SAKURA Law Office | Legal Update by Managing Partner Kenshiro Michishita
September 24, 2026
SAKURA Law Office | Kenshiro Michishita, Managing Partner
SAKURA Law Office has published the twelfth installment of its Legal Update series by Managing Partner Kenshiro Michishita, “Doing Business in Japan 2026 - Legal Guide for Foreign Companies on Market Entry, Corporate Formation, Contracts, Employment, Data Protection, Foreign Investment and Dispute Resolution.”
Foreign companies considering entry into Japan sometimes approach the project as if the principal legal task were simply to incorporate a Japanese subsidiary. In practice, incorporation is only one component of a much broader market-entry framework. The legal stability of a Japanese business depends on how the group decides who will contract with customers, who will employ personnel, where revenue will be booked, how data and intellectual property will be managed, which licences or registrations are required, how foreign-investment rules apply, and how disputes will ultimately be resolved.
Japan generally welcomes foreign investment and permits foreign companies to establish a presence through a representative office, a registered branch or a Japanese subsidiary, among other structures. At the same time, once a business operates in or targets the Japanese market, being a foreign company does not displace the application of Japanese employment law, data-protection law, consumer regulation, competition law, sector-specific regulation or other mandatory rules that may apply to the relevant activity.
The timing is particularly important in 2026. The criteria for the status of residence “Business Manager” were materially revised from October 16, 2025. An amendment to Japan’s Act on the Protection of Personal Information was promulgated on July 17, 2026, with major provisions to take effect on a later date prescribed by Cabinet Order. Mandatory employer measures concerning customer harassment will apply from October 1, 2026. The amended Whistleblower Protection Act will take effect on December 1, 2026. Japan’s foreign-investment screening regime under the Foreign Exchange and Foreign Trade Act, or FEFTA, is also scheduled to change materially from 2027.
Accordingly, the objective should not be to complete company registration as quickly as possible. The objective should be to establish a legal operating platform that aligns the business model, corporate structure, regulatory perimeter, contracts, employment arrangements, data governance, intellectual property and dispute strategy from the outset.
This Legal Update explains the principal legal issues that foreign companies should consider when starting or expanding a business in Japan, based on Japanese law and official materials available as of September 24, 2026. It is designed as a practical market-entry guide rather than a procedural incorporation checklist.
Executive Summary
For a foreign company entering Japan, the first question should not be “Should we form a Kabushiki Kaisha?” The first question is what the group intends to do in Japan, which entity will bear contractual and regulatory responsibility, how much operational substance will sit in Japan, and how the Japanese operation will interact with the foreign parent. A representative office limited to preparatory activity, a Japanese branch that remains legally part of the foreign company, and a separately incorporated Japanese subsidiary have materially different consequences for liability, governance, tax, licensing, staffing and information management.
A foreign company conducting continuous transactions in Japan may be subject to registration requirements under the Companies Act. A Japanese branch does not have a separate legal personality from the foreign head office, so the foreign company ultimately bears the liabilities of the branch. By contrast, a Japanese subsidiary established as a Kabushiki Kaisha or Godo Kaisha is a separate legal entity, which often makes it easier to localize contracts, employment, licences, financing and future M&A.
Corporate establishment should be coordinated with FEFTA filings and reporting, sector-specific licences, immigration status, bank-account opening, employment and social-insurance arrangements, APPI compliance, intellectual-property protection, consumer and competition law, tax planning and dispute resolution. In regulated sectors such as financial services, payments, crypto-assets, insurance, telecommunications, healthcare, pharmaceuticals, recruitment, worker dispatch and real estate, a company may be duly incorporated but still unable to commence the contemplated business until the necessary regulatory permissions are obtained.
Japanese law can also apply even where no Japanese subsidiary exists. The APPI contains certain extraterritorial provisions, and a foreign business handling personal information outside Japan in connection with offering goods or services to individuals in Japan may fall within the Japanese data-protection regime. Online businesses should therefore avoid assuming that the absence of a Japanese entity means that Japanese law is irrelevant.
SAKURA Law Office and Managing Partner Kenshiro Michishita view market entry as an integrated business-law exercise. The key is to design the Japanese operation so that corporate structure, foreign-investment regulation, contracts, employment, data, intellectual property, sector regulation, M&A and dispute planning work together rather than being addressed independently after the business has already launched.
