatory issues faced by companies looking to bring their services to Japan. If you encounter any regulatory hurdles while entering the Japanese market, our team can assess the existing regulations and determine if any revisions can be made. This service is fully supported in English, ensuring smooth communication throughout the process”.
JAPAN: AN ATTRACTIVE DESTINATION FOR ENTERPRISES TO INNOVATE AND CO-CREATE WITH STRONG GOVERNMENT SUPPORT AND A COLLABORATIVE MINDSET In conclusion, Japan is an ideal place for global corporations to co-create and develop long-term, stable projects with visionary people. The strong support provided by the government, coupled with the highly skilled workforce and collaborative mindset of the innovation ecosystem, makes Japan an attractive destination for businesses looking to innovate and create solutions that have a positive impact on society. We encourage companies to explore the potential of the Japanese ecosystem and consider partnering with us to unlock new opportunities for growth and success.
KEY TAKEAWAYS
Japan has always been at the forefront of innovation, with a strong emphasis on collaboration, humility, and a commitment to solving social problems. It is an ideal place for global enterprises to co-create and develop long-term, stable projects with visionary people.
Japan's engineering skills are strong, and the government is eager for international startups to bring their know-how and experience to support the development of the ecosystem. They will provide support every step of the way for those who come with new initiatives.
The Five-Year Plan is aimed at promoting startups to drive innovation and economic growth, with measures to support startups, such as creating a favorable business environment, improving access to funding, and promoting international partnerships. One of the most important pillars of this Five-Year Plan is open innovation.
The Japanese government has established several funds that both domestic and international enterprises can access, provided they have offices in Japan. This means that non-Japanese enterprises are treated as Japanese companies and have equal rights to funding and support.
The government is also supporting universities to create spin-off startups to transfer their strong research work into the market.
In addition to financial assistance, the government also encourages the development of new solutions and is creating new systems to test them.
They have even set up a space where new technologies can be tested and updated regulations can be implemented when necessary.
The job market in Japan has undergone significant changes in recent times, with more people now changing jobs, promoting diversity in the workplace, and exploring startup opportunities.
USEFUL LINKS
The government is taking steps to simplify procedures and support both Japanese and non-Japanese individuals, so we have compiled a list of useful links to initiatives that can help:
The website of the Ministry of Economy, Trade and Industry (METI) provides information about the Startup Visa, the special visa that allows non-Japanese entrepreneurs to stay in Japan for up to a year and start their own businesses. Learn more about the Startup Visa and eligibility criteria here: https://www.meti.go.jp/english/policy/economy/startup_nbp/startup_visa.html
The Kyoto Prefecture website provides information about the Startup Visa and the support services available for international entrepreneurs in Kyoto https://www.kyoto-obc.jp/startupvisa/
The Fukuoka city website provides information about the Startup Visa and the support services available for foreign entrepreneurs in Fukuoka https://www.city.fukuoka.lg.jp/keizai/r-support/business/startupviza_english.html
Shibuya Ward has a startup support website that offers consultation services for foreign entrepreneurs https://shibuya-startup-support.jp
The Tokyo Metropolitan Government office called Tokyo Reasonable Business Concierge also provides support to foreign entrepreneurs online. https://www.startup-support.metro.tokyo.lg.jp/for_foreign/bdc_tokyo/en/
J-Startup is a government initiative that provides support for Japanese startups and helps them expand globally https://www.j-startup.go.jp/en/
Invest Japan Hotline is a website managed by JETRO, which provides various services to support foreign enterprises looking to invest in Japan. The website includes a hotline service to provide assistance to foreign entrepreneurs. https://www.jetro.go.jp/en/invest/jetros_support/hotline/
For more information on Trusted Corporation and our services, please visit our website at www.trusted-inc.com. If you have any questions or would like to discuss a potential partnership, please don't hesitate to contact us at contact@trusted-inc.com
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