Business practicalities in Japan

Land and property rights

Establishing a business in Japan requires a business address in all cases and, depending on the type of business and type of visa, may require a residential address, as well. Office or factory space can be found independently or through a local real estate agent. Japan places no general restrictions on foreign ownership of land or property. Foreign individuals and companies can freely purchase real estate for commercial or residential use without needing government approval or holding a residency permit. However, non-residents may face additional administrative steps when opening bank accounts or securing financing through local banks, which often require proof of residency. A limited number of properties located in designated national-security zones may require additional notifications or review under Japan’s Economic Security legislation.

Intellectual property (IP)

Supporting innovation, technology and enterprise through strong IP legislation is a key priority of the Japanese government. As a member of the World Trade Organization (WTO), it has committed to common standards for the protection and enforcement of IP. Japan is a signatory to all the major World Intellectual Property Organization’s (WIPO) standards, such as the Paris Convention, the Berne Convention, the Madrid Protocol, the Budapest Treaty and the Patent Cooperation Treaty.

There are six main types of IP in Japan: trademarks, patents, copyright, designs, utility models, plant variety rights and trade secrets. The following mechanisms are used for registering IP:

Violation of IP and enforcement options:

Despite a strong IP protection framework, violations can occur. Businesses seeking to enforce their IP rights in Japan have several options depending on the type of dispute:

• Civil enforcement 
  • Injunction
  • Claim for damages
  • Unjust enrichment
  • Restoring credibility 
• Criminal enforcement 
• Administration enforcement 
• Mediation
• Arbitration
• Alternative Dispute Resolution System (ADR)

Businesses can also consult IP Australia for advice.

Import duties and tariffs 

Japan is a founding member of the WTO. Average applied tariff rates are among the lowest in the world, although the average applied Most Favoured Nation tariffs on agricultural products is above 15 per cent.

The cornerstone of Australia and Japan economic relations is the JAEPA, which came into force in 2015. The two countries are also members of Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). Some tariffs and quotas remain, especially on agricultural goods,however, most imports of goods fromAustralia now enter Japan dutyfree. Barriers to cross- border trade in services have also been lowered.

To find the tariff rate for specific goods from Australia under each of these agreements, visit the Department of Foreign Affairs and Trade’s FTA Portal at ftaportal.dfat.gov.au.

Calculations and payments 

Japan follows the WTO Valuation Agreement on imported goods. The import duty is calculated by multiplying the imported good’s dutiable value by the corresponding import duty rate. The dutiable value of imported goods is typically based on the cost, insurance and freight (CIF) level under the International Commercial Terms (incoterms).

Other taxes and charges

The Consumption Tax (value-added tax) was raised to 10 per cent in 2019. The reduced rate is 8%, but it applies to food and non-alcoholic beverages purchased for takeout or consumption at home. It also applies to certain newspaper subscriptions. It does NOT apply to alcoholic beverages or food consumed at restaurants. Resturant dining and alcholoic beverages are always taxed at 10 per cent. The Consumption Tax is not levied on goods for export. Excise taxes are levied on liquor, tobacco, aviation fuel and gasoline.

Export duties

Japan does not levy duties on exports. It does, however, have certain restrictions under the Export Trade Control Order and the Foreign Exchange Order. The Trade and Economic Security Bureau in the Ministry of Economy, Trade and Industry is responsible for export control policy.

Import and export regulations

Japan Customs, under the Ministry of Finance, is responsible for trade facilitation and revenue management, while the Ministry of Economy, Trade and Industry oversees the negotiation of trade agreements and rules. The National Tax Agency is involved in matters related to the Consumption Tax.

Certain goods in Japan are subject to import restrictions for health, safety or security reasons. A list of controlled imports and exports for Japan is available on the Japan Customs website.

Japan has a national single window system called the Nippon Automated Cargo and Port Consolidation System. This platform provides a single point of entry for submission of electronic permit applications. It is managed under a public-private partnership agreement. To use the system, firms must register for a Reporter ID. An explanation of the process can be found on the NACCS website.

