Japan 5-year Startup Development Plan (2022)

Translated by Google, shamelessly adjusted and boldly commented by Adrien

[AB] Disclaimer: 

  • I alone am responsible for any misunderstandings or errors in this translation.
  • Each of my comments has been italicized and has the accountability symbol [AB] added.
  • Some of my comments might come from a translation issue so I’ll try to keep them constructive and vividly accept any of your corrective comments.

Important Remark before reading:

The LinkedIn Word editor has limitations, and I found this document would be better used if shared in editable format. So here is the link to the google document. And here is the original in Japanese that I restructured word-editor-wise to make it easier to read.

You are welcome to comment on it. It could be a way to give feedback officially if many of us have something of value to share.  

Or, you can most likely duplicate it and clean it up yourself with your own commenting style. I tried my best to make it usable.

Or you can just read the article in here but be aware that it’s a 13,000 words document. Google will be better to give you a comfortable reading experience.

Although I tried to throw some comments over, I still have a lot to say about this 5-year plan, but things can change, and the government can too. Maybe very soon. So what will be put into practice, really? I wonder. But there is still certainty that tackling all the issues mentioned in the plan and building a digital, investment-friendly environment is a matter of national security, and this will happen one way or another.

I know my work is far from perfect, and I hope you got the essentials of it in terms of Japan strategy and tactics from what I write on my own and that I detail in my articles such as this one.

I have a couple of disagreements with this plan: 

  1. This 5 year plan shall be included in a bolder 15 to even 50 years one (I missed it maybe, let me know if there is one. There is a reference to a white paper, maybe that’s the one). A 5-year plan should be viewed as adjustments to Japan’s much larger, more critical, and bold global strategy. I am aware that local stakeholders in each of the 47 prefectures view having a 5-year plan as crucial and even essential. However, you’ll discover that there is a strong desire to essentially copy and paste what is focused on US benchmarking. I may be wrong, because at the end of the day they will 
  2. Of course, it’s not bad per se, but for example the NFT strange focus (imho), the MBA creation to create more entrepreneurs, the focus on the old way (through universities) of disseminating the new way (startup one) makes me wonder if it’s the most actionable tactic to multiply startup creation and scale.
  3. The way in which many aspects of taxation, stocks, and financial regulation revision are handled is likely very welcome, but in our opinion, this can only be accomplished through a genuine cross-ministry effort with powerful tools to make things happen despite the unavoidable baronies they will encounter. It’s not Japan specific, it’s human and (political parties) nature.
  4. There was no emphasis whatsoever in a crucial, critical, and structurally important point for the very implementation of this great plan: the digital education of all the very needed civil servants and other economic areas stakeholders. These stakeholders are the local relays and must be supported in their local policies implementation by first understanding all things digital education, digital entrepreneurship, and ecosystem development.
  5. If you want to build a pyramid, you better have a strong base structure first. 

There is a white paper mentioned somewhere that we could also read and detail. But that will take way more time.

Don’t forget to follow the links to different references, such as government bodies, agencies, and newslets. 

You can also spend time researching, binging, and safariing for some of the organizations mentioned but not linked to.

In all fairness, I thought that “package” was really interesting, had a lot of potential for change, and was probably widely anticipated. Thus, “Hurrah!” But putting all of this into practice while coordinating practices and specific policies among the various ministries involved will either make this an actionable, a procedural, or a negotiation nightmare. 

The Hojokin consulting industry won’t be as necessary if procedures are sped up, made easier, and widely publicized. But I have my doubts.

In conclusion, all is well. Now let’s not get ahead of ourselves and get overexcited, as I happen to be, and wait and see how it unfolds, but be prepared.

That’s all for today 🙂.

Japan 5-year Startup Development Plan

1. Basic Concept  

  1. The Kishida administration is promoting efforts to realize a “new capitalism.”
  2. Startups embody the idea of “new capitalism,” which transforms social issues into engines of growth and realizes a sustainable economy and society.
  3. Japan’s leading electronics manufacturers and automobile manufacturers also started their history as startups founded by young people in their 20s and 30s immediately after the war, and later became global companies driving the Japanese economy.
  4. However, as of 2022, although a variety of challengers have emerged, the startup rate and the number of unicorns (unlisted companies with a market capitalization of over 100 billion yen) remain at low levels compared to the United States and Europe.

[AB]:It’s intriguing to focus on the EU and the US, and it’s perfectly understandable and warranted from a geopolitical standpoint. However, having lived in France, Canada, and China, as well as seeing the phenomenal growth of everything IT and startups in India, I would encourage us to monitor and assess digital ecosystem-related policies in Eastern, Southern, and even Southeastern Asia. Just to observe how these lesser-known ecosystems are dealing with digital transformation. There’s a lot going on over there.

However, the US startup scene motivated us all in the early days. That is a fact as well as a starting point for new ecosystems in the making. But a starting point nonetheless.

  1. On the other hand, it has been found that even existing large companies that use conventional technologies can grow sustainably if they engage in open innovation, such as M&A with startups or collaboration to introduce new technologies. 

[AB] For those still wondering about open innovation: When a business actively seeks out feedback, suggestions, and ideas from consumers, suppliers, and other outside parties, it is engaging in open innovation. This strategy for innovation is distinct from the more common practice of keeping new ideas and technology within the company.

Crowdsourcing, licensing, and collaboration with other businesses are all examples of open innovation. Companies can use open innovation to get access to cutting-edge ideas and technology, reach new markets and customer bases, and form profitable business partnerships and alliances.

In today’s ever-changing business climate, open innovation may be a useful tool, but it must be carefully managed to ensure it supports the company’s overall strategy and objectives. 

[AB] Here are five possible benefits of open innovation for small and medium-sized businesses (SMEs):

  1. Access to a larger pool of ideas and technologies: By collaborating with outside parties, SMEs can have access to a larger pool of ideas and technologies that may not be available within the firm. This can assist SMEs in being at the forefront of their industries and providing new goods and services to their clients.
  2. Increased efficiency and speed: By using the skills and resources of external partners, open innovation may help SMEs develop innovative goods and services more rapidly and efficiently. This is especially true in fast-paced businesses where time to market is vital.
  3. Risk and cost reduction: By collaborating with other companies or people, SMEs may share the risk and expense of creating new goods and technologies, possibly decreasing the company’s financial burden.
  4. Improved consumer engagement: Through open innovation, SMEs may better understand their customers’ requirements and preferences, leading to more successful goods and services that fulfill customer demand.
  5. Open innovation may assist SMEs in forming relationships and collaborations that can lead to new business prospects, such as joint ventures or licensing agreements. This might assist SMEs in expanding their market reach and growing their businesses.

It’s a little theoretical, but you get the idea.

I mentioned SMEs for a very opinionated reason: DX will happen and thrive by, with, and through them.

5. Against this background, this year will be designated as the first year for the creation of startups, and a second startup boom following the post-war founding period will be realized. To that end, we will create an ecosystem that fosters startups in Japan by accelerating the launch of startups and promoting open innovation by existing large companies. 

[AB]: This sounds like a formal declaration of support for entrepreneurship-related national transformation. Resembling a startup manifesto, which is encouraging to all of us, entrepreneurs of any company size.

6. In creating the startup ecosystem, we will not fall into the Galapagos way of thinking, but will have the perspective of creating startups that boldly challenge the global market. 

[AB] This strange expression (Galapagos way of thinking) refers to the Galapagos Syndrome which you might want to know more about. To put it simply, the Galapagos syndrome, often referred to as the “Japan syndrome,” is the phenomenon in which businesses or goods become isolating and inward-looking in the home market, which ultimately results in a lack of competitiveness in the international market. This is a word that is frequently used to describe items or firms that are popular in Japan but have a difficult time gaining momentum in other nations.

The Galapagos Islands are where the phrase “Galapagos syndrome” originated. These islands are famous for their one-of-a-kind and remote habitat. The comparison shows that, like the unique and different animals that can only be found on the Galapagos Islands, businesses or products that are made in isolation may find it hard to adapt to the many settings and market conditions that exist outside of their local market.

Galapagos syndrome is a term that is commonly used in reference to Japan. In this context, it refers to businesses that have a significant presence on the domestic market but are unable to replicate their success in other countries due to their concentration on the unique requirements and preferences of the Japanese market. This could lead to the production of goods or the delivery of services that are inappropriate for international trade, which would reduce competitiveness and make it challenging to enter new markets.

