Imagine stepping into a city where the future feels real, where innovation is carefully planned, and where every corner blends tradition with the latest technology. This was my experience in Tokyo during the EIT Global Outreach “Connect and Experience Japan 2024” program. This summer,, I had the privilege of diving deep into the heart of Japan’s growing startup ecosystem, representing Croatia, the Innovation Agency Smion, and EIT Manufacturing and Food HUB in Croatia.
Japan, a significant economic partner for the EU with trade worth 134.455 billion EUR in 2023, is often seen as a sleeping giant in the world of startups. This short report shows how this giant is waking up and opening its doors to global innovation partnerships.
Firstly, I will share some of my personal impressions about Japan and then focus on Japan’s startup ecosystem.
First Impressions: Digitalisation and Optimisation
Tokyo immediately impressed me with its digitalization, organization, and cleanliness. The city operates on multiple levels, both literally and metaphorically. I experienced the efficient transportation system firsthand, travelling on the monorail that glides above the city and the Oedo Line metro, which operates several floors underground. The meticulous attention to detail, from digital customs clearance processes to the polite guidance of numerous staff members at the airport, reflects the precision of Japanese operations.
As someone who has been studying lean principles for over a decade, with Lean thinking rooted in the Toyota Production System, I was fascinated to observe how these principles were seamlessly integrated into the immigration process at the airport. Japan’s commitment to efficiency and digitalization was evident even before landing, with the “Visit Japan Web” platform allowing travelers to fill out customs and entry declaration information online.
Upon arrival at the airport, the process was divided into four distinct steps, each designed to lower the Takt time and improve throughput—principles at the core of Lean thinking. It looks like this:
- Travellers first scan their passports and fingerprints at a kiosk.
- The immigration police then check the passport and provide a stamp.
- At the electronic customs declaration kiosks, travellers reconfirm their customs declaration.
- For those who completed the digital traditionsprocess, the final step is to pass through the Electronic Declaration Gate, completing the process efficiently.
This approach, transforming a traditionally singular process into a streamlined series of tasks, reduces waiting times and enhances the overall experience, embodying the essence of Lean thinking.
I would say that having a process and then respecting it is how things operate in Japan.
Okay, now that I have provided a short description of my fascination with the lean way in Japan (or Japanese way), let’s switch to the topic at the core of this article, which is the Startup Ecosystem in Japan.
Japan as a startup nation
Traditionally, Japan has not been considered a startup nation like the US or Israel, but the giant is awakening. There are several reasons for this, with one of the most important being government startup support programs at both the prefecture and national levels.
Startup Development Five-Year Plan by Japan’s government
The cornerstone of Japan’s startup growth is the Startup Development Five-Year Plan, launched in 2022. This plan seeks to increase the number of startups in Japan tenfold over five years. It includes funding initiatives, regulatory reforms, and an emphasis on fostering entrepreneurship within universities and local ecosystems.
The goal is to create 100 unicorns by 2027, largely through deep tech, life sciences, and AI-driven startups. For these purposes, the Japanese government has a planned budget of approximately 1 trillion yen (about €6.3 billion EUR). During this period, the government aims to amplify investments tenfold, reaching a total of 10 trillion yen (about €63 billion EUR). The five-year plan for startup development has three pillars:
- Building human resources and networks for startup creation
- Enhancing funding provision for startups and diversifying exit strategies
- Promoting open innovation
Just some of the initiatives from the program that I had a chance to hear about during the visit to Japan:
J-Startup Program, which is an initiative by the Ministry of Economy, Trade, and Industry (METI) designed to help startups scale globally by providing mentorship, networking opportunities, and support from large corporations. The program selects high-potential startups and gives them access to government and private sector resources to enhance global competitiveness
Startup Visa program aimed at attracting international entrepreneurs, the Startup Visa program eases the residency process for foreign founders wanting to start a business in Japan.
Programs for startups from local governments
The most significant and with the biggest impact is Tokyo’s 10x10x10 Innovation Vision, introduced in 2022 by the Tokyo Metropolitan Government. The 10x strategy is aiming to multiply the number of unicorns, startups, and public-private partnerships by 2027 by tenfold. The strategy focuses on making Tokyo a global hub for innovation by attracting international startups but also supporting local entrepreneurship.
Central to this plan is the Tokyo Innovation Base which serves as a multi-functional hub for startups, corporations, and investors to collaborate, innovate, and grow—a place I had the chance to visit during my stay in Tokyo.
Part of 10x strategy is also SusHi Tech Tokyo 2024 Global Startup Program, a global innovation conference that aims to connect international startups with Tokyo’s ecosystem.
In 2023 the event attracted over 26,000 participants, including 328 startups and 288 investors. Second edition of SusHi Tech Tokyo 2024 Global Startup Program attracted over 40,206 attendees which is a year-over-year increase of over 50%. In 2024 the visitors came from a mix of 430+ startups; 82 countries and 321 cities; and 424 startup booths.
A few key statistics about Japan’s startup ecosystem
Japan has 10 unicorns, positioning it as number 18 globally in terms of total unicorns created. However, some have mentioned that there are 41 hidden unicorn companies (companies growing larger and more successful). There are several bigger startup ecosystems, such as Tokyo and Osaka.
For example, based on the Startup Genome report, Tokyo ranks as the #10 Global Startup Ecosystem (2024) but is the #1 Global Ecosystem in Knowledge (2024). The latter is not surprising, as one of the speakers during the program mentioned, “The average skill level is very high, and they are hardworking and especially trustworthy.” With unemployment being low (2.7% in July), it can be challenging for foreign startups to hire talent.
Corporate Venture Capital is Growing
As mentioned in the Global Corporate Venturing report, corporate-affiliated capital for startup investments has grown significantly. In 2013, there was just ¥20.3bn ($140m) in total corporate-affiliated capital, but now this figure has increased to ¥487.5bn ($3.37bn). During the program, we had the opportunity to meet representatives from companies such as Mitsubishi Chemicals, Honda Xcelerator, and Yamaha Music, among others.
In my opinion, the outlook for Japan’s startup ecosystem is very promising. The amount of startup investment in Japan has been growing impressively, with a Compound Annual Growth Rate (CAGR) of over 30% over the past 10 years, as highlighted by GLOBIS CAPITAL PARTNERS in their Japan Startup Ecosystem Report 2023 H1. This trend indicates a strong trajectory for continued growth and innovation in the coming years.
Comparison to the EU
Finally, let’s draw a comparison with the EU startup ecosystem.
The EU is not a single ecosystem but a collection of diverse startup hubs (Berlin, Paris, Stockholm, etc.), each with its strengths. Japan, by contrast, is more centralized, with Tokyo as its main startup hub.
Both Japan and the EU face challenges with regulatory environments and bureaucracy, but Japan’s business regulations can be particularly complex and slow to adapt. However, recent reforms are streamlining the process.
As one of the speakers during the program mentioned, there used to be a saying in Japan, “Japanese way or highway”. But this is now changing. Japan is changing, a bit slowly and this is their way.
Both Japan and the EU share conservative business cultures compared to the U.S., with a greater emphasis on stability and long-term planning.
This is just a short story to cover my experience visiting Japan’s startup and innovation ecosystem. If you find it interesting or valuable, please reach out to me, as I would love to connect.
Currently, we are planning a program for SEE startups in Japan, so if you would like to join or support, let me know.
Lastly, I extend my gratitude to the EIT Global Outreach program for this invaluable opportunity to explore Japan’s startup ecosystem.