1. Doing Business in Japan Does Not Begin with Incorporation
A common first question from foreign clients is whether a Kabushiki Kaisha or a Godo Kaisha is preferable. That question is important, but it should follow rather than precede the analysis of the proposed business. Counsel should first understand what the company will sell, whether the Japanese operation will contract directly with customers, how payments will flow, which entity will own or license the relevant intellectual property, whether regulated activity is involved, how personnel will be hired or transferred, and whether future fundraising, a joint venture or an exit is contemplated.
If the Japanese presence will be limited to market research, information collection or other preparatory functions, a representative office may be sufficient. If the foreign company will enter into contracts and conduct continuous commercial transactions in Japan, a registered branch or Japanese subsidiary will ordinarily need to be considered. If the group intends to hire employees, build a permanent operating platform and localize responsibility in Japan, employment law, social insurance, immigration, tax and internal governance should be designed alongside the entity structure.
Effective market-entry planning therefore starts by decomposing the proposed Japanese business into actual activities and then mapping the applicable legal, regulatory and operational requirements to those activities.
2. Principal Forms of Entry - Representative Office, Branch and Japanese Subsidiary
JETRO identifies three principal forms through which foreign companies commonly establish a business presence in Japan: a representative office, a branch office and a subsidiary company. These structures differ not only in name but in legal personality, permitted activities, liability, registration, banking, taxation and operational flexibility.
A representative office is generally used for preparatory and supplemental activities such as market surveys, information gathering, purchasing and publicity or advertising before full-scale commercial operations begin. JETRO explains that representative offices are not permitted to engage in sales activities and generally do not require registration under the Companies Act. Because the representative office is not itself a legal entity, opening a bank account or leasing premises in its own name is ordinarily difficult.
A Japanese branch is not a separate legal entity from the foreign company. It is part of the foreign company, and the foreign company is ultimately responsible for liabilities arising from the branch’s activities. Foreign companies wishing to engage in continuous transactions in Japan are subject to registration requirements under the Companies Act, and the branch structure requires a representative in Japan.
A Japanese subsidiary is a Japanese corporation separate from the foreign parent. The foreign parent’s liability is generally limited to its position as shareholder or member. A subsidiary can provide a clearer platform for customer contracts, employment, licences, financing, internal approvals and future capital transactions. For foreign groups intending a sustained Japanese presence, a subsidiary is therefore frequently selected.
3. Kabushiki Kaisha or Godo Kaisha - Choosing the Appropriate Japanese Subsidiary
Foreign companies establishing a subsidiary commonly choose between a Kabushiki Kaisha, or K.K., and a Godo Kaisha, or G.K. Both are limited-liability corporate forms, but their governance structure, internal flexibility, external familiarity and suitability for capital transactions differ.
The Kabushiki Kaisha is the most widely recognized Japanese corporate form and is based on a share-capital structure. The Companies Act provides a developed framework for directors, boards and shareholder governance. Where the group anticipates third-party investment, equity incentives, share transfers, M&A, financing or more formal governance, the K.K. structure is often easier to use and explain to counterparties.
The Godo Kaisha allows greater contractual flexibility through its articles of incorporation and can be efficient for a wholly owned subsidiary in which the foreign parent expects to retain centralized control and does not anticipate outside shareholders. It can also be attractive for groups that value simpler internal governance.
The decision should not be driven solely by formation cost. It should take into account future financing, management appointments, decision rights, distributions, transfers of ownership interests, reorganizations, exit options and the tax treatment in the parent company’s home jurisdiction.
4. A Japanese Branch Is Not Always the “Simpler” Option
A branch can appear attractive because it does not require the formation of a separate Japanese corporation. That simplicity can be useful in some cases. However, because the branch and foreign head office are the same legal entity, liabilities arising from the Japanese business ultimately attach to the foreign company itself.
The branch model can also create additional questions concerning head-office authority, accounting and tax, data access from outside Japan, internal allocation of contractual responsibility and the mechanics of a later sale or separation of the Japanese business. In some groups, ring-fencing the Japanese operation in a separate subsidiary produces cleaner governance and transaction execution even if the initial incorporation process is more involved.