What does it mean for all strong-minded, able, and willing foreign entrepreneurs? Massive opportunities for bringing ideas and cultural context to Web and mobile applications and SaaS; countless industry areas where our arts can be performed; and a greater, wider, and deeper level of involvement in the future of Japanese society and ours.

This is a very special time for bright foreign individuals willing to make it happen here.

7. So far, we have established a minister in charge of startups, clarified the unified control tower function for implementation, and have set a record-largest ¥1 trillion budget for comprehensive economic measures and a supplementary budget to overcome high prices and realize economic revitalization this fiscal year. A Cabinet decision has just been made on budgetary measures aimed at nurturing startups, and while making use of this, the perspectives of building human resources and networks, providing funds for business growth, diversifying exit strategies, and promoting open innovation are being considered. Therefore, in order to fully mobilize policy resources over many years, we will compile an overall picture of Japan’s startup development measures by the public and private sectors as a five-year plan. 

[AB]: 1 trillion equals today’s [Dec. 18, 2022] USD 7.3 billion (very roughly). 

So who is the Japan minister “in charge of startups”?. Here is the answer detailed in Japan NewsJapan Times. It’s already old news, but this set of measures might be made contingent on Economic Revitalization Minister Daishiro Yamagiwa’s freedom of action.

JDSupra has a piece here. [I can’t really recommend this site just yet, but the essay is worth reading for two reasons:

Reason 1: It provides a closer look at a (surprising to me) emphasis on NFTs, which I encourage to view as potentially limiting because it means freezing a unique (before AI comes up hustling and disrupting the disruptor) work of art, for example, on the blockchain while forgetting that AI is changing everything in the creation process making. This specific NFT being endlessly customizable, it develops then an unlimited degree of alternatives rendering unique ownership on the blockchain already outdated as a process and artist for example absolutely hopeless in preserving their art inclusion in fresh and endless “item production”.

If I place NFTs in the perspective of AI generated images, I would say that the focus on it is a bit late, since the way we can develop art inspired by great painters using AI tools will most likely make NFTs obsolete.

However, if I think in terms on online gaming, virtual real estate, and “physical” art, there are potential industries in the making.

Reason number two is the long-awaited support for Web3, blockchain, crypto, and DAO-friendly rules. This is something I’m going to have to keep an eye on. Not just in terms of analyzing good-hearted policy suggestions but also in terms of actual actions on the ground: subsidies [Hojokin], tax breaks, loans and guarantees, ecosystem support, and so on.

It has the potential to be a game changer in terms of attracting not only Japanese investors but also protecting local entrepreneurs’ freedom to build and experiment in blockchain/crypto-related fields without the constant hanging Damocles sword controlled by finance and tax regulators’ suspicious attitudes of any crypto-related new businesses.

Let’s take a closer look at the measures outlined in this point 7 and in more detail below.

2. Goals 

  1. In order to create an ecosystem that nurtures startups in Japan and realize the second startup boom, it is necessary to set big goals and work together with the public and private sectors to achieve them. 

[AB] Although I may be stepping outside of my “attributed” zone, I believe it might be time for us to work together to support, suggest, comment on, and even alarm the “startup officials” about specific non relevant measures. We can accomplish this by getting together, sharing our personal building experiences, and providing them with useful feedback so they can take appropriate corrective action if they see fit. 

It must be done politely, and our counsel must be delivered in a way that demonstrates deference and consideration. 

2. Regarding goals, it is important to focus not only on the “number” of startups (the number of businesses opened), but also on the growth of the startups that have been established, that is, on the “expansion of scale.” Therefore, we focus on the amount of investment in startups as an indicator that includes the absolute number of startups and the expansion of the size of the startups that have been founded.

[AB]: All this seems appropriate and obvious. However, as one set of KPIs applies to a specific startup or industry, another set of KPIs should apply to the authorities’ way of witnessing and addressing progress, imagining improvements, and reducing or changing what does not work for startup and scaleup progress. 

The effectiveness of a startup development strategy and how well it promotes digital transformation and entrepreneurship in a nation can depend on a variety of factors. Ten potential areas of focus for a government in such a plan are listed below:

  1. Access to funding: Startups frequently require financial assistance to get off the ground and thrive. Governments can help startups get the money they need by giving them grants, loans, and other forms of financing.
  2. Creating infrastructure: Startups require high-quality internet, telecommunications, and transportation infrastructure to succeed. Governments could put money into building up infrastructure to make it easier for startups to work and reach customers.
  3. Getting people educated and trained is important for the success of new businesses and the economy as a whole. Governments can pay for programs that help people get the education and training they need to be successful in the startup industry.
  4. Startups are often at the forefront of innovation. Governments can create an environment that encourages innovation by investing in research and development, funding incubators and accelerators, and giving tax breaks to companies that invest in innovation.
  5. Governments can help startups by making rules easier to understand, cutting down on red tape, and giving advice on how to deal with complicated rules.
  6. Governments can provide tools and assistance to those wishing to establish their own enterprises, such as business development services, mentorship programs, and networking opportunities.
  7. Startups often benefit from working with other companies and forming partnerships. The government can help these kinds of partnerships by encouraging networking and connecting startups with possible partners.
  8. Governments can help speed up the adoption of digital technologies by giving money and support to digital transformation programs and encouraging entrepreneurs to use digital tools and platforms.
  9. Tax breaks: Governments might give tax breaks to startups to get them to set up shop and grow in a certain area. These might include reduced tax rates for startups or tax benefits for businesses that invest in R&D.
  10. Governments can help new businesses by making it easier for them to get into domestic and international markets, such as through trade missions or promoting exports.

Okay, I get it; “These are too obvious too.” So let’s try to delve a little deeper and list 20 more potential KPIs that are unique to Japan in its quest to escape the “galapagos syndrome,” which has prevented the nation from regaining its former international brilliance for too long [beware, it could be viewed as too “foreigner” centric, sort of].

  1. Number of startups established by overseas entrepreneurs: This KPI tracks the number of startups founded by people from countries other than Japan, which might bring in new viewpoints and help to internationalize the startup ecosystem.
  2. Number of international partnerships and collaborations: This KPI tracks the number of partnerships and collaborations made by Japanese startups and multinational corporations.
  3. Number of startups enrolled in international accelerators or incubators: This KPI tracks the number of startups enrolled in international accelerators or incubators, which can give access to worldwide networks and assistance.
  4. Number of startups successfully exporting products or services: This KPI tracks the number of startups that successfully export their products or services to foreign nations.
  5. Number of startups entering new markets: This KPI tracks the number of startups that can enter and prosper in new local and international markets.
  6. Number of startups obtaining worldwide recognition: This KPI tracks the number of startups that have received international recognition from organizations or media throughout the world.
  7. Number of overseas investors: This KPI tracks the number of international investors who fund Japanese companies.
  8. Amount of international investment attracted: This KPI tracks the overall amount of overseas capital attracted by Japanese startups. Jetro probably does it in some form or shape.
  9. Number of patents registered internationally: This KPI tracks the number of patents registered in foreign countries by Japanese startups, which can assist them defend their intellectual property and drive innovation.
  10. Number of foreign consumers: This KPI tracks the number of international customers who use Japanese startups’ products or services.
  11. Number of startups having a worldwide client base: This KPI counts the number of startups with a substantial proportion of their customers based outside of Japan.
  12. Number of startups planning international expansion: This KPI tracks the number of companies planning to extend their operations overseas.
  13. Number of startups with international partnerships or collaborations: This KPI tracks the number of startups that have international partnerships or collaborations.
  14. Number of companies having foreign investors: This KPI tracks how many startups have international investors.
  15. The number of businesses having foreign board members or advisers is measured by this KPI, which can bring useful global insights.
  16. Number of international events held in Japan: This KPI tracks the number of international events held in Japan, such as conferences or trade exhibits, which can boost the country’s reputation as a centre for innovation and entrepreneurship.
  17. Number of foreign media mentions: This KPI tracks how many times Japanese startups are cited in overseas media.
  18. Number of foreign awards received: This KPI tracks the number of international awards received by Japanese startups, which can aid in the development of their reputation and credibility.
  19. Number of foreign speaking possibilities: This KPI tracks the number of speaking opportunities available to Japanese startups at international conferences or events, which can assist to boost the company’s and the country’s profile.
  20. Number of highly talented international individuals drawn to work for Japanese startups: This KPI evaluates the number of highly skilled foreign individuals drawn to work for Japanese startup companies, which can assist to bring in new views and knowledge.

