A Japan kabushiki kaisha (KK (株式会社)) or godo kaisha (GK (合同会社)) can be legally incorporated with as little as JPY 1 in paid-in capital (資本金 (shihonkin)) under the Companies Act (会社法), but JPY 1,000,000 to JPY 5,000,000 is the practical floor for a foreign-owned entity, since banks, customs authorities, and enterprise counterparties treat stated capital as a proxy for operational seriousness. Three thresholds above that floor change your tax and governance obligations: JPY 10,000,000 (consumption tax exemption), JPY 30,000,000 (Business Manager visa minimum, if that is part of your structure), and JPY 100,000,000 (large-company classification).
What Does Paid-In Capital Actually Represent?#
Paid-in capital (資本金) is the funds contributed by shareholders at or after incorporation that are formally recorded as stated capital on the company's balance sheet and on the commercial registry (商業登記), under the Companies Act (会社法).
That figure is:
(a) A registered, publicly disclosed figure on the commercial registry (shogyo toki (商業登記))
(b) A balance sheet category that represents the permanent equity base of the company
(c) A threshold-setting figure that determines how several regulatory and tax rules apply
It is not:
(a) A minimum operating cash balance. The company is not required to maintain ¥X in a bank account just because its stated capital is ¥X. Capital can be deployed for operations immediately after formation.
(b) A limit on losses. A company can operate at a loss and exceed its capital in cumulative losses; this triggers certain reporting obligations but does not automatically result in dissolution.
(c) Necessarily equal to the total funds the foreign parent has committed to the Japan subsidiary. Additional funding from the parent can be structured as shareholder loans or additional capital contributions depending on what makes sense for tax and operational purposes.
What Is the Legal Minimum Capital for a Japan KK or GK?#
The Companies Act (会社法) abolished minimum capital requirements in 2006. Both KK and GK can be incorporated with ¥1 of stated capital.
In practice, ¥1 capital is effectively not viable. A company with ¥1 stated capital:
(a) Will be declined by virtually all Japanese banks for corporate account applications, as banks treat stated capital as a proxy for operational seriousness
(b) Will face heightened scrutiny from customs authorities and enterprise counterparties who review the commercial registry
(c) Signals that the founders have not thought through the capitalization question, which creates doubt about operational readiness
The practical minimum for a foreign-owned entity seeking to operate credibly in Japan is ¥1,000,000 to ¥5,000,000, with ¥3,000,000 to ¥5,000,000 being the most common range for entities seeking bank accounts and enterprise client relationships.
Does Capital Below ¥10,000,000 Exempt You From Consumption Tax (JCT)?#
A newly incorporated company with stated capital below JPY 10,000,000 is generally exempt from collecting and remitting Consumption Tax (消費税法, Consumption Tax Act) for its first two fiscal years. This is the threshold with the most immediate financial impact on a newly incorporated company, and it is also covered from the filing-obligation side in the JCT Tax Representative Guide.
As a general rule under the Consumption Tax Act (消費税法), a newly incorporated company is exempt from the obligation to collect and remit consumption tax (消費税 (shohizei)) for its first two fiscal years, provided that its stated capital at formation is below ¥10,000,000.
If stated capital is ¥10,000,000 or above at incorporation, the JCT exemption does not apply, and the company must register as a JCT-paying business (kazei jigyo-sha (課税事業者)) from the first day of operations. It must collect 10% JCT on taxable sales and remit it to the tax authorities.
For cash flow, the two positions work out as follows:
(a) If your capital is below ¥10,000,000, you will typically have a two-year window in which you do not need to collect JCT on your sales (subject to exceptions; see below). During this period, you still pay JCT on your purchases but cannot recover it as input tax credit, so the net position depends on whether you mainly sell or mainly purchase.
(b) If your capital is ¥10,000,000 or above, JCT obligations begin immediately. For a B2B business selling to other JCT-registered businesses, this is typically neutral (your customer recovers the JCT as input tax). For a business with significant B2C sales or sales to non-JCT-registered buyers, the immediate JCT obligation increases the effective cost of your offering by 10%.
The JCT exemption regime is governed by multiple criteria beyond stated capital, including whether the company's taxable sales exceed the threshold in certain prior periods. Tax treatment for non-resident or foreign-owned entities may also differ from the general rule. Engage a qualified tax accountant (税理士) before making the capitalization decision on JCT grounds.
Where your business is primarily B2B and your counterparties are JCT-registered businesses, the JCT exemption provides minimal cash flow advantage because your customers recover the JCT in any case. For businesses with B2C or mixed revenue, the two-year exemption provides meaningful cash flow benefit, and staying below ¥10,000,000 is worth considering.
