Japan is seeking to invigorate economic growth by encouraging startups, but the relatively paltry tax breaks it offers investors compared with other countries like the United States threaten to limit its ambitions.

"The U.S. has a system of incentives that works,” said Masaaki Taira, a ruling Liberal Democratic Party (LDP) lawmaker involved with policymaking on new ventures. "Japan has been very rigid and imposed so many conditions that people don’t get the full benefit of capital gains.”

Struggling with a far lower business entry rate than the U.S. or Europe, Prime Minister Fumio Kishida’s government in 2022 launched a five-year plan to encourage new ventures. It set a goal of becoming Asia’s biggest startup hub by offering ¥1 trillion ($7.2 billion) in support and human resource development, as well as easing access to visas for entrepreneurs.