3. Five years: 360 billion yen (2017) → 820 billion yen (2021). By doing so, we will set a major goal of increasing the scale by 10 times (to 10 trillion yen) in 2027, five years from now, and we will promote joint efforts by the public and private sectors. 

[AB] So we are talking about USD 73 billion through 2027. Naturally, more details on repartition would be beneficial.

4. Furthermore, in the future, by creating 100 unicorns and 100,000 startups, we aim to make Japan the largest startup hub in Asia and one of the world’s leading clusters of startups. 

[AB] That’s great news; that’s huge; and it’s a terrific purpose, but getting there will be a lot of work, and we are contemplating a very long journey ahead of us to reach those goals, or I haven’t a clue what I’m talking about. 

To me, it still seems like a 15-year game, no less, to deal with. 

  • the three generations that need to be addressed in terms of digital education,
  • to disseminate entrepreneurship education and support at all societal and education levels, and 
  • to help ecosystem stakeholders with digital education and support. 

And even after 15 years, there is still no assurance whatsoever. But it is undoubtedly the sort of higher purpose that I enjoy assisting with in my modest ways. But we shouldn’t think that the goal of getting 100 unicorns in a short amount of time is possible unless it’s a “Ganbatte” slogan. 2027 is tomorrow already. 

I have some reservations even about the 100-unicorn target’s viability altogether and am not a big fan of the unicorn craze. Though it may not be possible in the long run given that we live in a world that is perpetually disrupted, I would prefer to see goals like creating 100,000 profitable and sustainable small startups (or, better yet, digitally transformed, or peacefully acquired and then digitally transferred) businesses. 

Here’s a Statista infographic to help us “pour a little water in our wine,” as the French that I am would say.

Another map here, and another India perspective here

Does that render the objective pointless? The Marshall Plan-style action plan with Japan’s digital education, digital entrepreneurship dissemination, and ecosystem development and deployment training and support would require 5 to 10 times the amount suggested to invest at the national level, but if you were in charge of making it happen, it would give you some perspective between facts and fiction. I may be mistaken, my attempts to interpret may be excessive, and my ability to see things from various angles is undoubtedly constrained. So please accept my apologies if my conclusions are too limited. In any case, this 5 year plan is more than exciting in terms of perspective.

Even more controversially, unless you agree with me that omicron now resembles the flu, I’d try to compare something that is obviously difficult to do: USD 73 billion for a 5 year “sort of Marshall” plan to a USD 317 billion budget for Covid. 

Before you go ballistic on me, but maybe I deserve it, I understand the sensitivity of the topic, and I know that all of this enormous budget is not only affected to new shots and other directly related health initiatives and expenses. Still, it’s huge and demonstrates that going Marshall is possible and really necessary for the digital world in an SME context since they are more or less the only ones that can recruit enough.

However, because there are so many societal, social, economic, and health (aside from Covid) problems, and because the government’s coffers aren’t inexhaustibly deep, I’ll say that the efforts are already fantastic and I won’t complain in any way. You can definitely relax.

3. Direction of the package  

  1. higher the average rate of entry and exit of firms (indicator of creative destruction), the higher the per capita economic growth rate. Furthermore, young companies (startups) contribute more to the creation of added value. 9.2% in the US and 11.9% 

Okay, not much more can be said at this point. It suggests a different kind of KPI that will probably be talked about in more detail below.

2. is only 5.1%, compared to UK2 the rate of business exits is also 3.3%, compared to 8.5% in the US and 10.5% in the UK3. 

3. First of all, in Japan as well, we will foster a large number of people who will lead startups and accelerate their start-ups. Therefore, in order to discover and nurture young human resources with excellent ideas and technologies, we will work to develop practical entrepreneurs by utilizing not only domestic but also overseas mentors and educational institutions. In addition, we will develop human resources who will be responsible for starting up startups in Japan, such as sending young human resources to countries around the world for training, and build a global network of such human resources. 

[AB] Most likely, the incubators, accelerators, venture studios, angel associations, and VC organizations could get some help from the government at some point, either in the form of direct investment or help with running the programs. Let’s read on.

4. the 1980s, but4(2019)5 startups trending ($30 billion in 2008 → $60 billion in 2015)6. In other words, support for promising companies is increasing, playing a major role in nurturing startups.

5. Therefore, in Japan as well, we will work to expand the supply of funds, including public capital, in conjunction with securing the leaders of startups. For this reason, in addition to fostering domestic venture capital, efforts will be made to attract overseas investors and venture capital. In addition, from the perspective of diversifying the business development and exit strategies of startups, centering on deep-tech startups that take time to grow, the government will promote the development of an environment related to stock options and the expansion of public procurement for startups. 

[AB]: Undoubtedly, it will help. Let’s read some more.

6. From the perspective of open innovation, the amount of investment in start-ups by business companies in Japan is extremely low compared to the United States, China, and Europe (US$ 40.2 billion, China US$ 11.5 billion, Europe US$ 9.0 billion). US$, Japan US$ 1.5 billion (2020))7. Also, the number of M&A deals with startups in Japan is extremely low compared to Europe and the United States ( 1,473 in the US, 244 in the UK, 60 in France, 49 in Germany, and 15 in Japan (2020))8. 

7. When considering startup exits, focusing on the ratio of M&A and IPO, M&A accounts for 90% in the United States, while IPO accounts for 80% in Japan, indicating an overwhelmingly high ratio of IPO9. It is required to increase the ratio of M&A. 

8. In this way, acquiring startups is important both as an exit strategy for startups and as a measure to promote open innovation by existing large companies. It is important to promote the development of an environment to promote innovation. 

9. Based on the above, in this five-year startup development plan, we will promote the following three major initiatives as an integrated effort. 

-(1) Building human resources and networks for creating startups 

-(2) Strengthening funding for startups and diversifying exit strategies 

-(3) Promoting open innovation 

[AB]: great. Not much of a comment, I know.

10. In addition, the fact that public support has been provided is certification for startups that have received support. It is said that it will play a role of effect (approval) and stimulate further private investment. The Cabinet has already approved the largest ever budgetary measure (approximately 1 trillion yen) for the development of startups as part of the recent comprehensive economic measures. The government will continue to mobilize all policy resources and make efforts to realize a major direction in the public and private sectors while conducting follow-up.

11. Regarding deep tech, which is a new industrial field that can become the core of the next-generation industry, we will clarify the priority fields. In addition, the government will strengthen initiatives related to entrepreneur education and startup creation support that specialize in individual deep tech fields such as agriculture and medicine. 

12. Tax measures will be considered in the future tax reform process. 

[AB]: We are totally aligned on this. Next, it must be structured. Probably later on, since I haven’t found it in this document.

4. First Pillar: Building Human Resources and Networks for Startup Creation  

  1. As was already mentioned, compared to the United States and major European nations, Japan continues to have a low rate of business openings and closings, and its population has one of the lowest perceptions of entrepreneurship as a desirable career path. 
  2. According to a survey of startups, 60% of respondents said that improvements in “awareness, climate, and trends” are necessary to increase the number of entrepreneurs in Japan11. For this reason, it is necessary to promote the development of human resources who aspire to start startups from a young age, such as in their teens and twenties. 
  3. Regarding support for startup creation at Japanese universities, the percentage of universities that provide commercialization support, facility provision, and entrepreneurship education for startups is still small, and we will improve this. 

[AB]: It’s exactly what we have been advocating in “Project 15: 3-Generations.” There is a lot to say about this, but in another article. However, I’ve witnessed many private initiatives for kids’ CS learning, and youth app development learning programs. All of this is being built as independent franchises rather than global and transferable initiatives. There is maybe something we can do to harmonize this for local economic development areas’ direct implementation.  

4. In addition, the government will improve the framework for providing support to those who are actually trying to start a business so that they can effectively connect their technology and knowledge to business. 

[AB]: not sure what it means concretely. But we’ll probably know this later on.

