As Japan repositions itself within the global innovation landscape, its startup ecosystem is entering what some investors describe as a new phase of development. For global venture capital players, the country is no longer viewed as a peripheral market, but as an increasingly strategic opportunity shaped by structural shifts, geopolitical changes and a renewed focus on innovation.
Speaking as part of an ongoing series of conversations around SusHi Tech Tokyo 2026, Lauren Nham, Foundry Ventures, Tokyo AI, offered a global investor’s perspective on how the Japan startup ecosystem is evolving and where its future opportunities lie.
A Market at an Inflection Point
According to Nham, Japan’s startup ecosystem has already gone through multiple cycles of development, and is now entering what could be considered a third or fourth wave.
“This is a very timely moment in the Japanese startup ecosystem,” she noted, pointing to a combination of geopolitical shifts and cultural changes that are reshaping how investors view the market.
In contrast to earlier phases, where international interest was often limited to accessing Japanese capital, the current phase is seeing a more strategic approach. Investors are now asking a different question: what is the long-term “Japan play”?
This shift reflects a broader reassessment of global markets, where supply chain resilience, localisation strategies and diversification of investment exposure are becoming increasingly important.
Scale, Stability and a Different Operating Logic
Japan’s appeal as an investment destination is underpinned by its scale and economic maturity. As one of the world’s largest economies and enterprise markets, it offers opportunities that are difficult to replicate elsewhere.
However, Nham emphasised that success in Japan requires a different mindset. Unlike markets driven by rapid growth and short-term returns, Japan places greater emphasis on longevity and trust. Business relationships are often built over time, and credibility plays a central role in how companies are evaluated.
“It’s not a market that appreciates hype,” she observed. “It appreciates longevity.” This distinction has important implications for founders and investors. Building a presence in Japan requires a deeper understanding of customer behaviour, risk perception and long-term value creation.
Despite the growing momentum, the Japanese startup ecosystem continues to face structural challenges. Nham pointed to institutional and regulatory headwinds, particularly in areas such as legal frameworks, taxation and funding structures. While early-stage funding has seen increasing support, particularly through government initiatives, gaps remain in later-stage financing and growth capital.
“There needs to be a through line to the exit,” she said, highlighting the importance of creating pathways for startups to scale beyond early-stage development.
These challenges also affect the ability of international investors to participate at scale. While interest from global capital is increasing, structural complexities can slow down deployment and limit flexibility.
Speed and Enablement
Another critical factor shaping the ecosystem is speed. Compared to more mature venture markets such as the United States, Japan’s startup ecosystem operates at a slower pace. This is partly due to regulatory and administrative processes, but also reflects broader cultural and organisational dynamics.
“There is an enablement gap,” Nham explained, referring to the absence of tools and systems that streamline business operations in other markets.
In markets like the US, founders have access to a wide range of platforms that simplify processes such as equity management, fundraising and compliance. In Japan, these systems are still evolving.
Decision-making processes can also be more layered, with greater emphasis on consensus and approval.
However, these challenges are accompanied by strong underlying strengths, particularly in research, engineering and intellectual property.
Deep Tech as a Core Strength
Japan’s global reputation for engineering excellence continues to shape its innovation ecosystem. Nham highlighted sectors such as robotics, materials science, energy systems and agriculture technology as areas where Japan holds a natural advantage.
Increasingly, these strengths are converging with emerging trends such as artificial intelligence, particularly in areas where hardware and software intersect.
This convergence is giving rise to what some investors describe as “physical AI” or “embodied AI”, where Japan’s capabilities in manufacturing and engineering can be combined with software-driven innovation. At the same time, climate and sustainability technologies are gaining traction, aligned with Japan’s broader commitment to environmental goals.
Growing Global Interest
International interest in Japan is also expanding. Startups from regions such as the Middle East and North America are increasingly exploring Japan as a market for expansion, particularly in sectors where enterprise demand is strong.
For these companies, Japan represents a large and sophisticated market, but one that requires careful preparation.
Language, often perceived as a barrier, is becoming less of an issue. Companies are addressing this through local hiring and partnerships, supported by a growing ecosystem of market entry specialists. However, success still depends on having a well-developed go-to-market strategy, supported by strong proof points and a clear understanding of customer needs.
As the ecosystem evolves, platforms such as SusHi Tech Tokyo 2026 are playing an increasingly important role in connecting stakeholders.
For Nham, such events provide more than just visibility. They create opportunities for dialogue, relationship building and feedback, all of which are essential in a market where trust plays a central role.
“Anytime we have a platform to promote dialogue and exchange views, that’s a critical first step,” she said.
These interactions are particularly important in venture investing, where decisions are often based on multiple engagements over time. By bringing together founders, investors and policymakers, SusHi Tech Tokyo contributes to building the relationships that underpin long-term collaboration.
A Shift in Momentum
The Japanese startup ecosystem is still evolving, but its trajectory is becoming clearer. While structural challenges remain, there is a growing sense of momentum driven by increased investor interest, policy support and international engagement.
Perhaps most importantly, there is a shift in mindset. From a market once perceived as cautious and inward-looking, Japan is increasingly positioning itself as an active participant in the global innovation ecosystem.
As Nham suggests, the opportunity lies not just in entering the market, but in understanding how to build within it.
SusHi Tech Tokyo 2026, the global innovation conference organised by the Tokyo Metropolitan Government, will take place from 27–29 April 2026 at Tokyo Big Sight. The event brings together startups, investors, corporations and policymakers exploring technologies shaping the future of sustainable cities and the global innovation ecosystem.