The National Tax Agency (NTA), an external organisation of the Ministry of Finance, imposes a wide-ranging tax regime that includes income taxes (corporate and personal), property taxes, goods and services taxes, stamp duties, international taxes and withholding taxes.

This section provides an overview of the taxes Australian businesses can expect to face when operating in Japan. Not all applicable taxes are covered in this guide and the information provided is of a general nature. Businesses should seek professional tax advice for understanding the taxes specific to their activities.

Table 1: Overview of Japan’s taxes for businesses

Corporate Income Tax (CIT)

Businesses are subject to the tax rates imposed under the corporate income tax (CIT) law. The standard CIT rate is 23.2 per cent. From 1 April 2025, CIT rates will rise according to the amount of taxable income. This change introduces a progressive element to the tax rate structure, targeting high-income corporations while maintaining relief for SMEs.

Personal income tax 

Individuals who meet one or more of the following criteria are classified as tax residents under Japanese law:

• Permanent residents, Japanese nationals, or Foreign individuals who have resided in Japan for more than five years (over 60 months) in the preceding 10 years. Permanent residents are taxed on their worldwide income.
• Non-permanent residents foreign individuals who have resided in Japan for five years or less in the preceding 10 years. Non-permanent residents are taxed on: Japan-source income, and foreign-source income only to the extent it is paid in or remitted to Japan.
• Non-residents Individuals who do not have a residence (“jusho”) or temporary address (“kyosho”) in Japan. Non-residents are taxed only on Japan-source income, typically at fixed non-resident tax rates.

Permanent residents are taxed on their worldwide income while non-permanent foreign residents are taxed only on income received in Japan. Foreigners residing in Japan for more than 60 months are considered permanent residents for tax purposes and are therefore required to pay tax on their worldwide income. For individuals not classified as tax residents, income tax rates are typically governed under the Australia-Japan DTA. Individuals who qualify as tax residents in Japan are subject to the following progressive tax rates.

The Australia–Japan Double Taxation Agreement (DTA) determines which country has taxing rights over specific types of income and helps prevent double taxation. It does not determine tax rates.

Tax residents in Japan (permanent and non-permanent residents) are subject to the following progressive income tax rates, in addition to local inhabitant taxes.

Table 2: Personal income tax rates

Indirect taxes

Goods & services tax: With the exception of certain goods, such as restaurant meals and alcohol, the Consumption Tax is 10 per cent.

Property taxes: The local authorities levy an annual fixed assets tax on depreciable fixed assets and real property. While real property is taxed at 1.4 per cent of the value, depreciable fixed assets are taxed at 1.4 per cent of cost after statutory depreciation.

Carbon Tax: Since 2012, Japan has a tax on carbon emissions called the Global Warming Countermeasures Tax. The tax has since been raised in increments and is currently at JPY 289 per ton of CO2 (AUD 3/tCO2 ).

Other: Japan taxes inheritances and gifts at progressive rates depending on the value of the inheritance or gift.

Auditing and accountancy play a vital role in enhancing transparency and accountability in a business, especially one engaged in a foreign market. It increases business performance by identifying risks and highlighting areas for improvement.

Accounting standards

In addition to the Japanese generally accepted accounting principles (GAAP), three other sets of accounting standards are accepted for local and foreign businesses: International Financial Reporting (IFRS), US GAAP and Japan’s Modified International Standards (JMIS).

Although the Australian Accounting Standards (AAS) are also based on IFRS, Australian businesses with Japanese operations should review the differences between jurisdictions to ensure their records are compliant with both countries’ accounting authorities.

Accounting standards in Japan are managed by the Accounting Standards Board of Japan.

Statutory audits

All companies are required to be audited at least once per year by a public accountant and in accordance with standards set by the Business Accounting Council (BAC), an advisory board within the Financial Services Agency (FSA). The BAC standards are generally aligned with the International Auditing and Assurance Standards Board (IAASB) rules.

Audits are required based on two legal acts.