5. As an organization to support startups, “incubators” that lend facilities and equipment to startups are gradually being established in Japan. It is becoming clear that it is essential for people with entrepreneurial experience to act as “mentors” (advisors) and provide detailed advice. 

6. receiving support from “accelerators” that provide mentoring can succeed (acquire or exit) earlier than startups that do not receive support12 startups. 

7. These suggest that accelerator mentors are able to provide useful information to startups support from mentors in Japan is still limited, so it is necessary to secure such opportunities. 

8. For this reason, we will promote the following specific efforts to build human resources and networks for the creation of startups. 

(1) Expansion and lateral development of support projects by mentors 

  • As a program for selecting and supporting young human resources in Japan, in the IT field, top runners in industry and academia serve as mentors in the “Unexplored Business” (Information-technology Promotion Agency). It discovers talented human resources (adoption screening) and provides project guidance (approximately 70 people per year). So far, 300 people have started or commercialized their businesses from this project. 
  • Expanding this on a large scale and developing it horizontally is meaningful for nurturing startups. By expanding this to efforts to develop young human resources centered on technical college students, high school students, and university students, the overall scale of training will be expanded from “70 people a year” to “500 people a year” in five years. 

[AB]: to better understand this part, I’ll need to delve into the IPA website and try to understand which is the demographics they are referring to. 500 people a year seem really low except if we refer to educators that will be in charge of disseminating digital education. I’m not sure I got this right.

  • In addition, we will consider further expanding the body for training young human resources by such mentors to include the Japan Agency for Medical Research and Development, the Japan Science and Technology Agency, the Japan Aerospace Exploration Agency, the Agriculture and Food Research Organization, etc. 
  • In addition, we will support the succession of the results of the Innovation Program, discover top talent from overseas such as Asia, and strengthen their efforts to attract them to Japan. Expand the Global Startup Acceleration Program, which includes mentoring with family members and network expansion. 

(2) Establishment of bases for fostering entrepreneurs overseas (“Dejima” project): 

  • We will select 20 young people who want to start businesses and dispatch them to Silicon Valley. Expanding. In doing so, a mechanism will be established to recruit a wide range of human resources, including students and female entrepreneurs. In addition, based on the perspective of securing opportunities to receive guidance from mentors, which are still limited in Japan, we are planning to visit US cities that are hubs for innovation, such as Silicon Valley, Boston, New York, San Diego, and Austin, as well as Israel, Singapore, Add intern training at startups, venture capital firms, accelerators, etc. in various parts of the world such as Northern Europe. In addition, new Japanese business bases will be established in Silicon Valley and Boston.

[AB]: well… ok.

(3) Enhancing Entrepreneurship Education, Including the Establishment of U.S. Universities’ Entrepreneurship Development Programs for Japan

  • there are limits to the provision of educational programs that have global strengths in entrepreneurship development. For this reason, the establishment of an MBA program for fostering entrepreneurs in Japan at American universities will be considered, and the environment will be improved so that people can earn a degree while working in Japan. 

[AB]: I don’t really get the interest in a world where so many drop out can become successful entrepreneurs. They understand how direct experience is far more beneficial than extremely expensive degrees. But it’s maybe another type of program I don’t know about. I have an MBA; I understand its purpose, curriculum, and limitations, and I seriously doubt it can help aspiring entrepreneurs. However, it may be useful for those looking for theoretical knowledge. 

(4) University Exit 

  • Although there are many university startups in metropolitan areas such as Tokyo, Kanagawa, Kyoto, Osaka, and Fukuoka, they are born all over the country, and there is also potential in rural areas. 
  • In order to support the creation of university-originated startups, research universities across the country are launching a movement to start up 50 companies per university, with one company aiming to exit. 

[AB]: That is the kind of project that makes me excited because there are treasures to be found here.

(5) Support for creating startups at universities and elementary, junior high and high school students 

  1. Considering the fact that nearly half of university students also want to work for startups, entrepreneurship education and support from mentors/accelerators for students who wish to do so. It is important to provide opportunities for 
  2. Centered on startup ecosystem base cities (8 cities), with the participation of overseas accelerators and venture capitals, over 5,000 projects, including global expansion, will be launched from universities in 5 years support the transformation. 
  3. For this reason, a new fund of 100 billion yen for five years, ten times the current fund, will be created in the Japan Science and Technology Agency. 
  4. We will promote the introduction of a “cross appointment system” that allows researchers, etc. to conclude employment contracts with both companies and universities/colleges of technology. 
  5. Incubation facilities at universities will be developed. In addition, efforts will be made to match technology seeds from universities and national research institutes (National Institute of Advanced Industrial Science and Technology, etc.) with managerial personnel at large companies. 

[AB]: These are really great points for bringing digital entrepreneurship and support to students via universities.

6. In addition, for elementary, junior high and high school students, we will establish a new support program for entrepreneurship education by inviting entrepreneurs as lecturers, and expand the implementation of entrepreneurship education for elementary, junior high and high school students that utilizes class hours such as comprehensive studies. 

[AB]: count me in.

7. schools and technical colleges that systematically engage in entrepreneurial education, and for elementary, junior high and high school students with high abilities in the STEM field, .we will strengthen support for educational opportunities for high 

8. Currently, 16,000 university and graduate students and 1,400 high school students are supported to study abroad annually. In addition to the fact that there are more people in Japan, it is meaningful to have junior and senior high school students also study abroad and gain learning experiences overseas, etc., in order to spread the entrepreneurial spirit in Japan. For this reason, we aim to expand support over the medium to long term. 

[AB]: It looks to me that those measures and many others are blurring lines between ministries’ areas of responsibilities. Those last measures would probably come more from the education ministry unless the “startup” ministry is cross-ministry. It is important to follow up on this since there will be opportunities to participate in the global effort.

(6) Enhancing Entrepreneurship Education 

  1. At Colleges of Technology with regard to colleges of technology, the government will actively promote entrepreneurship education at colleges of technology, as well as promote collaboration among colleges of technology, making the most of their “high technical capabilities.” 
  2. In addition, for colleges of technology that are engaged in entrepreneurial education using AI and deep tech, we will improve the environment, such as a trial production space, to enable free production activities and practical classes. 

[AB]: probably a translation issue, but I’m not sure what it really means.

(7) Global Startup Campus Concept 

  1. In order to contribute to the global expansion of human resources and research seeds of Japanese universities and research institutes, international joint research in the deep tech field will be conducted by inviting top overseas universities and inviting excellent researchers. We will establish a global startup campus with public and private funds, which will have both an incubation function and an incubation function. 
  2. In doing so, we will build long-term and stable cooperative relationships with top overseas universities, etc., and aim to realize strategic management by building an endowment (university fund) for the campus itself. . 
  3. In addition, the establishment of campuses will revitalize research and development at domestic universities and encourage reforms. Furthermore, rather than waiting for the completion of campus facilities and equipment, we will proactively implement joint research and researcher exchanges with overseas universities, etc., and quickly create startups not only in academic fields but also in startups and venture capital 
  4. we aim to develop doctoral course students and young researchers who are active globally, 
  5. overseas and global inner circles will also be possible through the use of entrepreneur training and incubation programs held by overseas universities and the formation of networks with top overseas venture capital firms ecosystems 
  6. By collaborating with domestic and foreign companies, we will improve the ability of domestic companies to create innovation through joint research and entrepreneur development programs on the same campus. 
  7. In cooperation with relevant local governments, from the perspective of strengthening the ecosystem as part of city planning, we will promote measures such as improving the living infrastructure for foreign human resources in an integrated manner to form a truly global campus. 
  8. This initiative will be a free “place of practice” that is not bound by the rules of existing organizations. We plan to establish a campus as a matter of course. 

[AB]: All this looks nice. I don’t have much to say.

(8) Intellectual Property Strategy at 

  1. Startups and Universities In order to enable startups to smoothly utilize the intellectual property owned by universities, etc., and develop their business, it is necessary to review the rules for handling non-exclusive licenses, etc. pertaining to patents jointly owned by universities and companies. In the current fiscal year, we will consider the development of an environment that makes it easy to utilize the shares and stock acquisition rights of startups, including the removal of restrictions on the university side when acquiring intellectual property rights from universities in exchange for stocks and stock acquisition rights. compile the “University Intellectual Property Governance Guidelines” within. We will also strengthen support for overseas patent applications by universities. 
  2. At the same time, with regard to the “open patent information database,” which registers patents with the intention of licensing (transferring or licensing) to third parties, the government will improve the database and promote public-private partnerships, including the transfer of data to the private sector. Strengthen. In doing so, we will also consider the modalities of incentives for licensing patents that we own to third parties. 

