（Original Video in Japanese was published on the FINOLAB CHANNEL on Sep. 15, 2026 by Makoto Shibata）　https://youtu.be/FgaaJaqEy1g

Japan has been introducing a series of regulatory reforms and new financial mechanisms to expand funding opportunities for startups. The starting point was the government’s Five-Year Startup Development Plan, adopted in November 2022. The strategy aims to fundamentally strengthen Japan’s startup ecosystem through three major pillars: developing entrepreneurial talent and networks, substantially increasing the supply of capital, and promoting open innovation between startups and established corporations. One of its headline objectives is to increase annual investment in startups to around ¥10 trillion within five years.

Since then, reforms have addressed different stages of startup growth and both sides of the investment relationship. Four particularly important areas are stock options, angel investment taxation, equity crowdfunding, and secondary markets for unlisted shares.

Stock options are important for startups because they allow companies with limited cash resources to attract and retain talented employees by sharing the potential upside of future growth. Japan has gradually made its stock-option regime more flexible. For qualifying stock options, taxation can be deferred from the time of exercise until the shares are sold. The exercise period was extended from ten to fifteen years in the FY2023 tax reform. The FY2024 reform further expanded the framework by introducing a system under which issuing companies can manage shares themselves and increasing the maximum annual exercise amount from ¥12 million to as much as ¥36 million. Legal reforms have also introduced a stock-option pool mechanism, giving startups greater flexibility in designing employee incentives.

The angel tax incentive has also been expanded to encourage investment at the pre-seed and seed stages. The system provides tax benefits to individual investors funding startups. Reforms introduced a Japanese version of the U.S. Qualified Small Business Stock concept, allowing preferential treatment when capital gains are reinvested in early-stage startups or used to establish a new business. Subsequent changes broadened eligible investments and extended the period during which capital gains can be reinvested. In FY2024, investments using the angel tax incentive reached approximately ¥18.5 billion, demonstrating the growing role of individual investors in startup financing.

A third area is equity crowdfunding. Japan introduced the framework in 2015, but initially imposed relatively strict limits: an individual could invest only ¥500,000 per company, while fundraising was effectively capped at ¥100 million. The rules have subsequently been relaxed. In 2022, the calculation method was changed so that companies could raise up to ¥100 million through crowdfunding alone. In 2025, the fundraising ceiling was raised to ¥500 million, while the individual investment limit was relaxed to 5% of the investor’s net assets, subject to a maximum of ¥2 million. At the same time, larger offerings remain subject to disclosure and auditing requirements, balancing easier access to capital with investor protection.

Perhaps the most significant structural development is the effort to establish a functioning secondary market for unlisted shares. Historically, Japan’s startup ecosystem has suffered from limited liquidity in private shares. Venture capital funds typically have a life of around ten years and eventually need to exit investments. Without an active secondary market, this has often meant relying on an IPO or M&A transaction. The lack of alternative liquidity has contributed to the problem of “small IPOs,” in which companies may go public before reaching sufficient scale simply to provide an exit opportunity for existing shareholders.

This contrasts with markets such as the United States, where platforms including Nasdaq Private Market, Forge Global, and EquityZen facilitate transactions in private-company shares. The United Kingdom also has markets and investment schemes designed to channel capital toward growing companies. Japan has created mechanisms such as the Japan Securities Dealers Association’s shareholder community framework and TOKYO PRO Market, but these have not generated comparable liquidity.

Regulatory reform is now attempting to change this situation. Traditionally, intermediating stock transactions required registration as a Type I Financial Instruments Business Operator, involving substantial capital and regulatory requirements that created high barriers to entry. An amendment to the Financial Instruments and Exchange Act enacted in 2024 introduced a special framework for intermediating unlisted securities. Requirements for individuals to qualify as professional investors have also been reviewed and clarified. These changes are intended to encourage new intermediaries and improve liquidity in private shares.

A more active secondary market could benefit several participants. Startups could avoid premature IPOs and pursue more flexible capital strategies. Venture capital funds and other existing shareholders could obtain liquidity without forcing portfolio companies to list. Investors would gain access to a broader range of private investment opportunities, while improved secondary-market liquidity could also encourage investment in primary fundraising rounds. For financial institutions, private-market intermediation could develop into a new business area as demand for private equity and alternative investments grows.

Several recent examples illustrate how the market is evolving. eCrowd combines equity crowdfunding with the angel tax incentive and has expanded into investment opportunities for middle- and later-stage companies through “eCrowd NEXT.” Smartround Securities, a subsidiary of Smartround, completed registration in August 2026 for the special unlisted-securities intermediation business, enabling it to develop secondary transactions in private shares. Meanwhile, LUCA Japan has created funds providing Japanese investors with exposure to selected late-stage U.S. private companies.

Another notable development is the combination of private equity with digital securities. In September 2025, SBI Securities, Shinsei Trust & Banking, Tokio Marine Asset Management, and BOOSTRY jointly developed Japan’s first private-equity fund investment product for individual investors using security-token technology. The product aims to broaden access to private-company investments that had traditionally been concentrated among institutional investors.

Overall, Japan’s startup-financing reforms represent more than a collection of deregulation measures. The broader policy direction is shifting from simply “increasing the number of public companies” to “increasing the number of growth companies.” The objective is not to create new markets or financial schemes for their own sake, but to build an ecosystem in which capital can circulate according to the different stages of startup growth. These reforms do not necessarily make fundraising easier, but they significantly expand the options available to entrepreneurs when designing their capital strategies—and, at the same time, broaden the range of opportunities available to investors.