Japan Unveils Residency Program for Angel Investors to Stimulate Startup Investment”

Japan will introduce a residency program for angel investors to encourage investment in the country’s startups. The program aims to attract much-needed investment capital and will offer residency lasting up to five years. This initiative comes as Japan seeks to boost its startup ecosystem in key sectors.

According to a report by Nikkei Asia, the new residency status will be implemented as early as April of the next fiscal year. The residency visa will cover 13 national strategic special zones for economic growth and innovation.

The eligibility criteria for obtaining residency under the program will include:

• Submission of investment proposals
• Assessment of the investor’s past performance.
• Evaluation of their financial assets.

However, specific details regarding these requirements, such as minimum investment thresholds, will be finalized later.

To mitigate the risks of financial crimes like money laundering, the local authorities overseeing the designated special zones will be responsible for certifying and overseeing angel investors participating in the program. 

Additionally, residency holders will be expected to actively contribute to startups’ growth by providing corporate guidance and mentorship. These measures aim to ensure that the residency program attracts genuine investors who support the economic development of Japan’s startup ecosystem.

In October of the previous year, Tokyo’s Shibuya ward proposed establishing a residency program tailored for angel investors, aiming to attract more investment into the country’s startup ecosystem.

The government intends to expand Shibuya’s initiative beyond the ward to encompass all designated strategic special zones. Despite a notable increase in venture capital investment in Japan, reaching 270.6 billion yen ($1.82 billion) in fiscal 2018, according to Mizuho Research & Technologies, the figure remains significantly lower compared to the substantial VC funding of 14.4 trillion yen in the U.S. 

In Japan, many startups face challenges securing funding, particularly those operating at a loss shortly after their inception. Unlike in Silicon Valley, where abundant capital from VC firms and affluent individuals facilitates the growth of startups, the capital ecosystem in Japan requires further development to support the flourishing of new ventures.

Japan plans to adopt insights from existing residency programs in other countries to enrich its startup investment landscape through the envisioned residency scheme. Drawing inspiration from initiatives like the one in the United States, where immigrant investors can secure permanent residency by investing $800,000 or more in areas with unemployment rates exceeding the national average, Japan aims to attract experienced investors to bolster its startup ecosystem.

However, concerns persist regarding introducing a residency program tailored for investors. The United Kingdom’s experience, where residency extensions were granted to individuals committing at least £2 million ($2.55 million) in investment, is a cautionary tale. Following suspicions of illicit fund inflow and potential links to corruption, the British government ceased accepting applications in February 2022. 

In Japan, ensuring thorough scrutiny of startup investment plans and applicant track records will be paramount. Collaboration between regulatory bodies such as the Financial Services Agency and local government authorities will be essential for effectively managing the visa process, necessitating adequate staffing and resources to maintain oversight and integrity.

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