[AB]: This is very exciting news.

(9) In order to promote the participation of Japanese researchers in the international top circles of the research community through expanded 

  1. joint research with researchers in the research field, as well as to acquire excellent young researchers overseas and strengthen their connections, With regard to international joint research support(Grants-in-Aid for Scientific Research “International Leading Research”), which requires the participation of young researchers, it has been made a requirement that young researchers account for 70% of the total expenses, in principle. support above. 
  2. In order to realize the world’s highest level research university, support will be provided through a university fund of 10 trillion yen based on the Act on International Universities for Excellence. In addition, we will work to improve the treatment of doctoral course students and improve the research environment, and increase the number of doctoral course students who receive an amount equivalent to their living expenses by 3 times (approximately 70% of students advancing to doctoral courses) by FY2025.
  3. As a further support measure for doctoral degree holders, addition of salary grades, etc. for doctoral course graduates in the recruitment of civil servants, such as implementation of additional measures for starting salaries for those who have completed doctoral courses in national public servants in FY2023. along with promoting the introduction of doctoral degrees on business cards of civil servants. Encourage a change in awareness of the use of doctoral degrees in private companies as well. 

[AB]: ok, does not look groundbreaking, unless I’m mistaken.

(10) Expansion of Attraction of Foreign Entrepreneurs and Investors 

  1. Currently, foreign entrepreneurs are permitted to enter the country and stay in Japan for up to one year as a startup visa (foreign entrepreneurship promotion business), but who confirms it? , is limited to local governments accredited by the national government. 
  2. In the future, in order to accelerate the attraction of further foreign entrepreneurs, not only local governments but also private organizations such as venture capitals and accelerators certified by the government will be able to carry out confirmation procedures for startup visas. Try to extend the period. 
  3. In addition, we will facilitate the granting of status of residence so that overseas angel investors can be active in Japan. In addition, efforts will be made to facilitate procedures for opening bank accounts. 
  4. We will promote the development of the living infrastructure necessary for acquiring highly-skilled global human resources, such as smooth granting of university entrance qualifications to foreign children who have graduated from international schools, multilingual support at government agencies and medical facilities, and onlineization. . 

[AB]: Everything that was mentioned is what we were hoping would occur. Great news.

(11) Developing an environment that supports re-challenges 

  • In 2022, the Employment Insurance Act was amended to stipulate that, in principle, one year after leaving the job, the eligibility to receive unemployment benefits would be lost. A system was established in which a maximum of 3 years is not counted in the period of receiving benefits. We will strive to develop an environment that encourages entrepreneurs to take on new challenges, such as by sufficiently disseminating information about this system. 

[AB]: This is a valid point. In most cases, failure is expected in the startup world. It won’t seem to make us outcasts anymore. 

(12) Promoting the Formation of Domestic Entrepreneur Communities In 

  1. Japan as well, in order to create further entrepreneur communities that will accelerate global expansion, regulatory reforms, expansion of the J-Startup system, and improvement of the environment, including the development of incubation facilities. proceed. 
  2. Universities, startups, venture capitals, and other parties concerned will share and train on successful examples of building ecosystems. Ram PEAKS14, etc. 

[AB]: Please refer to the article’s notes at the bottom. Sorry again for the poor translation. 

5. Pillar 2: Enhancing funding for startups and diversifying exit strategies  

  1. In the United States, various funding methods are available according to the stage of growth. The scale of all funding methods, including IPOs, public offerings, private equity funds, venture capitals, and corporate venture capitals, is much larger than that of Japan. 
  2. Looking at the amount of venture capital investment in 2021, both the amount and number of investments in Japan are still small (230 billion yen, 1,400 cases). In addition, compared to the amount of investment in 2020, the amount of investment in the United States (36.2 trillion yen, 17,100 cases) has doubled, while the amount of investment in Japan is only 1.5 times, and growth is low15. 
  3. When companies that have received venture capital investment are compared with those that have not, the companies that received investment are more active in expanding employment and innovating. In other words, it is confirmed that venture capitalists have the ability to significantly evaluate startups and have the ability to nurture them. 
  4. In order to expand venture capital investment in Japan, we will expand investment through limited liability investment of public capital in venture capital, including overseas venture capital, and expand support for startups by the government in cooperation with venture capital. proceed. 
  5. In addition, from the perspective of diversifying the business development and exit strategies of startups, we will promote the development of an environment for stock options and the expansion of public procurement. 
  6. For this reason, we will promote the following specific initiatives to strengthen funding to startups and diversify exit strategies. 

[AB]: All good points. Let’s see below where we are getting at.

(1) Strengthening the function of investing in venture capital by the Organization for Small and Medium Enterprises and Regional Innovation, Japan 

  1. The Organization for Small and Medium Enterprises and Regional Innovation, which has a track record of investment, will newly make limited liability investments in domestic and foreign venture capitals that have the financial strength and know-how to nurture startups. We will strengthen the investment function of 20 billion yen, keeping in mind the possibility of 
  2. Furthermore, regarding the new medium-term goals and plans from fiscal 2024 of the Organization for Small and Medium Enterprises and Regional Innovation, we have set goals to further strengthen the limited liability investment function, and we have decided to invest only in venture capitals run by young capitalists. We will consider supporting the development of domestic venture capital, such as establishing a framework, and reviewing the upper limit of the debt guarantee system for deep tech startups.

[AB]: That are tremendous news. Potentially game changer for those of us obsessed in supporting young structure undercaptalized.

(2) Strengthening the investment function of the 

  1. Innovation Investment Corporation has a track record of investing in startups through a 120 billion yen fund over the past four years. 
  2. In addition to launching a new fund that will double the investment scale, we will submit a bill around 2024 to extend the investment period to 2050 (the current deadline is 2034). Enhance functionality. 

[AB]: Great news.

(3) Strengthening investment functions of public-private funds, etc. 

  1. We will strengthen limited liability investment in domestic and foreign venture capital using public funds, including public-private funds other than the Organization for Small & Medium Enterprises and Regional Innovation, Japan and the Innovation Investment Corporation. Supply enough risk money to realize the amount of investment in a startup that is more than 10 times larger. 
  2. Regarding public-private funds, we will cooperate with the New Energy and Industrial Technology Development Organization and the Japan External Trade Organization (JETRO) in order to gather information from overseas, attract investors, and strengthen the network between overseas venture capital and Japanese startups. while working to strengthen overseas base functions and overseas venture capital investment functions. At that time, we will obtain cooperation and cooperation from gatekeepers (advisors) such as private financial institutions who have the ability to discern. 
  3. In addition, with regard to cooperation between government startup support organizations, we will strengthen unified information dissemination and increase effectiveness as a central point of contact. 
  4. Promote further utilization of special investment operations of Development Bank of Japan Inc. (DBJ). 

[AB]: Great potential support to help in developing a real VC culture. I’m not sure, however, how incubators, accelerators, and other startup support organizations will understand how to navigate easily through all these structures and probably programs. Consulting will be necessary. 

(4) Strengthen support measures for R&D startups by the New Energy and Industrial Technology Development Organization 

  1. In order to fill the gap between the technology seeds of R&D startups and their commercialization, it is equivalent to the practical development costs of certified venture capital. The New Energy and Industrial Technology Development Organization subsidizes the remaining two-thirds on the condition that one-third of the amount to be invested is invested. 
  2. In the future, we will increase the upper limit of the subsidy, expand the support menu, and expand the target venture capital including overseas venture capital. Create a new fund of 100 billion yen (20 billion yen per year). At this time, considering the burden on startups, efforts will be made to simplify the procedures.

(5) discovery ventures by the Japan Agency for Medical Research and Development 

  1. support for drug3 On the condition of investment, the remaining 2/3 is subsidized by the Japan Agency for Medical Research and Development. 
  2. In the future, we will expand support to areas other than those related to infectious diseases, such as drug discovery, where funding is difficult. At this time, considering the burden on startups, efforts will be made to simplify procedures. 

[AB]: it concerns the medical-related industries.