• Under the Financial Instruments and Exchange Act if companies:
  • Issue shares listed on a financial instruments exchange or are in the process of listing;
  • Filed a registration statement;
  • Has a specified number of shareholders 
• Under The Companies Act if companies:
  • Have capital stock of JPY 500 million (AUD 5.06 million) or more, or liabilities of more than JPY 20 billion (AUD 202.58 million ) at the end of the fiscal year;
  • Which adopt a “Company with committees” corporate governance system;
  • Appoint independent auditors on a voluntary basis.

Books and records

In consonance with the provisions of Article 432, paragraph 1 and article 615, paragraph 1 of the Companies Act, a company is required to enter the value of assets, liabilities and net assets to the accounting books. Other details concerning preparation of accounting books are to be governed by provisions of Article 445, paragraphs 4 and 5 of the Companies Act. Books of accounts are to be reported in electronic or magnetic format.

Annual General Meetings

Companies in Japan generally hold annual shareholder meetings in June, or within three months of the end of the latest financial year. Two weeks prior to the date of the meeting, the company must send a convocation notice to shareholders with the following details:

• the date, time and place of the meeting;
• the agendas of the meeting;
• whether voting cards or electric voting cards are used; and
• other matters prescribed by the Companies Act.

Quality control

Audits are overseen by the BAC who offer guidelines and frameworks to aid businesses in selecting an auditor. The BAC is responsible for monitoring programs for improving audit quality. They provide industry-specific targets against which companies can compare their audit performance. The Japan FSA, under which the BAC sits, is a member of the International Forum of Independent Audit Regulators.

Doing business in Japan will often require employing local and foreign workers. Understanding Japan’s labour market regulations, recruitment methods and Japan-specific management styles is crucial to building and supporting an effective team.

Labour market

Skill level: Educational attainment is high in Japan. Nearly three-fifths (57 per cent) of the labour force – age 25 - 64 – have tertiary education, well above the OECD average of 42%. The overall employment rate, in May 2025, reached 62.3%, compared to other OECD countries with nearly 77 per cent participation rate.

Employment contracts: Historically, Japanese companies operated on a system of lifetime employment and seniority-based advancement. This has been changing in recent years as companies and employees increasingly seek flexibility, different skills and, for employees, higher wages based on performance.

Minimum wage: Japan’s national average minimum wage in 2025 is ¥1,118 per hour (AUD 11.52), following a record increase of ¥63 (about 6%) from the previous year. Starting October 2025, all 47 prefectures exceed ¥1,000/hour (AUD 10.31), with Tokyo at ¥1,226 (AUD 12.64) and Kanagawa at ¥1,225. This marks the largest single-year hike since the current system began.

Starting from October 2024, new minimum wages are expected to be announced for all the prefectures. Minimum wages in each prefecture will be increased by JPY 50 (AUD 0.50). Tokyo will have the highest minimum wage of JPY 1,163 (AUD 12). The wage hike will put increased pressure on businesses that are already coping with inflated raw material and utility prices.

Human resources and employment law: Three main legislative acts apply to labour laws in Japan: the Labor Standards Act, The Industrial Safety and Health Act and the Minimum Wage Act. Together, these regulate employment terms and conditions for all employees under a work contract with an employer.

Working hours: In principle, employees should not work more than 40 hours per week, although exceptions are made for certain professions, including health and hygiene, restaurant and entertainment businesses (with less than 10 regular employees), cinemas and theatres, and retail and beauty. In practice, especially in full-time corporate or whitecollar jobs (seishain), working hours extend far beyond 40 hours per week and can reach 80 hours of overtime or more per month. This led to legislation in 2018 called the Work Style Reform Act, but the restrictions the act was meant to set may be more in breach than honoured.

International recruitment: Hiring foreign professionals in Japan on long-term assignments is complicated by the country’s tax regulations regarding expatriate workers. Under Japanese law, individuals who have lived in Japan for more than five years out of the preceding ten are subject to taxation on their worldwide income, not just their Japan-sourced earnings. This may deter some expatriates, especially those with significant investments or income streams in their home countries and may discourage others from remaining in Japan beyond the initial five-year period.

Many firms address this concern by structuring compensation packages, offering tax equalization programs, or providing specialized advisory services to help international employees navigate Japan’s tax landscape.