What Happens at ¥100,000,000 - The Large Company (大会社) Line?#
At or above JPY 100,000,000 in stated capital, a company loses SME tax treatment and picks up governance and filing obligations that a smaller entity does not carry. Under the Companies Act (会社法) and the Corporate Tax Act (法人税法), companies with stated capital (or stated capital plus additional paid-in capital in certain calculations) at or above ¥100,000,000 are classified as "large companies" (大会社 / 大法人) for specific purposes.
Reaching ¥100,000,000 brings the following consequences:
(a) Corporate governance obligations under the Companies Act (会社法). Large KKs with capital of ¥500,000,000 or more (or those with listed shares) are subject to mandatory audit committee or accounting auditor (kaikei kansanin (会計監査人)) requirements. Below ¥500,000,000 stated capital (the more common foreign-owned entity range), the specific governance requirements depend on whether the company elects certain corporate governance structures, but ¥100,000,000 is still a relevant marker for additional statutory audit requirements in some configurations.
(b) Loss of SME preferential tax rates under 法人税法. Japanese SME tax provisions (including reduced corporate tax rates on the first ¥8,000,000 of taxable income) are available only to companies whose capital is below ¥100,000,000 and who are not subsidiaries of large companies. Foreign subsidiaries of large multinational parents may not qualify for SME rates regardless of their own capital amount, because the group relationship matters.
(c) Mandatory electronic tax filing. Companies with capital of ¥100,000,000 or above are required to file certain corporate tax returns electronically.
(d) Consumption tax and size-based surcharges. Under the Local Tax Act (地方税法), the local business tax (jigyo zei (事業税)) calculation for large companies (defined differently in local tax law, but ¥100,000,000 is a common marker) includes a size-based levy (gaigata hyojun kazei (外形標準課税)) on payroll and capital, not just on taxable income. This creates a minimum local business tax obligation even in loss years.
Most foreign-owned Japan subsidiaries that are market-entry or representative entities do not approach the ¥100,000,000 threshold voluntarily. The threshold becomes relevant when a company is raising capital for a significant Japan operation, in which case the tax and governance implications should be explicitly modeled with a tax advisor.
Is There a Practical Floor Below the Legal Minimum?#
There is a practical floor at around ¥5,000,000: below that level some insurance-type calculations and general creditworthiness assessments begin to treat the entity as having minimal commercial credibility. This is not a hard statutory threshold in the way the JCT and large company thresholds are, but it operates as a practical floor in several contexts:
(a) Bank account applications: many regional banks and some megabanks informally target ¥3,000,000 to ¥10,000,000 as the minimum capital they expect from a new foreign-owned applicant
(b) Supplier and customer due diligence: enterprise procurement departments often review stated capital as part of vendor onboarding; sub-¥1,000,000 capital flags as a risk indicator
(c) Customs creditworthiness: Customs authorities assess importer credibility based on multiple factors; very low stated capital can be one negative indicator
What Capital Amount Should You Choose?#
Most foreign-owned entities land between ¥3,000,000 and ¥5,000,000 for a B2B services company, or ¥5,000,000 to ¥10,000,000 for an import or trading entity seeking customs and enterprise credibility. The right figure depends on your JCT position, whether a Business Manager visa is part of the structure, and how the entity will be funded going forward, so model it against the thresholds above before filing the Articles of Incorporation (定款). For most foreign companies, the practical choice follows the type of business.
For a B2B services or consulting entity with no physical goods, keep capital below ¥10,000,000 for the first two years and set it at ¥3,000,000 to ¥5,000,000. You stay below the JCT threshold, appear credible to banks and counterparties, and keep the registration tax at the statutory minimum (¥150,000 for KK, ¥60,000 for GK). The two-year JCT exemption is useful if your early revenues are B2C or mixed.
An import/export trading company, or any entity that needs customs credibility from day one, should consider ¥5,000,000 to ¥10,000,000, a level that carries credibility with customs authorities and enterprise customers. Stay below ¥10,000,000 if the JCT exemption has cash flow value for your model; exceed it if you need to project greater scale.
A regulated entity (financial, medical, telecom), or one that must meet a specific ministry's capitalization requirement, should check the sector-specific minimum capital requirements with its regulatory advisor. Some regulated activities have minimum capital requirements well above the general Companies Act floor.
