Foreign executives operating businesses or restaurants in Japan left the country at nearly four times the rate in the first half of this year compared to the same period last year. This increase is attributed to the Japanese government's efforts to prevent the improper acquisition of residency status through paper companies, which led to significant tightening of eligibility criteria and assessments starting last fall. While the intention is to eliminate unviable businesses, concerns have arisen that the departure of small foreign operators may impact Japanese companies that have been trading with them.
The Nikkei reported on September 3, based on statistics from the Japanese Immigration Services Agency, that 953 holders of 'management and administration' residency status left Japan without going through re-entry procedures in the first half of this year, a 3.9-fold increase from the same period last year. The number of departures, which had been in the dozens per month until last fall, rose to 114 in December and has remained between 100 and 200 each month from January to June this year.
The surge in departures began immediately after the Japanese government tightened residency requirements for foreign executives. In October of last year, the Immigration Services Agency revised regulations, raising the corporate capital requirement from 5 million yen to 30 million yen (approximately $280,000). Additionally, it mandated at least three years of management experience or a master's degree, as well as the employment of full-time staff and a certain level of Japanese language proficiency.
Existing residents are allowed to renew their residency until October 2028 even if they do not meet the new criteria, provided they are expected to comply in the future. Despite this grace period, the number of departures has increased since the implementation of the new rules. Some have noted that assessments of management practices have also become stricter than before, independent of the new criteria.
The number of foreign residents holding 'management and administration' status has rapidly increased, with 46,781 such residents in Japan at the end of last year, a 1.7-fold increase from five years ago. However, the tightening of requirements has led to a near halt in new applications, with the number of applications dropping by approximately 96% in the five months following the regulatory changes compared to the previous five months.
The challenge is that even foreign entrepreneurs running legitimate small businesses find it difficult to meet the new criteria. According to Tokyo Shoko Research, among the 143,367 new corporations established in Japan in 2024, only 1,491 had capital exceeding 30 million yen, accounting for just 1% of the total. This means that foreign executives are being asked to meet capital requirements that 99% of new Japanese corporations do not fulfill.
The impact of the new criteria may extend beyond foreign entrepreneurs. Kenji Goto, an information department manager at Tokyo Shoko Research, pointed out, "It is difficult for small businesses to meet the new standards, and if foreign entrepreneurs close their businesses, it will also affect Japanese companies that supply raw materials or lease commercial properties to them."
The Takaiichi government has tightened residency requirements for foreign executives and is also tightening overall eligibility assessments. In January of this year, new Japanese language proficiency requirements were added for permanent residency applications, and since April, the assessment for 'intra-company transferee' residency status for foreign employees relocating from overseas to Japanese branches has also been strengthened. This includes new requirements for submitting corporate registration and tax status from overseas offices, as well as local social insurance enrollment records and documentation from Japanese offices. If tax evasion is confirmed, residency renewal will generally not be permitted.
The Japanese government aims to close loopholes in residency qualifications that have relatively lenient requirements while actively welcoming highly skilled professionals who meet stringent criteria such as education and salary. However, the number of 'highly skilled professionals' the government seeks to attract is only about 30,000, which is less than 1% of the total foreign residents. The Nikkei noted that if the tightening of assessments complicates procedures, it could deter foreign companies and talent from entering Japan.
* This article has been translated by AI.
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