Holidays: Workers employed for at least six months are entitled to annual leave. Entitlements depend on years of service from the commencement of employment.

Overtime rates: Employees working over and above the statutory working hours, working on statutory off days or late nights are eligible to be paid an increased rate of wages by the company.

Sick leave: There is no provision for sick leave in Japanese labour law. Employees who need to take sick leave must, in general, use their paid annual leave.

Social, health and unemployment insurance contributions: There are four primary type of social insurance programs that firms, domestic or foreign, must enrol in when they incorporate or hire employees / staff. They are:

Ending employment: Japanese labour laws make it difficult for employers to dismiss employees. The burden of proof falls on the employer in the case of a dispute. There are four approved legal grounds, or tests that must be met, for dismissal. They are:

• Necessity
• Effort to avoid redundancy
• Reasonable selection
• Reasonable process

In practice, however, companies often attempt to persuade employees to resign voluntarily by increasing the size of their severance package, for example. There are limits to these types of offers companies can make to encourage resignation, beyond which the companies risk running afoul of the law. In these instances, it is up to the courts to make the determination of whether the company has violated the law.

Severance pay: While almost all companies in Japan offer some form of severance pay based on length of service and reasons for termination, there is no law requiring them to offer severance. Employers do receive a concessionary tax rate on severance packages.

Recruiting staff

Online advertising: Online job advertisements are an effective way to access talent in Japan and many companies recruit online to increase the likelihood of getting skilled workers. There are several useful websites in Japan for online advertising

• Indeed is the most popular online platform for Japanese professionals across all levels of experience and industry.
• Bizreach is another popular online platform for Japanese seeking domestic employment with a foreign firm and for positions in foreign countries. It focuses mainly on executive-level applicants and positions. It also offers CareerTrek, a site for lower and mid-level employees.
• Doda is a generalist job board, catering to all levels of employment, industries and experience. It also offers free and fee-based CV advisory services to applicants.
• en world provides recruitment services for all levels and types of employment, including contract professionals.
• Townwork is a popular platform for part time and casual jobs in Japan.

Executive search and recruitment: Executive search firms can provide tailored searches for more senior roles and expatriates. As the fourth largest economy in the world, with a strong export-led manufacturing sector and a large financial sector, most international firms such as Randstad, Michael Page, Korn Ferry, Robert Walters, Robert Half and Morgan McKinley have offices in Japan.

Work permits: There are three main types of working visas in Japan. They depend on the role and the nature of the work. All foreigners must have a visa to work in Japan.

Foreign companies establishing a commercial presence in Japan will need a local bank account to conduct business. Foreign companies establishing a local subsidiary may open accounts denominated in Japanese yen, US Dollars and other foreign currencies once registration is complete.

In Japan, financial institutions may be classed as city banks, one of two types of regional banks, foreign banks and trusts, among others. While all types of institutions are permitted to take deposits, the extent of other services offered may vary.

When choosing a bank account in Japan, businesses should consider which options best meet their needs. Current/transactional accounts offer ease of use but are generally not interest-bearing, whereas savings and fixed deposit accounts usually provide returns on your deposits. Foreigners may also want to consider the benefits of selecting a multi-currency account which enables individuals and businesses to hold and spend multiple currencies without exchange. Multi-currency accounts are not widely available to Japanese residents, especially corporate accounts. Many major Japanese domestic banks do not offer true multi-currency accounts.

Table 3: Financial institutions in Japan

Australian banks in Japan

Three major Australian banks have licenses to provide banking services in Japan: ANZ, CBA and NAB. They offer a range of products and services for corporate clients, including corporate and commercial banking, trade finance and cash management.

Japanese banks in Australia

A number of large Japanese banks have a presence in Australia. These include Sumitomo Mitsui Banking Corporation, MUFG Bank and Mizuho. Working with these banks in Australia before conducting business in Japan could help smooth the establishment of banking facilities.

Foreign exchange controls

The Japanese Yen is freely convertible into domestic and offshore accounts and currencies. There are no significant restrictions on transactions, including remittances, repatriation of profits or capital flows.

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