If you plan to grow rapidly and raise equity in Japan, incorporate with the capital that reflects the anticipated first-round investment rather than an artificially low figure. Increasing capital later triggers additional registration tax (0.7% of the incremental amount) and a formal shareholders' resolution.
When you enter via acquisition of an existing shell KK, the shell's existing stated capital is what it is. If you need to align the capital with your capitalization plan, you can increase or reduce capital post-acquisition through a formal procedure. See the Japan Capital Increase Guide for the 0.7% registration tax and shareholder-resolution mechanics.
Deciding between a KK and a GK affects some of these thresholds too, since the two entity types carry different registration tax and credibility profiles; see KK vs. GK - Choosing the Right Corporate Structure and the Japan Company Formation Cost Guide for the full cost breakdown at each capital level.
Capital Increase vs. Starting Right#
Many foreign companies incorporate with artificially low capital (¥100,000 or ¥1,000,000) with the intention of increasing it later if the Japan business succeeds. This approach has real costs:
(a) Additional registration tax on increase: 0.7% of the incremental capital amount (no minimum on increases, just the 0.7% rate).
(b) Shareholder resolution requirement. For a KK, a capital increase requires a board resolution and, in most cases, a shareholders' general meeting resolution. For a foreign parent acting as sole shareholder, this means producing a proper shareholders' written resolution, having it translated and authenticated if required by the bank, and registering the change at the Legal Affairs Bureau.
(c) Bank KYC re-documentation. The bank will typically require updated documentation reflecting the new capital amount.
The cost of a capital increase is meaningful but not prohibitive. The greater risk of starting too low is signaling under-capitalization to banks and counterparties in the critical early period when the company is establishing its credibility. Starting with the right capital amount is typically the better approach.
Foreign Parent Capital Injection: Equity vs. Shareholder Loan#
When a foreign parent funds its Japan subsidiary, the injection can take two forms: equity (subscription for new shares or units, increasing stated capital) or shareholder loan (a debt instrument from the parent to the subsidiary). The choice affects:
(a) Repatriation flexibility. Equity capital is more constrained to repatriate (requires distribution of dividends or capital reduction); shareholder loans can be repaid as the business generates cash.
(b) Transfer pricing. Interest on shareholder loans is subject to Japan transfer pricing rules (the interest rate must be arm's length). Equity has no transfer pricing obligation but dividends paid back to the parent are subject to withholding tax.
(c) Registration tax. Only capital formally recorded as stated capital (資本金) triggers registration tax. Funds recorded as additional paid-in capital (shihon joyo-kin (資本剰余金)) via a split of the subscription amount between capital and surplus do not trigger additional registration tax in some circumstances.
(d) Optics. The commercial registry shows only the stated capital figure, not shareholder loan balances. For credibility with banks and counterparties, stated capital matters more than the total funding picture.
The optimal structure depends on the expected funding trajectory, repatriation plan, and tax position. Engage a Japan tax accountant (税理士) before the first capital contribution.
Frequently Asked Questions#
Can I incorporate with ¥1 capital and increase it later?
Legally yes, since the Companies Act sets no minimum above ¥1, but in practice banks decline virtually all corporate account applications from entities with token capital. A later increase also costs 0.7% registration tax on the incremental amount plus a formal shareholders' resolution, so most foreign-owned entities capitalize correctly at formation rather than raising capital afterward. See the Japan Capital Increase Guide for the full procedure.
Does my capital amount affect whether I can get a Japan corporate bank account?
Capital is one factor among several and does not decide approval on its own. Banks weigh a physical office, a Japan-resident representative director, and demonstrated business substance more heavily than the stated capital figure, though very low capital (under roughly ¥1,000,000) is a negative signal on top of those factors. See Japan Corporate Bank Account - Why It's the Hardest Part of Market Entry for the full approval picture.
Should I capitalize at exactly ¥9,999,999 to stay under the JCT threshold?
Staying below ¥10,000,000 preserves the two-year JCT exemption, but the exemption only has cash-flow value if your revenue includes B2C or non-JCT-registered buyers; for a purely B2B business selling to JCT-registered counterparties, the exemption is close to neutral because those customers recover the JCT as input tax regardless. Model your actual customer mix before treating the threshold as decisive, and confirm the current exemption criteria with a Japan tax accountant (税理士), since the rule has been amended more than once.
This article is informational only and does not constitute legal, tax, or financial advice. Tax thresholds and regulations are subject to change, and the JCT exemption rule in particular has been amended more than once. Verify current rules with a qualified Japan-licensed tax accountant (税理士) before making capitalization decisions. Last updated: September 2026.