The Rise of Startups in Japan: A New Wave of Innovation

For decades, Japan has been known for its large, established corporations like Sony, Toyota, and Panasonic. These giants dominated their industries while startups struggled to gain a foothold in a conservative business culture. However, in recent years a startup boom has swept across Japan, leading to a surge of entrepreneurship and innovation. 

The shifting economic landscape is a driving force behind this startup growth. Japan faced stagnant growth and recession in the 1990s which led to banks and investors being reluctant to take risks on new ventures. But things started changing in the 2000s as the government pushed initiatives to support startups, seeing them as vital for economic growth. Additionally, more Japanese looked to start their own companies as lifetime employment at major corporations declined. 

Venture capital funding has dramatically increased, from under $1 billion in 2010 to over $3 billion in 2018. Accelerators and incubators have popped up across Tokyo and other cities, providing training and seed funding. Co-working spaces give entrepreneurs affordable office space and a collaborative environment. Events like Slush Tokyo and Startup Weekend bring the startup community together. 

The growth of startups is also being driven by increased technical skills and global mindsets. More Japanese students study abroad, gaining international exposure. Universities in Japan are expanding computer science and engineering programs, producing graduates eager to apply their skills in the startup world. Government initiatives have increased R&D spending, helping turn research into new technologies.

So what are the hottest startup sectors emerging in Japan? 

E-Commerce

Japan has been slow to embrace e-commerce, with under 5% of retail spending happening online versus over 15% in the U.S. But this presents a massive opportunity, and a new generation of e-commerce leaders like Mercari (flea market app) and Base (Shopify of Japan) are capitalizing. As shopping shifts online, this sector will continue booming.

Travel Tech

Japan's tourism industry is growing rapidly in preparation for international events like the 2019 Rugby World Cup and 2020 Tokyo Olympics. Startups are springing up to meet traveler needs from reservations to translations. Pocket Concierge offers an AI assistant for booking hotels and restaurants, while WAmazing helps foreigners navigate activities and transportation.  

Fintech

Cash still dominates in Japan, so innovators are trying to transform financial services. Origami offers payroll and HR software for Japanese corporations, while Paidy provides instant online credit for consumers. Cryptocurrency exchanges like BitFlyer and Coincheck are bringing bitcoin and blockchain technology into the mainstream. 

Healthtech

As Japan’s population ages, healthtech startups are tackling problems from elder care to access to doctors. Curon is an online medical clinic matching patients with physicians instantly via video chat. CareTech Holdings operates a network of healthcare facilities leveraging AI and big data. WealthNavi uses robotics to provide financial planning tailored for retirees. 

Deep Tech

Technologies like AI, robotics, IoT and 5G are reshaping society, and Japan is determined to be a leader. Startups like Preferred Networks (AI solutions) and Groove X (social companion robot) are creating cutting-edge innovations. The government’s Society 5.0 plan focuses on commercializing deep tech research, and universities are spinning off ventures. 

While software and consumer web services dominate among startups globally, Japan’s deep expertise in hardware and robotics gives it an edge in frontier tech. Automation and labor-saving technology will be in demand in Japan thanks to its aging population and low immigration.

Despite this progress, hurdles remain. Startup funding is still dwarfed by places like the U.S. and China. Japanese work culture emphasizes stability over risk-taking. Failure still carries stigma making entrepreneurs afraid to “rock the boat.” Linguistic and cultural barriers limit international customer acquisition. Intellectual property laws and acquisition deals favor established corporations.

But the momentum is clearly on the side of startups. As the old guard companies reform, and the government makes reforms favoring entrepreneurs, exciting innovations will emerge across industries. The startup ecosystem still lags behind Silicon Valley and China, but expect Japan’s tech scene to become an engine of economic growth and inventiveness in the decades ahead.