A branch decision should therefore be made after considering liability exposure, permanent-establishment taxation, licensing, contract execution, information governance, financing and eventual withdrawal or sale - not simply because it may appear procedurally easier at the outset.
5. Incorporation and Registration - Designing the Legal Vehicle for the Business
A Japanese subsidiary comes into existence upon registration with the Legal Affairs Bureau. A foreign company establishing a registered branch must likewise complete the registration required by the Companies Act. Depending on the jurisdiction of the foreign parent and the structure selected, certificates concerning the foreign company, evidence of authority, signature certificates, affidavits and other documents may need to be prepared or authenticated outside Japan.
The important task at formation is to ensure that the corporate name, registered office, stated business purposes, capital, fiscal year, management structure, representation authority and share or membership structure align with the actual Japanese business. The corporate purposes in particular should be drafted with the contemplated business, reasonably foreseeable expansion and any licensing requirements in mind.
Japanese company law permits incorporation with very small stated capital. That does not mean that minimal capital is appropriate in practice. Immigration, licensing, bank onboarding, counterparty credit review and working-capital needs may impose very different commercial or regulatory expectations. The amount legally sufficient to incorporate and the amount commercially appropriate to operate are separate questions.
6. FEFTA - Foreign Investment Review Should Be Considered from the Start
Foreign investment into Japan may be subject to prior notification or post-closing reporting under the Foreign Exchange and Foreign Trade Act, commonly referred to as FEFTA. Investments involving designated business sectors that are relevant to national security or other protected interests may require a filing before the investment can be implemented.
Even where a foreign company is establishing a new Japanese subsidiary rather than acquiring an existing company, FEFTA reporting or notification questions may arise depending on the activity and investor profile. JETRO’s market-entry materials accordingly place FEFTA procedures within the broader process of establishing and operating a business in Japan.
The FEFTA framework is also changing. As discussed in SAKURA Law Office Legal Update No. 11, the 2026 amendments and related implementing measures expand the analysis in areas including indirect acquisitions, foreign-government influence, important technologies and post-investment risk management. Foreign companies entering Japan in 2026 should therefore design their structure with both current requirements and foreseeable future investment or acquisition activity in mind.
7. Sector-Specific Licences - Incorporation Does Not Necessarily Authorize the Business
Many businesses can commence operations in Japan after ordinary corporate and tax registrations are completed. Others require licences, registrations, approvals or notifications under sector-specific statutes. Regulated areas include, among others, banking and financial instruments, payment services, crypto-assets, lending, insurance, telecommunications, healthcare, pharmaceuticals and medical devices, recruitment and worker dispatch, travel and real estate.
Whether a licence is required is determined by the substance of the business model rather than by the label used by the company. Relevant questions include who receives customer funds, in whose name contracts are entered into, whether the company holds or controls customer assets or data, whether regulated advice or professional services are being provided, and whether the business merely advertises or introduces transactions or instead intervenes materially in third-party transactions.
Regulatory mapping should therefore be performed at the product-design stage. Waiting until after incorporation to determine whether the business can legally operate may delay launch, require changes to the commercial model or create avoidable compliance risk.
8. Immigration and Expatriate Management - The Business Manager Criteria Changed Materially in October 2025
Foreign executives and expatriates working in Japan must hold an appropriate status of residence for the activities they will perform. Incorporation of a company or registration of a branch does not itself authorize a foreign national to manage or work in Japan.
The criteria for the status of residence “Business Manager” were materially revised effective October 16, 2025. The Immigration Services Agency states that, for new applications, the business must generally employ at least one qualifying full-time employee and, where the business operator is a corporation, have JPY 30 million or more in paid-in capital or total contributions. The revised framework also includes requirements relating to the applicant’s management experience or relevant graduate-level education and a Japanese-language capability requirement to be satisfied by the manager or a qualifying full-time employee.
Corporate and immigration structuring should therefore be designed together. Where a foreign founder or executive will relocate to Japan, capitalization, staffing, office premises, business plans and division of management responsibility should be considered before incorporation rather than after the company has already been formed.
