Japan tightens startup residence visa to plug immigration loopholes - but this actually scares away new foreign startup talents

(Tokyo News) In an effort to close the loophole where immigrants obtain residency through shell companies, the Japanese government significantly raised the application threshold for "management and operation visas" for foreigners at the end of last year. However, this move has sparked controversy in the industry, resulting in a sharp decline in applications and undermining the original policy intention of attracting new investment and foreign technology talents to alleviate the country's population decline.

The Nikkei Asia reported on Tuesday (June 30th) that Japan's Business Manager Visa, which is specifically designed for foreign entrepreneurs, tightened its regulations in October last year. The minimum capital requirement was raised from 500 million yen to 3000 million yen, and additional requirements such as management experience, educational qualifications, and Japanese language proficiency were added. This led to a sharp decline in the number of visa applications, which dropped by 96% from an average of about 1700 applications per month to only about 70 at present.

Official data shows that as of June last year, there were 44,760 people residing in Japan on business management visas. This number has increased by 170% over the past 10 years. Some members of parliament have thus pointed out that the number of foreigners obtaining residence rights by registering empty shell companies with no actual business operations is on the rise. They criticize the visa program as a "migration loophole", allowing foreigners to "enjoy Japan's social insurance system for free".

Professor Mashima Chieko from International Christian University told Nikkei Asia that the controversy has intensified since the Senate election in July last year. At that time, the far-right Japanese political party that participates in the Senate used public concerns about immigration to win more seats.

Masako Hashimoto later became the prime minister. When she delivered a policy speech last October, she promised to "resolutely combat these illegal or irregular activities", but also clearly rejected xenophobia.

Shakhboz Khayrilloev, the founder of an AI logistics service startup from Uzbekistan, told Nikkei Asia that after the regulations tightened, many young foreign talents were deterred from coming to Japan to develop software projects. He said: "Many start-up companies couldn't meet the capital requirement of 30 million yen at the beginning stage. In the tech industry, developing software and exploring the market are both very time-consuming."

Another visa holder from Australia disclosed anonymously that although he has been running an audio engineering company in Japan for nearly 10 years and invested 10 million yen in a new recording studio last year, the amendment of the regulations has made him worried. The visa conditions are likely to be further tightened in the future. This uncertainty has completely changed his and his wife's life plans. They have decided to close the business and return to Australia by the end of this year.

Immigration lawyer Tomada Ichiro pointed out at a press conference earlier this month that currently, about 70% of the capital of those holding management and operation visas is 5 million yen. "For them to obtain bank loans in accordance with the new regulations, the challenge is extremely high."

Although the regulations provide a three-year grace period for existing visa holders to comply with the new regulations, and those who fail to meet the requirements upon expiration can have their visas extended based on their individual business circumstances, Tomada Ichiro calls on the government to issue more explicit guidelines to provide greater clarity for entrepreneurs, so that they do not have to choose to discontinue their business operations out of fear of losing their visas.

Kobayashi Chie stated outright that the new regulations do not target the minority of people who exploit loopholes in the immigration system; instead, they affect the majority of those who run small businesses seriously. "The government should provide financing support to these foreign business operators in a fair manner to local merchants, and at the same time, strengthen the plan for Japanese language training."