Introduction

Japan is positioning itself as a major startup and innovation hub in Asia under the Startup Development Five-year Plan, first announced by the Japanese government in 2022. Under the plan, Japan aims for the public and private sectors to increase startup investment to ¥10 trillion by FY2027.

The plan also sets ambitious targets to create 100,000 startups and 100 “unicorns,” defined in the official plan as unlisted companies with a market capitalization of over ¥100 billion. The official plan states an ambition to make Japan the largest startup hub in Asia and one of the world’s leading clusters of startups.

This article explains how Japan’s startup strategy is structured, what progress and challenges remain, and what the country’s evolving startup ecosystem may mean for companies and investors looking at Asia.

How the plan is structured

The ¥10 trillion target is not a direct government spending target. Rather, it is a public-private mobilization goal aimed at expanding Japan’s startup investment from ¥820 billion in 2021 to ¥10 trillion by FY2027.

The Startup Development Five-year Plan is built around three official pillars.

First, the plan aims to build human resources and networks for startup creation. This includes expanding programs that dispatch young entrepreneurs to global startup hubs such as Silicon Valley and other overseas ecosystems, helping them gain access to mentors, investors, and international networks.

Second, the plan aims to strengthen funding for startups and diversify exit strategies. This includes measures related to stock options, R&D tax incentives, and the promotion of M&A as an exit strategy, rather than relying mainly on IPOs.

Third, the plan promotes open innovation. This includes encouraging collaboration between startups, universities, research institutions, and established companies, so that Japan can better commercialize technologies and create globally scalable startups.

The plan also supports deep-tech fields through measures such as the Global Startup Campus concept and startup creation support in areas connected to research, agriculture, medicine, and advanced technology.

Key policy measures and numeric targets

The plan’s headline targets are to increase startup investment to ¥10 trillion by FY2027, create 100,000 startups, and create 100 unicorns. These targets are part of a broader effort to significantly expand the scale and impact of Japan’s startup ecosystem.

To support these targets, Japan has introduced or promoted several policy measures.

One focus is improving access to funding. The plan aims to strengthen financial support for startups, attract domestic and foreign venture capital, and create a stronger environment for late-stage growth funding.

Another focus is diversifying exit routes. Japan’s startup ecosystem has historically relied heavily on IPOs, while M&A exits have been less common than in the U.S. and Europe. The plan therefore emphasizes the need to promote M&A as an exit strategy and create more flexible paths for startup growth.

The Tokyo Stock Exchange has introduced measures to enhance the functionality of the Growth Market, including stronger information disclosure and improved communication with investors. These measures are intended to improve the market environment for growth companies and investors.

Human-capital development is another important lever. The plan includes programs to train and dispatch young entrepreneurs to global startup hubs, helping address the need for stronger entrepreneurial talent and international networks.

Current situation and challenges

As of 2025–2026, Japan is midway through the implementation period of the FY2027 Startup Development Five-year Plan. Public and private initiatives indicate growing policy support and investor interest in Japan’s startup ecosystem, including increasing attention from foreign funds.

However, structural challenges remain. Japan still faces a low corporate entry rate, limited M&A exits compared with the U.S. and Europe, IPO-heavy exit patterns, and the need to build stronger global networks for entrepreneurs.

These challenges suggest that Japan’s success will depend not only on policy targets, but also on whether the country can sustain policy momentum, attract domestic and foreign capital, and help startups expand beyond the domestic market.

Regional and international linkages

Japan’s startup strategy is also connected to broader regional and international initiatives. The plan emphasizes global networks, including entrepreneur-development programs linked to U.S. innovation hubs such as Silicon Valley, Boston, New York, San Diego, and Austin, as well as connections with Israel, Singapore, Northern Europe, and other regions.

Separately, Japan is strengthening ASEAN-related economic collaboration through initiatives such as the ASEAN-Japan Economic Co-Creation Vision and its Future Design and Action Plan. These initiatives aim to deepen business collaboration between Japan and ASEAN, including innovation, digital transformation, and cross-border business creation.

Regional collaboration pathways are also emerging through initiatives such as JETRO support programs and TSE Asia Startup Hub. These programs can help overseas startups connect with Japanese companies, investors, and capital markets.

What this means for business and investors

For companies and investors focusing on Asia, Japan’s startup strategy creates several implications.

First, the policy environment points to growing opportunities in Japanese startups, particularly in deep tech and fields connected to university research, advanced technology, and corporate open innovation.

Second, Japan may offer new opportunities for regional collaboration between Japanese startups, large Japanese corporations, and Southeast Asian markets. This is especially relevant where startups are looking for strategic partnerships with Japanese companies, commercialization support, or access to Japanese corporate networks.

Third, Japan may complement existing startup hubs such as Singapore by offering access to mature corporations, advanced manufacturing capabilities, capital markets, and strategic partnerships. In this sense, Japan’s role may not be simply to compete with other Asian hubs, but to provide a different type of ecosystem built on its corporate, industrial, and research base.

Conclusion

Japan’s Startup Development Five-year Plan is an ambitious public-private effort to expand startup investment, build entrepreneurial talent and networks, diversify funding and exit routes, and promote open innovation.

If Japan can sustain policy momentum and connect its startups more effectively with global capital, regional partners, and large corporate networks, it could strengthen its role as a major startup and innovation hub in Asia. However it is important to note that success will depend on whether Japan can move beyond policy targets and create a startup environment where companies can scale internationally.