9. Office Premises and Bank Accounts - Operational Substance Matters
A registered address alone is not always sufficient for the practical needs of a Japanese operation. Depending on the business, licences, immigration status, bank KYC and counterparty onboarding may require evidence of genuine operational substance and suitable premises.
For the Business Manager status, the Immigration Services Agency and JETRO materials emphasize the existence of an appropriate business office. A virtual or nominal address may therefore be inadequate depending on the circumstances and the regulatory purpose for which the premises are being assessed.
Corporate bank accounts are likewise not automatic upon registration. Japanese financial institutions generally conduct KYC concerning beneficial ownership, the business model, expected transaction patterns, source of funds, the foreign parent and other risk factors. For businesses that need to process payroll, vendor payments or customer receipts shortly after launch, the expected timing of account opening should be incorporated into the project plan.
10. Contracts with Japanese Counterparties - English-Language Documentation Does Not Displace Japanese Law
Foreign companies operating in Japan enter into a wide range of contracts, including distribution agreements, service agreements, licences, SaaS agreements, NDAs, joint-development agreements, OEM arrangements, reseller agreements and leases. The fact that a contract is written in English does not prevent Japanese law from becoming relevant.
Parties may in many circumstances choose foreign governing law and foreign courts or arbitration. That choice does not necessarily exclude mandatory Japanese rules applicable to employment, consumers, data protection, licensing and other regulated areas. The enforceability and practical effectiveness of the chosen dispute-resolution mechanism should therefore be considered together with the governing-law clause.
Japanese transactions also require careful attention to authority to sign, electronic signatures and seals, the priority between master agreements, order forms and online terms, acceptance procedures, non-conformity remedies, limitation of liability, indemnities, intellectual property, confidentiality, personal data, subcontracting, termination, anti-social-forces clauses and dispute resolution. A global template should be localized to the actual Japanese transaction rather than copied mechanically.
11. Employment - Japanese Labor Law Generally Applies to Employees Working in Japan
Where a company employs workers in Japan, Japanese employment laws generally apply regardless of whether the employer is foreign-owned. JETRO’s guidance for foreign investors addresses the Labor Standards Act, Industrial Safety and Health Act, Minimum Wage Act and other employment legislation as part of the legal framework for operating in Japan.
At hiring, employers must provide legally required information concerning working conditions, including matters such as contract term, workplace, duties and the scope of future changes, working hours, holidays, wages and termination. A foreign parent’s standard offer letter may not contain every item required under Japanese law, so Japan-specific employment documentation is often necessary.
An employer with ten or more employees on a regular basis at a workplace is generally required to prepare rules of employment and file them with the competent Labor Standards Inspection Office. Overtime and holiday work also require appropriate labor-management arrangements, including where applicable an Article 36 agreement.
12. Termination and HR Decisions - Do Not Import an At-Will Employment Model into Japan
Dismissal is one of the areas in which foreign companies most frequently underestimate the differences between Japan and other jurisdictions. The concept of at-will employment recognized in some countries does not apply in Japan. A dismissal may be invalid if it lacks objectively reasonable grounds and is not considered appropriate in general societal terms.
Redundancy, poor performance, misconduct and organizational restructuring each require careful review of the facts, process, opportunities for improvement, reassignment possibilities, internal rules and overall fairness. A global restructuring decision made by the parent company does not automatically permit the Japanese subsidiary or branch to apply the same termination process used elsewhere.
Japan-compliant employment agreements, rules of employment, evaluation systems, disciplinary procedures and termination protocols should be developed from the beginning of the Japanese operation rather than only after a dispute arises.
13. Social Insurance and Labor Insurance - Post-Incorporation Administrative Compliance
A Japanese corporation or branch that hires personnel may be required to enroll employees and the employer in health insurance, employees’ pension insurance, workers’ compensation insurance, employment insurance and related systems, depending on the applicable statutory requirements. Registrations and notifications must be completed with the relevant authorities.
A foreign parent’s global benefits program does not necessarily replace mandatory Japanese social-insurance obligations. Intra-group expatriates may be affected by social-security agreements between Japan and another country, so immigration, payroll, tax and social-insurance planning should be coordinated with appropriate licensed professionals.
