One of the trickiest obstacles to creating a business startup in Japan is opening your company’s corporate bank account.
It is particularly difficult that even budding Japanese startups find this part of the business setup a struggle knowing they have no credit to present. Nonexistent credit means no records of annual corporate tax returns to evaluate, and that’s even after they have made it through the bank’s dreaded subjective criteria.
The unavoidable reality of a ‘subjective criteria’ — all of whom are undisclosed and are left to the bank manager’s discretion — that each bank and their bank branches implement adds another layer of ambiguity and unnecessary delay in processing the bank application.
Although these criteria may look obscure, there are helpful ways to mitigate the problems that come along the unavoidable and complicated step of opening a corporate bank account.
- Tapping the Services of a Japanese Resident Representative Director
- Presenting the Right Amount of Capital
- A Clear and Simple Business Overview
1. Tapping Services of a Japanese Representative Director
The ideal resident representative director has to be Japanese.
As was mentioned in the first item in ensuring market entry success in Japan, opening a corporate bank account will inevitably fall into the territory of subjective criteria.
In many of the cases of the rejections, one commonality that has been observed and surmised as the cause for the undesired outcome: the representative director of the Japanese company is a resident alien person. Even in possessing a valid business manager visa, the assessment remained as is.
Banks do not disclose the basis for rejections, however, it’s undeniable that the lack of a Japanese representative director was a major influence for the banks’ decision to accept or reject applications.
Japanese banks are uncomfortable in dealing and working with startups looked over by a foreign representative director, regardless if the person is a resident or not.
Furthermore, a revision of the Japanese legal law in 2015 allowing a non-resident person to set up a business has created more harm than good.
In this recent ruling, a non-resident is afforded the opportunity to register their Japanese-based business. When the business registration is granted, they are then required at least a personal Japanese bank account to provide initial capital for the company registration. But as a non-resident, it is automatically assumed that the person would not possess a personal account obtained from a Japanese bank. And as mentioned beforehand, banks will, in almost all cases reject applications for a corporate bank account initiated by a person of foreign citizenship.
This puts the business in a limbo of existing but not operating, as the crucial step of having a corporate bank account — used for practically all mandatory transactions e.g. the filing of corporate tax returns, paying to vendors or receiving fees from customers among others — remains in an indefinite standstill.
To recoup in this situation, it would then come as a necessity to hire a Japanese person to make the application of a corporate bank account proceed, and by that point, it will have cost more time and money to re-register the new resident representative director to the legal bureau.
So right at the onset of registering your business, we strongly recommend appointing a reliable Japanese person as your company’s resident representative director.
If you are unable to find one with reputation and background experience, we can offer our service as a designated professional nominee resident representative director.
2. Presenting the Right Amount of Capital
Did you know you that you can open a company in Japan for 1 yen? Yes, that’s right.
However, no one would trust a company whose capital sits around that trivial amount. (Note: the company registration certificate is open to the public and anyone can look-over your company’s capital)
At least 1 million to 2 million yen of capital is required to open a corporate bank account because the banks estimate these reference values would be the bare minimum to cover operating expenses before the company starts generating revenues.
If you plan to apply for a residence visa, you will need an initial capital of 5 million yen for the business manager visa. At least 3 million yen is recommended for the engineer and specialist in humanities/international studies type of visa.
3. A Clear and Simple Business Overview
It is essential to be able to explain your business overview in clear and simple terms to the Japanese resident representative director. That way, when it’s time to open your corporate account, he can relay the same business overview to the best of his competence that the banker grants the application.
We further recommend your business to acquire at least a basic corporate website(English site is fine) with the official company name, address, and the business overview. Banks request a printout of the corporate website homepage so they can examine the business’s legitimate existence.
It would be easier to deliver your company’s business overview with the website printout in hand rather than explaining it verbally. Visual contents give a positive impression to the banker.
Added bonus to further enhance your chances and stay in the correct lane as you move along with your business.
Please make sure that your business is not to engage in any illegal acts or violations of the law.
Your Japanese company must meet all the set requirements to apply for business permission or notification where qualifying for them is mandatory to operate as a business in Japan such as restaurant, recruiting firm, among others.
The bank will certainly check whether the status of your company meets all license requirements.
As long as you meet the three requirements, you will be victorious in opening your very own corporate bank account.