(6) Strengthening connections with advanced overseas ecosystems In 

  • Boston, venture capitalists in the bio field have capitalists with advanced expertise, and from the stage of basic research before company launches, universities, hospitals, pharmaceutical companies The evolution of the startup creation and training model, such as starting support in collaboration with other companies, has realized early exits for bio-startups. We will strengthen the connection between the world’s most advanced ecosystem and the drug discovery startup ecosystem in Japan. 

(7) Measures to encourage investment in startups In 

  1. order to supply funds to startups from individuals such as founders, a preferential tax system will be developed for the sale of shares held and reinvestment in startups. 
  2. Regarding the angel tax system, we will consider simplifying the procedure and making it online, such as reducing the application documents required to receive tax incentives. 
  3. In addition, in order to promote angel investment, we will work to spread platforms for information sharing and matching between angel investors and startups. 
  4. Consider measures to deal with social entrepreneurs (impact startups) in the future. 

(8) Promoting investment from individuals to venture capital 

  • Considering the fact that a large amount of personal funds are invested in venture capital in other countries, it is important to encourage individuals to invest in startups through venture capital while paying attention to investor protection. Consider measures to further promote investment, including tax measures. 

(9) Improving the environment for stock options

  1. In Japan, the amount raised through IPOs is smaller than in the US and Europe, and it has been pointed out that startups are rushing toward IPOs. It is important to allow startups that take time to commercialize, and startups that want to remain unlisted for a long period of time to expand their business, to be able to flexibly choose the timing of their IPO, mainly in the deep tech sector. 
  2. Regarding stock options, which are used globally as employee compensation for startups, it is desirable that the timing of exercising rights (listing) can be flexible according to the growth speed of the startup’s business, and that it can be used through simple procedures. . 
  3. For this reason, we will extend the exercise period of the stock option tax system for startups. 
  4. In addition, regarding tax-qualified stock options, the obligation to entrust the custody of stock certificates, which is currently required when rights are exercised when unlisted, will be eliminated and further relaxation will be sought. 
  5. In the United States, so-called stock option pools, in which a certain amount of stock option issuance limits are set in advance and stock options are granted flexibly to employees, are widely used. In Japan, under the Companies Act, it is necessary to grant stock options to employees within one year after the stock option issuance limit is set based on the resolution of the general meeting of shareholders, and such flexible issuance of stock options is not permitted. . In Japan as well, while referring to the example of the United States, we will improve the environment for the realization of stock option pools, including revisions to corporate law measures and taxation measures. 
  6. In addition, we will organize and clarify in guidelines the issues that startups face when using stock options, such as the use of stock option pools and the handling of stock options when employees retire. 
  7. Unclear rules for how to measure the price of classified stocks in the case of unlisted stocks hinder the granting of stock options as remuneration. Through guidelines, etc., clarify the price calculation rules for classified stocks. At the same time, there are voices saying that it is not clear in what cases a special resolution of a general meeting of class shareholders is required for class shares. Therefore, we will conduct necessary studies, including clarification of requirements, based on actual needs. 
  8. Investigate the actual situation of trust-type stock options (a system in which stock options are granted via a trust company), and take necessary measures according to the results. 

[AB]: not much to say. Great measures to support investment, and potentially very interesting support to startup intermediary organizations. To be followed.

(10) environment for utilization of RSU (Restricted Stock Unit) 

  • is generally used as a reward/incentive for employees. On the other hand, in Japan, it is unclear whether or not RSUs fall under the obligation to disclose new stock issued for new stock issuances of 100 million yen or more annually, as stipulated in the Financial Instruments and Exchange Act. there is a voice Clarify the handling. 

(11) Improving the environment for the use of 

  • stock investment-type crowdfunding Stock investment-type crowdfunding is a mechanism in which an unlisted company issues stocks and collects small amounts of funds from many people through the Internet. Consider making it possible to procure funds from professional investors that exceed the current maximum issuance amount (100 million yen). Plan. 

(12) Fundamental review of SBIR (Small Business Innovation Research) system and promotion 

  1. of public procurement It is important to utilize public procurement in order to nurture startups. With regard to the SBIR system (Small Business Innovation Research), with reference to the SBIR system in the United States, we will drastically expand support for companies that have just been established (startups). 
  2. With regard to properties, construction work, and services procured by the national government, independent administrative agencies, and other government-affiliated institutions, the contract ratio from SMEs less than 10 years old remains at around 1% (77.7 billion yen (FY2020 results)). Where possible, we will expand procurement from startups and quickly expand the contract ratio to 3% or more (300 billion yen scale). 
  3. The minister in charge of start-up will follow up on the implementation status of the measures, and if they are not achieved, they will urge the ministries and agencies in charge to make corrections. 
  4. In the current SBIR system, each ministry’s R&D-related subsidies are aggregated for the FS stage of business ideas (“Phase 1”) and the R&D stage for practical application (“Phase 2”). It supports research and development of startups with 7 billion yen. Along with expanding that, we will also add the large-scale technology development and demonstration stage (“Phase 3”) to the scope of support. 
  5. At that time, not only will the Cabinet Office compile R&D-related subsidies from each ministry and designate them, but also through the Cabinet Office, a new fund of 200 billion yen for 5 years (40 billion yen ” to back up. 
  6. In addition, we will promote the use of startups, including those selected as J-startups, in a wide range of government procurement, including public infrastructure (railway, electricity, water, etc.). 
  7. In order to expand the participation of startups in government procurement, we will consider a bidding participation qualification system, including consideration of rules on negotiated contracts and measures to add points in large-scale national research. 
  8. In order to comprehensively promote public procurement by local governments, the following measures will be promoted. 

▪ Promote the unification of documents, which differ among local governments, and online procedures. 

▪ Encourage a cross-sectional review of procurement participation requirements that differ for each local government, and promote procurement by local governments and private businesses through visualization of the state of public procurement by the government. 

▪ Take measures such as giving additional points to procurement from startups at the time of adoption screening for digital garden city national concept subsidies to promote local digital implementation. 

▪ We will catalog the specifications of services provided by IT companies, including startups, and aim for early introduction by demonstrating a digital marketplace that makes it easier for the government to procure products that meet the requirements by the end of FY2023.

[AB]: To be perfectly honest, I’m a little lost here, but I get the impression that this is a crucial set of affirmations, for lack of a better word. We must definitely get back to this and make some more inquiries to understand concrete policy leverage for startups.

(13) Revision of the system that eliminates the need for personal guarantees

  1. By entrepreneurs, 77% of those who are interested in starting a business answered that they would have to bear debts or personal guarantees as a risk in the event of failure. Fact, at present, 47% of entrepreneurs provide personal guarantees when borrowing from private financial institutions, including loans with credit guarantees16. 
  2. Create a new credit guarantee system that does not require personal guarantees for startups less than five years old. For this purpose, 12 billion yen will be provided as compensation for losses to credit guarantee associations. 
  3. In addition, for loans provided by the Japan Finance Corporation, we will set a loan requirement that does not require a manager’s guarantee within five years of the start-up’s founding. In addition, we will continue to provide capital loans to startups with cash flow shortages and SMEs whose financial situation has temporarily deteriorated. For these reasons, we will make additional investments in the Corporation. 
  4. At the same time, the relevant ministries and agencies will compile measures within this year to establish financing practices that do not rely on business guarantees. 

[AB]: That is fantastic news for our entrepreneurs. Guarantee concerns serve as a strong deterrent.  

(14) Improving the IPO process

  • In line with the April 2015 “Review of the IPO process,” the securities industry and competition authorities will steadily review the system and improve operations. In addition, we will implement listing examinations for companies whose corporate value is difficult to assess, such as deep tech startups that utilize new technologies in cutting-edge fields, and utilize direct listings that only list existing shares without issuing new shares. 

(15) Consideration of SPAC (Special Purpose Acquisition Company) 

  1. The procurement amount per IPO in Japan is US$300 million and Europe’s US$200 million, which is small at US$60 million. According to an international comparison by a US research firm, there are 633 US companies, 173 Chinese companies, and 147 European companies that are unicorn companies (unlisted companies with a market capitalization of more than $1 billion).contrast, Japan has only six companies17 In. 
  2. Regarding SPACs (Special Purpose Acquisition Companies), we will proceed with consideration of the development of necessary systems in the event of their introduction, taking into account trends in the international financial markets and giving due consideration to investor protection. 