14. Customer Harassment - New Mandatory Employer Measures from October 1, 2026
Companies with employees in Japan must also prepare for the mandatory customer-harassment prevention measures that take effect on October 1, 2026. Foreign ownership does not exempt an employer from Japanese workplace-protection obligations applicable to employees working in the Japanese business.
Employers are required to establish appropriate measures including a clear policy, consultation channels, prompt fact-finding, protection and support for affected workers, measures to prevent recurrence, privacy protection and prohibition of disadvantageous treatment in connection with consultation or reporting. These requirements are particularly relevant to retail, hospitality, e-commerce, platforms, call centers, SaaS support and other businesses with frequent customer interaction.
A global customer-conduct or anti-abuse policy may be useful, but it should be reviewed to determine whether it provides the employee consultation and protection mechanisms required by Japanese law.
15. Whistleblowing and Compliance - Design for the December 1, 2026 Amendments
As the Japanese operation grows, the Whistleblower Protection Act becomes an important component of the compliance framework. Amendments effective December 1, 2026 strengthen protections in areas including freelancers, interference with whistleblowing, searching for whistleblowers, certain presumptions relating to dismissal or disciplinary action, and penalties in specified circumstances.
A global Speak Up Hotline should therefore be reviewed for compatibility with Japanese law. Where reports concerning the Japanese business are shared with an overseas headquarters, the group should address access to identifying information, personal-data handling, investigation independence, conflicts of interest and the designation and responsibilities of personnel handling whistleblowing matters.
The objective is not merely to create a Japanese policy document. The more important task is to connect the global compliance system with Japan-specific statutory requirements and investigation practice.
16. Data Protection - The APPI May Apply Even Without a Japanese Subsidiary
Japan’s Act on the Protection of Personal Information, or APPI, should be considered early in the market-entry process. Customer data, employee data, website and app data, online identifiers, payment information and inquiry records can all create Japanese data-protection obligations.
A particularly important point for foreign companies is that the absence of a Japanese corporation does not necessarily prevent the APPI from applying. The Act contains provisions with extraterritorial effect in specified circumstances, including where a foreign business handles personal information of individuals in Japan in connection with providing goods or services to them.
Accordingly, a foreign head office operating a Japan-facing website or application may need to assess privacy notices, purposes of use, security measures, outsourcing, breach response, data-subject requests and cross-border transfers under Japanese law even before a Japanese subsidiary is established.
17. The 2026 APPI Amendments - Enacted, but Major Provisions Are Not Yet in Force
An amendment to the APPI was promulgated on July 17, 2026. Most major provisions are scheduled to take effect on a date to be specified by Cabinet Order within two years from promulgation. As of September 24, 2026, companies must therefore distinguish between the current law and amendments that have been enacted but are not yet effective.
For foreign groups designing a new CRM, HR platform, marketing stack, AI environment or other data infrastructure for Japan, it may be commercially sensible to consider the future statutory framework rather than build a system optimized only for the current law and then redesign it shortly after launch.
Cross-border data sharing with overseas headquarters should also be analyzed carefully. Transfers from Japan to a third party in a foreign country, outsourcing arrangements, cloud services and consent requirements can produce different legal outcomes depending on the structure and the role of each entity.
18. Intellectual Property - Review Trademarks Before Publicly Launching the Brand in Japan
Foreign companies entering Japan should review trademarks, patents, designs, copyright, trade secrets and other intellectual-property rights before commercial launch. Trademarks deserve particular attention because Japan follows a first-to-file system: as a general rule, where identical or similar marks are filed, priority is determined by filing rather than by a foreign company’s prior use in another jurisdiction.
A brand that has been used internationally for many years is not automatically protected in Japan. Clearance searches and filing strategy should therefore be considered before public announcements, exhibitions, distributor negotiations or major marketing activity create visibility around the Japanese launch.
Joint-development, OEM, licensing and distribution arrangements should also distinguish pre-existing IP, newly developed results, improvements, data, know-how, trademark use and the consequences of termination. Ownership of the commercial relationship should not be left to implication.
