Overview

During IVS Kyoto last summer, leaders from Japan’s startup and innovation ecosystem gathered to discuss strengthening Japan’s role on the global stage. The panel, which included Toshimitsu Motegi (Secretary-General Liberal Democratic Party), Hiro Nishiguchi (President of Startup Genome Japan 株式会社), Masaru Nagura (Director of CIC Tokyo), and moderator Chika Minami (Director for Startup Policy at Ministry of Economy, Trade and Industry), addressed critical issues affecting Japan's startup landscape. Topics ranged from the need for global competitiveness and regulatory reform to the role of diversity. These insights resonate with finance leaders committed to fostering Japan’s long-term growth.

Insights

Strengthening Competitiveness through Globalization and Scale

Nishiguchi highlighted the importance of increasing Japan’s global footprint, noting Tokyo's rise to 10th in global startup ecosystems but emphasizing the need for more large-scale exits to compete with global leaders like Silicon Valley and London. Despite over 600 exits in Tokyo in recent years, the financial impact remains limited. Nishiguchi argued that for Japan’s startups to thrive, scaling operations internationally is essential.

Regulatory Reform as a Catalyst for Growth

The panelists agreed that Japan’s rigid regulatory environment hampers growth, especially in sectors like ride-sharing. Motegi highlighted that reducing regulatory barriers could expand the market size from 6 trillion to 15 trillion yen over the next decade. Nagura stressed the importance of deregulation as a test ground for innovation within Japan.

The Role of Diversity in Driving Ecosystem Success

The panel underscored diversity as a critical factor in thriving startup ecosystems. Compared to Silicon Valley, Japan’s ecosystem is relatively homogeneous. By fostering inclusion of foreign talent, women, and underrepresented groups, Japan could enhance its competitive edge. Nishiguchi emphasized, “Diversity is the source of competitiveness,” advocating for a more inclusive landscape to boost innovation.

Increasing Funding and Investment Opportunities

Motegi pointed to Japan's substantial financial assets, with households holding approximately 2,200 trillion yen, much of it in low-interest accounts. Redirecting even a portion of these assets could significantly boost the startup ecosystem. The recent NISA upgrade, allowing a 15% inclusion of unlisted stocks in investment trusts, offers a new channel to funnel funds into startups.

Education and a Cultural Shift Toward Entrepreneurship

To unlock Japan’s entrepreneurial potential, the panelists stressed fostering a culture of risk-taking and innovation. Nagura advocated for a societal shift, encouraging a mindset that embraces failure. Entrepreneurship education that integrates global business perspectives was cited as essential to nurturing leaders ready to scale internationally.

Our Thoughts

The panel’s insights align with our mission to bridge Japan with global startup ecosystems. At Headline Asia, we see untapped potential in Japan’s financial resources and robust domestic market but recognize that regulatory flexibility and cultural openness are key to growth. Our initiatives aim to support these needs:

• Bridging Ecosystems: Through cross-border programs like IVS LAUNCHPAD, we connect Japanese startups with international exposure, fostering diversity and global connections.
• Local Presence with Global Reach: Our efforts to connect Japan with other markets resonate with the panel’s emphasis on expanding Japan’s global footprint.
• Unlocking Financial Potential: By implementing global best practices, we aim to mobilize Japanese capital effectively for startup growth, utilizing trusted networks to foster sustainable development.

Takeaways

To strengthen Japan’s position in global innovation, founders and stakeholders should consider the following strategies:

• Expand Internationally: Increase financial impact through global reach.
• Advocate for Regulatory Flexibility: Collaborate with policymakers to support innovation.
• Build Diverse Teams: Drive fresh ideas through varied perspectives.
• Activate Dormant Funds: Direct private assets toward startup investments.
• Support Entrepreneurship Education: Foster risk-taking and global thinking.

As Japan’s startup ecosystem grows, these steps offer a strategic path forward. By addressing regulatory barriers, fostering diversity, encouraging cultural shifts, and mobilizing dormant financial assets, Japan has the potential to become a global powerhouse in innovation.

Want to learn more about our next IVS event or get insider perspectives from top industry experts and Headline Asia’s leadership?

Reach out to Shimakawa Toshiaki.