[AB]: SPAC vehicles are really interesting way to finance projects. But they have proved to be highly risky not to mention a disaster. I’d like to get more about this from experts. Copying everything US shall not be a general policy, Again, I maybe mistaken.

(16) Development of a secondary market for unlisted stocks 

  1. Currently, private trading systems (PTS) operated by securities companies are not permitted to handle unlisted stocks, even for professional investors. In order to enable the handling of unlisted stocks for professional investors so that startups can grow without being listed, we will revise relevant ordinances of the Financial Instruments and Exchange Act within FY2023. 
  2. At the same time, we will promote the development of an environment for smoother transactions in the secondary market, such as promoting private-sector efforts to standardize data on securities, etc. of unlisted companies. 

[AB]: Very much appreciated.

(17) Revision of the Specified Investor Private Placement System 

  • As a means of raising funds for startups, the Specified Investor Private Placement System, which solicits applications for acquisition of newly issued securities only from professional investors, will be revised in July this year. In 2005, the Japan Securities Dealers Association established rules to allow the use of the private placement system for specified investors, even for unlisted securities. On the other hand, for startups, the new regulations require specific securities information to be newly provided or disclosed. Some say that the clerical burden associated with information (corporate information, business performance, etc.) is heavy. Based on this, while following up on the status of utilization of the new system, we will review it as necessary, taking into account actual needs and the perspective of investor protection. 

[AB]: That’s great news.

(18) Tax measures related to departure tax, etc. to encourage overseas expansion  

  • In order to promote overseas expansion of startups, when the entrepreneur himself is assigned overseas when the startup expands overseas, the stock certificate of his own startup is used as collateral. Confirm and make known that it is possible to leave the country with the company’s guarantee even if it is not provided. In addition, even employees, etc. will not be required to provide share certificates as collateral if they pledge their shares. 

(19) Improving the environment for Web 3.0 

  1. Crypto-assets issued and held by corporations that engage in crypto-assets business will be taxed as subject to end-of-term mark-to-market taxation of corporate tax if they continue to hold the crypto-assets for the purpose of operating the business. take measures to prevent 
  2. Regarding other crypto-assets as well, we will consider the tax treatment based on the legal and accounting treatment. 
  3. In March 2022, the Accounting Standards Board of Japan (ASBJ) organized and announced issues related to accounting for crypto-assets, and discussions are underway. Based on these discussions, we will promote the development of an environment that allows audits by certified public accountants and audit firms. 
  4. Regarding investment targets of investment limited partnerships (LPS), clarify that businesses that handle so-called security tokens, which are tokenized securities, are also subject to investment, and businesses that handle other crypto assets and tokens are also subject to investment. Encourage diversification of investment in businesses that handle crypto assets and tokens, such as 
  5. In addition, the benefits and challenges of blockchain-based DAOs (Decentralized Autonomous Organizations), which are expected to be utilized for regional revitalization and the resolution of social issues, will be sorted out as soon as possible. 
  6. We will discover and support new use cases for the international expansion of content businesses such as art and games using digital technology. 
  7. Secure and develop human resources in Japan who will be responsible for cutting-edge digital technologies such as blockchain technology. 
  8. collaboration between overseas human resources with advanced technology and specialized knowledge and Japanese startups,we will create an environment where overseas human resources can play an active role, such as attracting overseas human resources and creating exchange opportunities for domestic and foreign Web3.0 human resources in collaboration with the private sector. Carry out maintenance. 

[AB]: interesting, but promises only for now. To be followed.

(20) Creation of business growth collateral In order to create 

  1. In order to create an environment in which startups, etc. that do not have many tangible assets can procure growth funds in an optimal way, It is effective to evaluate the project itself, such as the nature of the project, and provide financing. 
  2. Therefore, we will aim to submit related bills to the Diet as soon as possible in order to create a system that allows startups to procure growth funds from financial institutions using the entire business as collateral. 

[AB]: Good.

(21) Circulation of personal financial assets and long-term operating funds such as GPIF to venture investments 

  1. Japan’s personal financial assets amounting to 2,000 trillion yen are circulating to foster startups, and long-term operating funds such as GPIF are used for venture investments and infrastructure. Build a circulation flow for maintenance, etc. 
  2. For this reason, we will promote the asset income doubling plan in order to circulate individual financial assets to foster startups by promoting venture investments by angel investors and investing in domestic venture funds such as pensions. 
  3. In addition, public institutional investors such as GPIF are working to become a driving force for growth through investment in domestic venture funds from the perspective of the interests of the insured, such as sustainable growth of the overall market, risk reduction and performance improvement through diversified investment. We will strive to improve the environment for expanding the supply of funds to domestic startups, which are 
  4. Regarding corporate pensions, the government will accept the Stewardship Code, which aims to increase the medium- to long-term investment returns of beneficiaries, and encourage listed companies to make efforts in personnel and management aspects based on the Corporate Governance Code. 

[AB]: not sure about this. We need an expert.

(22) With regard to the provision of funds to startups by banks, etc. 

  1. through promotional loans to startups, the status of support for startups through interviews, etc. during monitoring of banks, etc. based on financial administrative policies, etc. Also check and follow up flexibly. 
  2. Normally, banks are prohibited from investing more than 5% in a business company under the Banking Act, but the Banking Act will be amended in 2021 to allow 5% investment in startups within 10 years of establishment. Expanded the exception measures that allow investment exceeding 100%. In the future, we will carry out sufficient awareness activities, follow up on the implementation status, and encourage banks to actively invest in startups. 
  3. In addition to the above, for example, in the start-up support system of the Japan Finance Corporation, financial companies (fintech companies) are also eligible for loans after screening that there is no risk of lending. The government will promote the development of an environment for promoting 
  4. Promote fund formation by financial institutions and investment in startups by regional financial institutions. In addition, clarify and disseminate that continuous investment from banks to startups will not be subject to restrictions as speculative unlisted stocks. 

[AB]: Again, good news and potential leverage.

(23) Developing a social entrepreneurship ecosystem and promoting impact investment 

  1. In Japan, when young people consider starting a startup, they often aim to solve social issues such as environmental problems and child-rearing problems. (2021 survey of startups is the top motivation for starting up startups in Japan). 
  2. To this end, the government will support the development of educational programs and network creation related to social entrepreneurs (impact startups) at universities in Japan, and promote the creation of bases for fostering social entrepreneurs. 
  3. Promote a program to send young people who aspire to become social entrepreneurs overseas. 
  4. The private sector is expected to actively participate in services that have been handled by the public sector so far, in order to respond to diverse needs in a detailed manner. In Japan, which is said to be a developed country facing challenges, we will lead the world in understanding social issues as an energy source for growth, and building a system into our economy and society to resolve them. 
  5. For this reason, in order to promote impact investment and strengthen support for social enterprises, we will consider new corporate forms that play public roles in the private sector, reform existing corporate forms, and launch impact startups based on international certification. Consider establishing a Japanese version of the certification system. 
  6. In order to support social entrepreneurs (impact startups), the following items will be considered. 
  7. Preferential treatment in public procurement 
  8. Listing of recommended companies from the national government to local governments 
  9. Matching with local governments 
  10. Investment support measures 
  11. Utilization of hometown tax and corporate hometown tax 
  12. Bond, etc.) ▪ Support by investment funds
  13. Basic guidelines for expanding impact investment 

[AB]: It’s big for social impact oriented startups (like us).

(24) Attracting overseas startups and strengthening the overseas expansion of domestic startups 

  1. We will promote the dissemination of information on Japanese startups and support systems to overseas venture capital firms, startups, and entrepreneurs, and strengthen business matching. The Council for the Promotion of Foreign Direct Investment in Japan will also position startups as a priority area in the new action plan to be formulated around next spring, and will work to enhance related measures. 
  2. We will strengthen networking at global events related to startups, as well as promote matching of global human resources and technology demonstrations and joint research overseas. 

[AB]: That’s a big but important challenge to surmount.

(25) Improving the environment to attract foreign investors and venture capital.