19. B2C and E-Commerce - Localize Consumer Terms and Online Sales Flows
Businesses selling goods or services to consumers in Japan should consider the Consumer Contract Act, the Act on Specified Commercial Transactions, the Act against Unjustifiable Premiums and Misleading Representations and other consumer and advertising rules. E-commerce, subscription services and online applications may be subject to specific disclosure, confirmation, cancellation, return and advertising requirements.
The Consumer Contract Act permits rescission in specified cases involving improper solicitation and renders certain unfair contract clauses ineffective. Broad exclusions of liability or unilateral modification clauses contained in global terms of service may therefore require review before being used with Japanese consumers.
For Japan-facing online services, legal localization should go beyond translating an English Terms of Service. The purchase flow, disclosures, cancellation mechanics, marketing claims and customer communications should also be reviewed against Japanese consumer law.
20. Competition and Fair Trading - Rules Continue After Market Entry
The Act on Prohibition of Private Monopolization and Maintenance of Fair Trade, commonly called the Antimonopoly Act, regulates cartels, private monopolization, unfair trade practices, abuse of a superior bargaining position and certain business combinations. Foreign companies may be exposed to Japanese competition law where their conduct affects the Japanese market.
Resale-price restrictions, exchanges of competitively sensitive information, platform conditions, unilateral disadvantages imposed on counterparties and M&A transactions can raise issues that go beyond ordinary freedom of contract. The Japan Fair Trade Commission actively enforces the Antimonopoly Act and related fair-trading legislation.
Foreign companies using global distribution or procurement templates should therefore assess whether their Japanese commercial arrangements are compatible with local competition and fair-trading rules.
21. Tax - Corporate Legal Structure and Tax Structure Should Be Designed Together
The choice between a subsidiary and a branch affects Japanese corporate taxation, permanent-establishment analysis, withholding tax, consumption tax, transfer pricing, treaty benefits and other tax matters. A Japanese subsidiary is generally taxed as a Japanese corporation, while a branch may create a Japanese permanent establishment of the foreign company with Japanese tax consequences attributable to the branch’s activities.
Japanese companies and branches are also required to make tax-related filings after establishment. JETRO’s market-entry guidance identifies corporate establishment notices, foreign-corporation notices, payroll-office notifications and other tax procedures as part of the post-registration process.
SAKURA Law Office addresses the legal aspects of corporate structure, contracts, regulation and transaction design and, where necessary, coordinates with tax accountants, certified public accountants and other specialists. Legal and tax structuring should be undertaken together so that the chosen operating model does not need to be rebuilt after launch.
22. Dispute Resolution - Decide the Exit Before the Dispute Occurs
Contracts with Japanese counterparties should address governing law and dispute resolution before any dispute arises. Litigation in Japan, litigation abroad and international arbitration differ materially in procedure, language, evidence, interim relief, confidentiality and enforcement.
Selecting a foreign court does not eliminate the possibility that assets in Japan may need to be preserved or a foreign judgment enforced in Japan. Conversely, litigation in the Japanese courts ordinarily requires preparation for Japanese-language proceedings and Japanese procedural practice.
Contract negotiations should therefore consider how unpaid invoices, termination disputes, IP infringement, confidentiality breaches, product claims, distributor disputes or other contingencies will be handled in practice - where the case will be heard, what interim measures may be available and against which assets an eventual judgment or award can be enforced.
23. Joint Ventures and M&A - Greenfield Entry Is Not the Only Route
A foreign company does not need to build every component of its Japanese operation from zero. A joint venture, minority investment or acquisition can provide access to customers, employees, licences, distribution networks, technology and other established infrastructure.
JV and M&A transactions introduce a different legal risk profile. Legal due diligence should address existing liabilities, employment, licences, personal data, intellectual property, litigation and compliance. Shareholders’ agreements should allocate board appointment rights, veto rights, information rights, funding obligations, non-compete arrangements, exit mechanisms and deadlock procedures.
Foreign investment into an existing Japanese company may also trigger FEFTA review. The decision between greenfield incorporation, JV and M&A should therefore be made by comparing speed, legacy liabilities, regulatory requirements, commercial control and exit objectives rather than by treating incorporation as the default route.
24. The First 90 Days - Building the Legal Operating Platform
After a subsidiary or branch has been established, legal work often becomes fragmented across contracts, HR, data, licences, intellectual property and compliance. A cross-functional legal review during the first stage of operations helps ensure that these separate workstreams are aligned.
