Mercans offers complete payroll, PEO and HR services in Japan
Presenting an excellent business environment and stable infrastructure, Japan has been taking a lead in achieving global decarbonization as well as improving its investment environment for foreign companies. Its primary industries include automobiles, consumer electronics, computers and other electronics. The world’s first host of a second Paralympics, Japan also aspires to realize a global community with diversity and inclusivity.Download PDF
Doing Business in Japan
There are many good reasons to do business in the world’s third largest economy by nominal GDP. Ranked #1 in the world for Industrial Clusters, #1 for Research and Development and #1 for patent applications (per million population), there are many foreign-affiliated companies that have entered the Japanese market with JETHRO’s (Japan External Trade Organization) support.
Entity Registration and Incorporation Requirements
Setting up a new business or expanding an existing one in Japan is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.
Banking Hours: 9:00 am to 3:00 pm
The standard working week is from Monday to Friday from 10:00 am to 6:00 pm
Japan has a range of laws in place to ensure fair working conditions and these laws apply equally to all irrespective of nationality. Some of the most important laws address equal treatment, the prohibition of forced labor, the elimination of intermedia exploitation, the period of an employment contract and clear indication of working conditions.
Automobiles, consumer electronics, computers, semiconductors, and iron and steel
Dates & Numbers
Official State Name
Japanese Yen ¥
International Dialing Code
All wages must be paid in currency and directly to the workers in full, at least once a month and on a definite date. Payment of wages via bank transfer is also permitted. There are two types of minimum wage: regional minimum wage (separately prescribed for each prefecture and applying to all workers irrespective of industry or job type) and specified minimum wage ( prescribed for specific industries). Whether both wage types may apply, the higher of the two minimum wages shall apply.
It is acceptable to provide employees with online payslips
Payroll reports must be kept for 40 years
Employees with a year and a half of service are entitled to 11 days of paid annual leave
There are no sick leave rights in Japan. Employees take such leave out of their annual leave
14 weeks of paid maternity leave, six of which have to be taken before the due date and one year of paternity leave after the birth of the child
Maternity & Paternity Leave
A 13th and 14th month salary can be paid as a bonus in December
13th month salary
The minimum hourly wage is 930 yen
Maximum limits for overtime are set at three hours per day and paid at 150% of the standard salary rate
Severance pay is required only for expatriates who get half a year’s salary for every year they’ve been employed up to five years
Tax and Social Security
Tax is managed by the National Tax Agency and most wage earners are not required to file a final tax return because the calculation and payment of income taxes are generally completed through the year-end adjustment by the person paying the salary. Japan’s social security system is designed to cover all citizens’ pension, medical care and long-term care (universal health insurance and pension systems). Social security depends on insurance contribution; it is funded approximately 60% by insurance contribution, 30% public expenditure and about 10% by asset income.
Permanent resident taxpayers are taxed on their worldwide income. Non-resident taxpayers are taxed only on their Japan-sourced income. There is also a surtax consisting of a 2.1% tax assessed on an individual’s national income tax.
Corporate Income Tax
Personal Income Tax
There is a two-fold system in place, that is, occupational insurance (health insurance, employees’ pension) for salaried workers and insurance (National Health Insurance, National Pension) for the self-employed.
Social Security Rate
Social Security Rate for Employers
Social Security Rate for Employees
Japan has in place several laws pertaining to labor and the protection of workers including the Labor Standards Act, the Industrial Safety and Health Act and the Minimum Wage Act. These laws apply in principle to all enterprises in Japan regardless of whether the employee is Japanese or foreign or whether the company is a foreign or Japanese-registered organization.
Labor contracts with a definite period shall not be concluded for a period exceeding three years in principle. The exceptions are contracts with workers aged 60 or older (which can be concluded for a maximum of five years) and labor contracts with a definite period regarding required completion of certain undertakings (e.g. construction work) for which the contract will be for the necessary period for completion.
In principle, an employer shall not have a worker work for over 40 hours per week or more than eight hours per day. Workers shall also be provided with at least one day off per week or four days off or more during a four-week period. This does not apply to agriculture, livestock or fishery industries. However, companies that operate a multi-country payroll must take note of Agreement 36 which refers to the Labor-Management Agreement that the employer has concluded relating to Overtime Work and Work on Days Off. With such an agreement, the employer can allow employees to engage in overtime work and work on days off within the scope of the agreement.
Where a worker has been employed continuously for six months (calculated from the day of their hiring and they have reported to work at least 80 percent of the total working days), an employer shall grant annual paid leave to the worker. When leave requested may interfere with the normal operation of the enterprise, the employer has the right to change the dates of leave.
If a dismissal lacks reasonable grounds and is not considered appropriate in general societal terms, it is treated as an abuse of rights and therefore, invalid. In the case of fixed-term labor contracts, an employer may not dismiss a worker until the term of the labor contract has expired (unless there are unavoidable circumstances).
Minimum notice period for terminating an employee
Total number of public holidays
Working hours per week
Up to 5 days
Total number of days for Compassionate & Bereavement Leave
Regardless of the work status, all applicants are required to apply for a Certificate of Eligibility. Where a professional is deemed highly skilled by the ‘points based system” and gains the status of residence for advanced specialized/technical activities, the individual may be eligible for preferential immigration treatment.
Under the residence management system for foreign nationals in Japan, a residence card is issued to foreign nationals. It is issued to foreign nationals residing legally in Japan for the mid to long term who have resident status under the Immigration Control Act when they are granted a residence-related permit such as a landing permission, permission for change of status of residence and permission for extension of period of stay.
Work Permit validity
1 – 3 years
The Certificate of Eligibility
Japan Work Visa Application Form, completed and signed. A copy of the application form can be downloaded from the website of the Japan Ministry of Foreign Affairs
valid passport and copies of the same
Passport-sized photographs (photos must be clear and meet the appropriate standards such as white background and visible face)
Documents detailing the applicant’s position in the company, the salary that will be received and the duration of work
Documents attesting to the applicant’s academic and professional history
Documents related to the receiving company, such as the company registration, statement of profit and loss, etc.
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