  1. Unlisted shares held by funds are valued at fair value (mark-to-market) overseas, but in Japan they are often valued at acquisition cost. Regarding the performance of venture capital in Japan, in order to enable international comparison and promote the attraction of foreign investors, points to note in auditing venture capital and the practical handling of accounting treatment will be clarified. Facilitate the introduction of fair value valuation.
  2. Regarding the investment target of an investment limited partnership (LPS), the acquisition and holding of shares issued by foreign corporations is currently limited to the total investment amount of all partners only if the LPS is certified by the Industrial Competitiveness Enhancement Act. It is possible to invest more than 50%. From the perspective of facilitating overseas investment by venture capital, the upper limit on the overseas investment ratio of LPS laws will be abolished. In addition, the handling of LPS accounting rules will be clarified by positioning them as laws and regulations. 
  3. for foreign investors, Japanese contract forms may become barriers to entry, or venture managers and employees may not be able to  under the same conditions as overseas in terms of taxation and labor laws operate. 
  4. It will be easier for foreign investors and global top human resources in Japan and overseas to work in Japan’s startup ecosystem by creating and disseminating model contracts in line with global standards while taking into consideration the actual situation of business operations of foreign investors. Promote the development of a world-class environment. 

[AB]: Although it is a little technical, this will increase investors’ propensity, and willingness to invest and maybe set up branches locally. As it may facilitate new investment opportunities, attract foreign investors, and introduce new financial instruments in Japan, we must pay attention to this.

(26) Strengthening startup creation in local areas

  1. In addition to the efforts of startup ecosystem core cities and J-Startups, we will increase investment from national universities in regional funds in which regional financial institutions participate, and strengthen support for startups by regional universities.
  2. Active support for startups by regional financial institutions will be provided through the promotion of investments in startups by regional financial institutions and promotion of human resource matching between large enterprises and small and medium-sized enterprises, including regional startups. 
  3. We will support the development of next-generation satellite offices where startups in various fields and businesses that support them can gather, and the entrepreneurial community, including local universities and financial institutions, can act as a base for their activities. 
  4. Promote the use of PFI, etc. for mutual assistance-type social businesses (multiple businesses working together to develop facilities, equipment, and digital infrastructure that can be shared with local social services). 
  5. The places where companies in the deep tech field can conduct demonstration experiments while ensuring safety are limited, so with the cooperation of local governments, companies and residents in the surrounding area, we will create and expand places for deep tech demonstrations. . 

[AB]: This looks like a major push to build and disseminate digital ecosystems.

A private finance initiative (PFI) is a way for public projects to be paid for with money from the private sector. PFIs relieve the government and taxpayers of the immediate burden of raising funds for these projects.

Here is a detailed document on PFI  if you need to know more about it. 

(27) Support for creation of startups in Fukushima

  • At Hamadori, Fukushima, we will work to develop a demonstration field so that robots, drones, flying cars, etc. can be smoothly demonstrated in an environment that is closer to actual use.

(28) Utilization of startups at the 2025 Osaka/Kansai Expo 

  • At the 2025 Osaka/Kansai World Expo, which is called the “Future Society Experimental Site,” we will actively utilize startup technologies.

[AB]: nothing smart to say here.

6. Pillar 3: Promoting Open Innovation  

  1. It is not easy for existing blue-chip companies to maintain their growth rate. The old argument for disruptive innovation was that companies that used old technology would inevitably lose out to companies that used new technology to enter the market. 
  2. However, recent research has confirmed that even companies that have used old technology can sustainably survive if they collaborate with startups to introduce new technology. Investment in startups is important to promote open innovation by existing large companies. 
  3. For this reason, the government will promote the following specific initiatives to promote open innovation. 

(1) Ideal tax measures, etc., to encourage open innovation

  1. In order to promote M&A, which is an exit strategy for startups to grow significantly under the umbrella of a business company, the open innovation promotion tax system is limited to those that particularly contribute to the growth of startups. In addition, tax measures will be taken for the acquisition of existing issued shares. In doing so, the government will adopt sufficiently effective tax measures. 
  2. In addition, regarding the R&D tax system, we will expand preferential treatment when collaborating with startups. 
  3. Consider measures to promote investment from business companies to venture capital. 

(2) Revision of rules for public offerings

  • Currently, when conducting public offerings, self-regulation by the Japan Securities Dealers Association stipulates that funds should be allocated within one year in principle. hinder M&A. In the future, we will revise the self-regulation, such as abolishing the uniform allocation deadline of funds, and implement it in FY2023. 

(3) Development of private liquidation legislation for business restructuring 

  1. Due to the COVID-19 pandemic, Japanese companies’ debt balances have continued to increase, and 30% of companies believe that debt is a hindrance to business restructuring. In European countries, there are legal systems that do not require the consent of all lenders and under the approval of the court, change the rights by majority vote and restructure the business, but Japan does not. . 
  2. For this reason, in order to facilitate business restructuring by Japanese companies, we have established a number of legal frameworks for business restructuring so that private liquidation (debt liquidation) can be conducted by a majority vote of creditors and the approval of the court without requiring the consent of all creditors. submit a bill to the Diet to facilitate the private liquidation of 

(4) Smooth labor movement to startups 

  1. In order to nurture startups, we will review employment practices such as working styles premised on lifelong employment in Japan, prohibition of side jobs and side jobs, and overemphasis on hiring new graduates all at once, and promote smooth movement of human resources. 
  2. It is important to securing Ph.D. human resources is particularly important in deep tech, etc., and a shift away from the overemphasis on hiring new graduates at once is required. 
  3. In order to give workers the opportunity to move to startups, it is necessary to facilitate labor movement without unemployment between companies and industries, and invest in people for reskilling (re-learning to move to growth fields). Aiming to simultaneously solve the three challenges of structural wage increases that have played a role in the background, we will compile a “Guidelines for Facilitation of Labor Movement” by June 2023. 
  4. In compiling, consideration will be given to the transfer of human resources to startups. 
  5. In particular, in order to contribute to the smooth movement of labor to start-ups, as a labor policy, we will strengthen the promotion of side jobs and side jobs, and support companies that send human resources to side jobs or accept human resources for side jobs. In addition, we will strengthen support for entrepreneurship in the form of secondment of human resources from large companies. 
  6. Strengthen consultation and support by experts in management, legal affairs, intellectual property, etc. for the commercialization of startups. We will also strengthen support such as connecting intellectual property strategy experts to startups through venture capital. 
  7. Consider how information disclosure and governance should be when a large company sells its own intellectual property, human resources, and other management resources to a startup. 

(5) Consideration for further acceleration of organizational restructuring 

  1. It is important to promote spin-offs from the viewpoint of demonstrating the potential of management resources (human resources, technology, etc.) Therefore, even if a part of the equity is left in the spin-off company, it will not be subject to taxation. 
  2. In addition, consideration will be given to measures to promote bold business restructuring.

(6) Expansion of voluntary application of International Financial Reporting Standards (IFRS) to promote M&A 

  • Japanese accounting standards stipulate that goodwill should be amortized regularly using the straight-line method. Some say that this accounting standard is causing companies to be cautious about M&A, as the amortization of goodwill will continue to put pressure on the earnings of acquired companies. For this reason, companies are encouraged to expand voluntary application of International Financial Reporting Standards (IFRS), which does not amortize goodwill. 

(7) Collection and organization of data for grasping the overall picture of the startup ecosystem 

  • In order to accurately grasp the trends surrounding the startup ecosystem and consider the necessary policies, international comparisons should be made. As much as possible, we will collect and organize data, such as conducting fact-finding surveys. 

[AB]: That is an important point. I tried to address this in part here

(8) Promoting the openness of data on public services and infrastructure 

  1. Compared to large companies, startups lack the human resources to allocate to information gathering. It is not easy to consider the possibility of utilization. 
  2. The national and local governments will provide information on public data that can be used by startups, etc. on the Internet. 

(9) Strengthening the network between large companies and startups 

  1. In order to promote smooth open innovation, we will disseminate “guidelines” that should be kept in mind regarding non-disclosure agreements, license agreements, etc. when startups and business companies collaborate. 
  2. Strengthen networks through J-Startup and the Open Innovation and Venture Creation Council (JOIC). 

[AB]: https://www.j-startup.go.jp/en/ https://www.joic.jp/index.html 

Remember to get there so you want feel frustrated into reading all this in detail in this article and you will be able to use the google document and add comments so we could build a “compounded brain”.

The Japanese original text here.


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