The review should confirm that registration and representation authority match actual operations, required licences have been obtained, standard contracts and online terms are localized, employment documents and time-management systems are in place, personal data and cross-border transfers are mapped, trademarks and other IP are protected, whistleblowing and harassment channels are operational, and evidence-preservation and escalation procedures exist for disputes or incidents.
The legal project should therefore not be treated as complete when the corporate registry issues a certificate. The more meaningful milestone is when the business can make its first sale, hire its first employee and process its first customer data under an operating framework that is legally sustainable.
25. SAKURA Law Office’s Perspective on Doing Business in Japan
The central task in advising a foreign company entering Japan is not simply to explain Japanese statutes one by one. It is to understand the proposed business and design a structure in which corporate authority, contractual responsibility, personnel, data, technology, capital and dispute risk are allocated deliberately.
A model in which the foreign parent remains the contracting party with Japanese customers and the Japanese subsidiary provides only local sales support will require a different legal framework from a model in which the Japanese subsidiary contracts with customers, employs personnel, manages local data and records Japanese revenue. Market-entry law is therefore part of business-model design, not merely a company-registration exercise.
SAKURA Law Office and Managing Partner Kenshiro Michishita advise on corporate law, M&A, international transactions, technology and AI, data protection, intellectual property, Web3 and financial regulation, employment, crisis management and related matters affecting foreign companies operating in Japan. We place particular emphasis on connecting Japanese legal requirements with global governance and transaction structures, including coordination with overseas general counsel and foreign law firms.
26. Frequently Asked Questions
Q1. Must a foreign company establish a Japanese subsidiary in order to do business in Japan?
Not necessarily. Depending on the activity, a representative office, registered branch, Japanese subsidiary or another structure may be available. However, continuous transactions in Japan can trigger Companies Act registration requirements, and the company must separately assess licensing, tax, employment, FEFTA and other applicable rules.
Q2. Can a representative office sign customer contracts and record sales in Japan?
As a general matter, representative offices are intended for preparatory and supplemental activities such as market research, information collection and advertising, not ordinary sales activity. A branch or Japanese subsidiary should ordinarily be considered where the company intends to conduct sustained commercial operations in Japan.
Q3. Is a K.K. or G.K. better for a foreign-owned Japanese subsidiary?
There is no universal answer. A K.K. is often easier where third-party investment, share transfers, formal governance, equity incentives or M&A are anticipated. A G.K. can be efficient for a wholly owned subsidiary that values internal flexibility. The parent’s tax and accounting treatment should also be reviewed.
Q4. Must the representative director of a Japanese subsidiary reside in Japan?
Japanese company law does not impose a universal Japan-residency requirement on the representative of a K.K. or G.K. A foreign company operating through a registered Japanese branch, however, must have at least one representative in Japan. Immigration, banking and licensing may create separate practical requirements, so the registration rule should not be analyzed in isolation.
Q5. Can a Japanese company be incorporated with JPY 1 of capital?
Japanese company law permits incorporation with very small capital, but the practical answer may be very different. For example, the revised Business Manager criteria generally require JPY 30 million or more in capital or total contributions for a corporate business, together with other requirements. Licensing, bank onboarding, credit and working-capital needs may also justify significantly greater capitalization.
Q6. If an overseas head office provides an online service directly to customers in Japan, does Japanese law not apply because there is no Japanese entity?
No. The absence of a Japanese subsidiary does not by itself prevent Japanese law from applying. The APPI has certain extraterritorial provisions, and consumer, sector-specific and other laws may also apply depending on the service and the way in which the Japanese market is targeted.
Q7. Can a foreign parent use its global employment agreement unchanged for employees in Japan?
That is generally not advisable. Japanese law prescribes information that must be provided at hiring and imposes local rules concerning working hours, dismissal, overtime, workplace rules and social insurance. Global templates should be localized for Japan.
Q8. Is it safe to begin using a brand in Japan before filing a Japanese trademark application?
There is risk in doing so. Japan follows the first-to-file principle for trademarks, so a foreign company’s historical use abroad does not automatically secure priority in Japan. Trademark clearance and filing should be considered before a public Japanese launch whenever possible.
