During a recent visit to Japan, it became clear that while the country is renowned worldwide for its robotics and manufacturing excellence, the pathways for start-ups, especially those focused on clean technologies, remain difficult and limited. Despite Japan’s public commitment to reach carbon neutrality by 2050, announced by then-Prime Minister Yoshihide Suga, the system still heavily favors large, established companies. Real progress requires fast-moving, creative start-ups that can develop and deliver new energy solutions.
Japan’s plan to promote innovation, called the 6th Science, Technology and Innovation Basic Plan, emphasizes building a “Sustainable Society” through science, technology, and green growth. However, over 90% of public research funding continues to go to large companies, leaving both domestic and international start-ups with limited support to drive meaningful change.
Local Limits
Japan’s cleantech ambitions face structural challenges that prevent start-ups from growing within the domestic market. Investment remains dominated by large corporate venture funds (62% in 2020), which mostly focus on early-stage, domestic businesses rather than global expansion.
Public programs also fall short. The ¥2 trillion Green Innovation Fund rarely reaches start-ups, with most funding absorbed by large industry groups. Programs like J-Startup Impact selected only 30 climate-focused start-ups from over 500 applicants in 2023.
Government procurement is another missed opportunity. Japan’s target of 3% start-up participation in public contracts remains below 1.1%, limiting crucial early customers for new companies.
Global Obstacles
While 58% of top Japanese start-ups have expanded overseas, with another 20% planning to, few reach a sustainable, global scale. Foreign start-ups face similar barriers. Despite 716 Startup Visas issued, complicated rules, language gaps, and limited support networks make it hard for foreign entrepreneurs to succeed.
Without clear action—better funding access, simpler rules, and global-friendly support—start-ups will remain on the sidelines of Japan’s clean future.
Unlocking Start-Up Potential—Actions for Change
Japan’s 2050 carbon neutrality goal depends on quickly scaling clean technologies—but start-ups are still held back by system gaps.
First, public funding must be more accessible. Start-ups need dedicated channels within the ¥2T Green Innovation Fund, alongside new investment programs to help them grow and expand internationally.
Second, complex rules must be simplified. A single, English-accessible platform for information on business licenses, funding, and government procurement would lower entry barriers for both local and foreign entrepreneurs.
Third, government contracts should help start-ups. Setting clear, enforced targets for start-up participation in public projects would provide vital early customers.
Japan already has the skills, resources, and international partnerships to lead in cleantech innovation. What’s missing is an environment where start-ups can play a central role.
Building the Right Environment for Cleantech Innovation
Japan’s path to carbon neutrality requires more than efforts by big corporations. Start-ups—both local and international—bring the speed, creativity, and bold ideas needed to advance clean technologies. But without the right support system, their role remains limited.
Research shows that healthy innovation ecosystems directly fuel economic growth and sustainability. Japan’s current policies provide a starting point, but real barriers remain.
Supporting start-ups demands more than policy changes. It requires deliberate efforts to build connections, partnerships, and resources that help young companies grow—from small pilots to global solutions. Without this, promising cleantech technologies will stay stuck, and Japan’s climate goals will be out of reach.
Creating a connected, supportive ecosystem for start-ups is essential—not only for achieving Japan’s 2050 carbon neutrality target, but for securing its leadership in the future of clean technology.
As Charles Darwin famously stated, “It is not the strongest of the species that survives, nor the most intelligent, but the one most adaptable to change.” Japan’s innovation system must now adapt by empowering startups to tackle the urgent challenges of decarbonization and sustainable growth. With the US federal government reversing recent progress, Japan has a unique window of opportunity to accelerate its efforts—is Japan prepared to seize the opportunity?
