Introduction
International students who graduate from Japanese universities or graduate schools can use certain “Designated Activities” statuses of residence to stay in Japan and prepare for starting a business.
However, many applications are denied because the business plan is considered unrealistic or insufficient, and applicants often struggle to understand what level of detail is required and what is regarded as inadequate.
This article explains, based on information from the Immigration Services Agency of Japan and public startup support schemes, typical patterns where business plans cause refusal in “Designated Activities” for startup preparation, and practical countermeasures.
Outline of Designated Activities for Startup Preparation and the Role of Business Plans
Under the “Designated Activities” category, there are frameworks such as the Foreign Entrepreneurship Promotion Program and “Future Creation Human Resources,” which allow startup preparation activities in Japan for up to two years.
To use these schemes, a “Certificate of Confirmation of Startup Preparation Activity Plan” and the attached startup preparation plan or business plan issued by local governments or implementing organizations play a central role in the examination.
According to METI notices and related regulations, the startup preparation plan must be “appropriate and reliable,” and the business is expected to reach a certain scale within one year after landing or change of status of residence.
Therefore, if the content of the business plan is vague and lacks factual basis, it may be judged that the plan is not sufficiently reliable or that the business is unlikely to reach the required scale, which can lead to refusal.
Pattern 1: Overly Optimistic Revenue and Cost Projections with No Supporting Basis
One typical pattern with a high risk of refusal is a business plan where sales projections are too optimistic and expenses are underestimated, resulting in unrealistic financial forecasts.
For example, the plan may assume high sales from the first month after launch without explaining how customers will be acquired or presenting any concrete contracts or prospects, making the figures look like mere wishes rather than realistic projections.
Public startup guidebooks and startup visa materials emphasize that applicants must clearly explain the grounds for sales estimates, market size, and cost structure to demonstrate business sustainability and profitability.
To avoid refusal, applicants should use statistical data, industry reports, and communications with potential clients as supporting evidence and present conservative scenarios alongside optimistic ones in their financial projections.
Pattern 2: Insufficient Market and Competitor Analysis, and Unclear Differentiation
Another common problem is a lack of market and competitor analysis, which makes it unclear who the target customers are, what exactly will be offered, and how the business is differentiated.
For instance, a plan might simply state “providing services for foreigners in Japan” or “selling products online in Japan” without specifying the needs of the target customers or explaining how the services differ from those of existing competitors.
Tokyo’s foreign entrepreneurship schemes and similar programs explicitly treat “market potential” and “competitive advantage” as key evaluation points in screening business plans.
Therefore, when applying for Designated Activities for startup preparation, it is important to specify customer attributes and size, describe current competitors’ services and price ranges, and clearly explain the strengths and uniqueness of the proposed business in the Japanese market.
Pattern 3: Lack of Concrete Timeline and Action Plan for Startup Preparation
Startup preparation statuses assume that the applicant will reach the requirements for the “Business Manager” status of residence within the granted period, making a clear schedule crucial.
However, in many refused cases, the business plan describes only vague timeframes, such as “First year: preparation” and “Second year: full-scale operation,” without specifying concrete tasks or milestones.
Official notices and local startup visa guidelines list typical activities during the preparation period, such as securing an office, incorporating the company, paying in capital, hiring employees, and starting business operations.
Thus, it is advisable to include a month-by-month or quarterly action plan, showing when the office lease, incorporation, initial sales, and other key steps will be completed, thereby demonstrating that the requirements can realistically be met within the time limit.
Pattern 4: Vague Funding Plan and Insufficient Explanation of Capital Sources
For former international students, the amount, source, and management of startup funds are also closely scrutinized.
Plans that vaguely state “family will support me” or “I expect investment from an investor” without specifying exact amounts, timing, or contract arrangements tend to be viewed as lacking realistic funding plans.
Foreign entrepreneurship guidebooks and guidelines for the “Business Manager” status emphasize not only the required capital amount, but also that funds must be prepared through lawful channels and that sufficient working capital must remain after initial investment.
Accordingly, applicants should clearly describe how initial investment, working capital, and living expenses will be covered, supported by documents such as bank balance certificates, remittance records, or draft investment agreements, and show that funds will not be exhausted quickly.
Pattern 5: Weak Relationship Between Applicant’s Background and Business Content
Public materials indicate that, for both Designated Activities for startup preparation and the subsequent “Business Manager” status, examiners focus on whether the applicant has academic or professional experience related to the proposed business.
Nonetheless, many refused business plans propose ventures that have no relationship with the applicant’s field of study or work experience, without any explanation of how this gap will be covered or who will provide complementary expertise.
For example, if a person with only IT engineering experience plans to open a restaurant in Japan, but provides no explanation of experience in the food industry or of support from experienced partners or staff, examiners may doubt the person’s managerial capability.
To avoid this, applicants should explain how their academic and professional background is relevant and, where necessary, present a management structure that includes Japanese partners or experienced staff, thereby strengthening the credibility of the overall team.
Hypothetical Failure Case and How It Could Be Improved
Consider a hypothetical case: Student A (fictional, from Asia, holding a bachelor’s degree in economics from a private university in Tokyo) plans to operate share houses for foreign residents in Japan and applies for Designated Activities for startup preparation.
In the initial business plan, A states, “We will operate three properties in the first year and expand to ten in the second year with 90% occupancy,” but provides almost no information about actual properties, market data, or concrete funding arrangements beyond “family support.”
Such a plan may be considered insufficiently grounded and not “appropriate and reliable” under the criteria for startup preparation plans, resulting in a high risk of refusal.
An improved version would narrow the target to, for example, “international students and young engineers from the applicant’s home country,” start with one 15-room property in the first year, present detailed rent settings and comparisons with nearby competitors, and attach bank balance certificates and remittance records from family members as evidence for the funding plan.
Conclusion
Business plans that tend to cause refusal in “Designated Activities (startup preparation for international students)” typically share features such as baseless optimistic financial projections, lack of market and competitor analysis, unclear preparation schedules, vague funding plans, and weak relevance between the applicant’s background and the business.
On the other hand, by following key points indicated in official information from the Immigration Services Agency, METI notices, and local startup visa schemes, applicants can improve their chances of approval by demonstrating clear grounds for financial projections, concrete action plans, transparent funding sources, and a strong link between their expertise and the proposed business.
Since this status of residence is a crucial step toward later obtaining the “Business Manager” status and operating a stable business in Japan, applicants are strongly advised to check public information carefully and work with professionals to refine their business plans.