Q9. Must contracts with Japanese companies be governed by Japanese law?
Not necessarily. Parties may often choose foreign governing law and dispute resolution. Mandatory Japanese rules may nevertheless apply in fields such as employment, consumers, data protection and licensing, and enforcement considerations should be assessed when drafting the clause.
Q10. Is greenfield incorporation or M&A better for entering Japan?
It depends on the commercial objective. Greenfield entry can reduce exposure to historical liabilities but requires customers, employees, licences and infrastructure to be built from the ground up. M&A or a JV can provide an existing platform but requires careful due diligence and risk allocation. FEFTA and other regulatory requirements should be considered in either case.
27. About Kenshiro Michishita’s Legal Update Series
SAKURA Law Office publishes the Legal Update series through the profile of Managing Partner Kenshiro Michishita, addressing legal issues of practical importance to companies, investors and executives in areas including corporate law, M&A, international transactions, AI and technology, data protection, intellectual property, crisis management, employment, whistleblowing, Web3 and digital assets.
This twelfth installment builds on the earlier Legal Updates concerning AI governance, compliance and foreign-investment screening and serves as a foundational “Doing Business in Japan” guide for foreign companies entering or expanding in the Japanese market.
Future installments will address acquisitions of Japanese companies by foreign buyers, legal due diligence, share purchase agreements, international litigation, recognition and enforcement of foreign judgments, international arbitration, online defamation, corporate investigations, Web3 and crypto-assets, and other issues arising in cross-border business involving Japan.
28. How SAKURA Law Office Can Assist Foreign Companies Entering Japan
SAKURA Law Office advises foreign companies, overseas start-ups, private equity and venture capital investors, global strategic buyers and other international businesses on entering and operating in Japan. Our work includes market-entry structuring, K.K. and G.K. formation strategy, branch structuring, FEFTA, sector regulation, contracts, employment, data protection, intellectual property, whistleblowing, customer-harassment compliance, M&A, joint ventures and dispute resolution.
We also advise foreign groups that already have a Japanese subsidiary or branch on reviewing existing contracts, policies, employment practices, data governance, licensing and compliance systems from the perspective of Japanese law.
Where appropriate, we coordinate in English with overseas general counsel, legal teams, compliance teams and foreign law firms so that Japanese requirements are integrated into the group’s global governance, contracting and risk-management framework rather than treated as an isolated local workstream.
29. Contact
For advice regarding doing business in Japan, market entry, Japanese subsidiaries or branches, contracts, FEFTA, licences, employment, data protection, intellectual property, M&A, joint ventures, compliance or international disputes, please contact SAKURA Law Office.
When contacting us, please indicate that your inquiry concerns “Doing Business in Japan / Japan market entry” so that it can be directed promptly to the appropriate lawyer.
SAKURA Law Office
Kenshiro Michishita, Managing Partner
Ark Hills South Tower 4F, 1-4-5 Roppongi, Minato-ku, Tokyo 106-0032, Japan
Tel: +81-3-6910-0692
Written and supervised by
SAKURA Law Office
Kenshiro Michishita, Managing Partner
Principal References
Japan Patent Office, “Outline of the Trademark System” and first-to-file materials
Japan External Trade Organization (JETRO), “Taxes in Japan”
This article provides general legal information based on Japanese law and official materials available as of September 24, 2026, including the Companies Act, FEFTA, the Immigration Control and Refugee Recognition Act, employment legislation, the APPI, consumer laws, the Antimonopoly Act and related regulations. It does not constitute legal advice regarding any specific matter. The appropriate entity structure, regulatory licences, FEFTA filings, immigration status, employment arrangements, data-protection measures, tax treatment, consumer-law compliance, intellectual-property strategy and other requirements depend on the particular business model, investor profile, contractual arrangements, data flows, workforce and customer base. Tax, accounting, social insurance, corporate registration, immigration and other matters may require coordination with appropriately licensed professionals. Companies should also confirm the latest rules at the time of implementation, including the 2026 APPI amendments, the 2027 FEFTA reforms and any implementing regulations or official guidance issued after the date of this article.