Oak Admin Guides
The Three Fundamental Ways Companies Enter Japan
When companies talk about "entering Japan," they are usually referring to one of three very different setups. Each carries distinct legal implications, operational limits, and strategic trade-offs. Choosing the wrong one is one of the most common early mistakes.
Representative Offices: Exploring the Market Without Committing
A representative office is the lightest possible footprint a foreign company can have in Japan. It is not a legal entity and does not require formal incorporation.
Representative offices are limited to non-commercial activities such as market research, relationship building, promotional activity, and information gathering. They are commonly used by companies that want to better understand Japanese customers, meet potential partners, or evaluate competitors before committing to a larger presence.
What representative offices cannot do is often overlooked:
- Generate revenue in Japan
- Sign contracts
- Invoice customers
- Directly hire employees
Any commercial activity must be conducted by the overseas parent company.
Because no entity is created, setup is relatively quick and inexpensive. There are no corporate tax filings and limited administrative burden. However, this lightness also limits credibility. Banks, landlords, and counterparties generally view representative offices as temporary by design.
In practice, representative offices work best as a short-term exploratory phase, not as a long-term operating model.
Branch Offices: Operating as an Extension of Headquarters
A branch office allows a foreign company to conduct commercial activity in Japan without creating a separate legal entity. Unlike a representative office, a branch can sign contracts, generate revenue, and hire staff.
However, a branch office is legally an extension of the parent company. This means the foreign headquarters retains full liability for the branch's activities in Japan. There is no legal separation between the two.
Branch offices are often chosen by established foreign companies that already operate internationally and want a functional presence in Japan with fewer corporate formalities. Setup is generally faster than creating a subsidiary, and governance requirements are lighter.
That said, branch offices can be perceived as less independent by banks, investors, and some business partners. They also offer less flexibility for future investment or restructuring. For this reason, they are less common among startups and founder-led ventures.
Japanese Subsidiaries: The Default Choice for Long-Term Operations
For companies planning sustained operations in Japan, a locally incorporated subsidiary is by far the most common choice.
A Japanese subsidiary is a separate legal entity established under Japanese law. It can be 100% foreign-owned and operates independently from the parent company, subject to its own corporate and tax obligations.
Subsidiaries are generally:
- Easier to integrate into Japan's banking system
- Simpler to use when hiring employees
- More credible in the eyes of customers, partners, and government agencies
- More flexible for governance, investment, and long-term growth
The trade-off is complexity. Incorporation requires more documentation, ongoing compliance obligations exist from day one, and setup costs are higher than lighter models. Despite this, most companies that succeed in Japan eventually operate through a subsidiary, even if they begin with a more limited presence.
Strategy Before Structure
One of the most important insights for companies entering Japan is that structure should follow strategy, not convenience.
Companies that choose a representative office simply because it appears easy often find themselves blocked later when they want to hire staff or apply for visas. Companies that rush into incorporation without thinking through banking or immigration constraints may end up with a registered entity that cannot function.
The right questions at this stage are strategic rather than legal:
- Is Japan a long-term market or an experiment?
- Will revenue be generated locally?
- Will staff be hired in Japan within the first year?
- Will founders or executives need to live in Japan?
- How important is local credibility early on?
Clear answers to these questions make the correct structure much easier to identify.
Everything Is Connected
In Japan, incorporation affects banking. Banking affects visas. Visas affect hiring. Hiring affects payroll and tax. Payroll affects compliance. Each decision narrows or expands what is possible downstream.
Companies that approach setup as a checklist often struggle. Those that treat it as an interconnected system move more smoothly and avoid costly rework.