How to start a business in Japan How to start business in Japan

We help you build your business in Japan. Our comprehensive support and advising greatly simplifies the road to global business success.

Table of contents

  • Introduction to Japan
  • Japan Public Holidays
  • Working hours
  • Overtime
  • Rest periods
  • Holiday entitlement
  • Japan Maternity Leave
  • Sick leave in Japan
  • Termination/Severance
  • Japan Visa
  • Healthcare
  • Japan Tax
  • Additional Information
  • Why INS Global

Business environment in Japan

Known for being at the forefront of innovation and experimental, futuristic technology, Japan presents considerable opportunities to Western businesses in a wide variety of sectors. Its economy is ranked as the third largest in the world and is a particularly attractive destination for those in the automotive industry, as well as retail, biotechnology and I.T. Japan exports more than $640bn products are exported every year with $100bn made up of cars and $30bn made up of vehicle spare parts. In comparison to other countries in the region, the highly developed nation is a strong testing ground for new products in Asia, especially in these sectors. JETRTO (the Japan External Trade Organisation) reports that in increasing number of foreign corporations are working with Japanese companies to develop their products and services so it’s never been a better time to expand into the market.

With the correct strategy and partner to work with, it’s possible for foreign businesses to reap the benefits of Japan’s thriving market.

Doing business in Japan: Things to know

Public Holidays

Japan celebrates 16 national, government-recognised holidays. Employers in Japan are not obliged to give time off to employees on a national holiday, although it is common.

  • New Year’s Day
  • Coming of Age Day
  • National Foundation Day
  • The Emperor’s Birthday
  • Vernal Equinox Day
  • Shōwa Day
  • Constitution Memorial Day
  • Greenery Day
  • Children’s Day
  • Marine Day
  • Mountain Day
  • Respect for the Aged Day
  • Autumnal Equinox Day
  • Health and Sports Day
  • Culture Day
  • Labour Thanksgiving Day

Working hours in Japan

The normal standard work week in Japan runs from Monday to Friday and totals 40 hours per week or eight hours per day, excluding breaks.

Overtime

Minimum overtime rates in Japan are as follows:

  • Standard overtime – 125% of base hourly rate
  • Work on a rest day – 135% of base hourly rate
  • Late night overtime (between 10pm and 5am) 150% of base hourly rate
  • Late night overtime on a rest day – 160% of base hourly rate
  • Overtime work in excess of 60 hours per month – 150% of base hourly rate
  • Late night overtime in excess of 60 hours per month – 175% of base hourly rate

Japan’s work-centric culture has increasingly come into the spotlight over the last few years due to the growing number of deaths related to overworking, known in Japanese as ‘karoshi’. In 2019, Japan passed a law capping overtime, in an attempt to tackle the nation’s notorious culture of arduous working hours. The new law limits overtime to 45 hours per month and 360 hours per year. Companies in violation of the law may face potential fines.

Japan overtime limits:

  • One week: 15 hours
  • Two weeks: 27 hours
  • Four weeks: 43 hours
  • One month: 45 hours
  • Two months: 81 hours
  • Three months: 120 hours.
  • One year: 360 hours

Rest periods

Employees in Japan are entitled to at least a 45-minute break when working for 6 hours or a one-hour break when working for 8 hours.

Holiday entitlement

Employees who have been employed continuously for at least 6 months and have worked at least 80% of all working days in this period at entitled to ten days of paid annual leave. Annual leave entitlement increases over time depending on length of service within a company. The entitlement increases by 1 day per year thereafter, up to a maximum of 20 days per year. Employers may be allocated more annual leave but this is at the discretion of the employer. Used annual leave expires after two years.

Japan Maternity Leave

Pregnant employees are entitled to take 6 weeks of maternity leave before giving birth. This rises to 14 weeks of maternity leave for multiple pregnancies. The employer is not allowed to ask the female employee to return to work until 8 weeks after delivery. It is not a requirement that Japanese employers to pay maternity leave unless the employment contract states otherwise. During maternity leave, social insurance will pay for the employee’s salary up to the limit of around 2/3 of the base salary.

Childcare leave

Childcare leave applies to both the mother and the father of a new born child, starts on the day after the maternity leave ends and runs until the child reaches the age of 1. During childcare leave, labour insurance will pay around 2/3 of the employee’s base salary.

Japan Sick Leave

There is no statutory law governing sick leave in Japan meaning that employers in Japan are not required to grant sick leave to employees. However, some foreign companies grant sick leave to their employees as a special benefit but this is matter of agreement between the employer and employee.

Termination/Severance

Probation periods are common in Japan and usually range from 3-6 months. Employers have the right to terminate employment contracts during or at the end of the probation period. However, employees in Japan enjoy substantial security when it comes to their employment and terminations to employment contracts must be based on acceptable grounds. It is considered easier to dismiss an employee during the probation period than afterwards.

Acceptable grounds for dismissal in Japan depend on each individual case, but generally include:

  • Theft or violence in the workplace
  • Serious insubordination
  • Serious and ongoing poor performance after formal warnings given, corrective training provided and other solutions explored.
  • False information regarding one’s background and skills, impacting on performance at company.

Japanese healthcare system

Japan boasts a high quality, preventative healthcare system, often cited as a contributing factor to Japan having the highest life expectancy rate in the world. Foreign nationals are able to use the state funded healthcare with all the same rights as a Japanese national. If you are working in Japan, your employee will enrol you onto the state healthcare program. INS Global will do this before you start working if using our PEO solution. Contributions, which should amount to no more than 10% of your monthly salary, will be deducted from your pay every month. As healthcare is comprehensive, it is less common for employers to private healthcare to employees.

Japan Tax

In Japan, employees’ income is subject to national and local income tax. National income follows a progressive tax rate, as shown below:

Local tax also applies to an employee’s income earnt in Japan, generally imposed at a flat rate of 10%, however this may vary from region to region.

Develop your business in Japan: Why INS Global

International expansion presents many opportunities for foreign companies wishing to test new markets or expand their global reach. However, it can also be time-consuming and involve unique risks including an unfamiliar regulatory environment, compliance with tax and employment laws, culture and language barriers. INS Global’s solutions can help you get to where you want to go. Contact us today to make your expansion into Japan a reality. Our expert advisers can help you identify the most appropriate avenues for growth, taking into account your long-term development goals.

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