According to the most recent national census in 2021, there were around 5.16 million non-governmental business establishments in Japan. The majority of these establishments were private business enterprises including incorporated companies and sole proprietorships. Over 99 percent of the business enterprises were operating in the secondary and tertiary economic sectors, with the wholesale and retail trade industry accounting for the largest share of total enterprises. Enterprises in the industries of wholesale and retail trade, manufacturing, and medical, healthcare, and welfare generated about 61 percent of the total sales revenue of enterprises in Japan.
The labor productivity per employee of SMEs is generally much lower than the average employee productivity of large enterprises. Some experts suggest that Japan’s relatively low labor productivity compared to other Group of Seven Nations is because the majority of the nation’s workforce is engaged in SMEs. SMEs commonly face labor shortages and struggles of business succession, which lead to a constant number of business suspensions or discontinuation in recent years. This trend is expected to remain in the coming years following the rise in the average age of managers. To improve business conditions and labor productivity, the Japanese government subsidizes SMEs through various programs such as aid for capital investments for innovative services and product development and IT system installation.
Only stock companies are entitled to be publicly listed in the Japanese stock market. As of 2023, the number of listed companies exceeded 3,900 on the Tokyo Stock Exchange (TSE), with most companies headquartered in Tokyo Prefecture. Toyota Motor Corporation ranked first as a leading company in terms of market capitalization in 2024.
Small and medium-sized enterprises
As of 2021, approximately 99.7 percent of business enterprises in the non-primary sectors in Japan were small and medium-sized enterprises (SMEs). According to the Small and Medium-sized Enterprise Basic Act enacted in 1963, SMEs are identified as enterprises that retain less than 300 million Japanese yen of capital and less than 300 regular employees for those in the manufacturing, construction, transportation, and other industries. This classification varies depending on the industry in which the enterprise is operating. SMEs in the wholesale trade industry, for example, are defined as having less than 100 million yen of capital and less than 100 employees, while those in the service industry maintain less than 50 million yen of capital and less than 100 employees. SMEs in the retail trade industry keep less than 50 million yen of capital and less than 50 employees.The labor productivity per employee of SMEs is generally much lower than the average employee productivity of large enterprises. Some experts suggest that Japan’s relatively low labor productivity compared to other Group of Seven Nations is because the majority of the nation’s workforce is engaged in SMEs. SMEs commonly face labor shortages and struggles of business succession, which lead to a constant number of business suspensions or discontinuation in recent years. This trend is expected to remain in the coming years following the rise in the average age of managers. To improve business conditions and labor productivity, the Japanese government subsidizes SMEs through various programs such as aid for capital investments for innovative services and product development and IT system installation.
Incorporated companies
There are four types of incorporated companies that can be established under Japan’s Companies Act enacted in 2005: stock companies, limited liability companies, limited partnership companies, and general partnership companies. Stock companies raise funds with the issued shares and return the profits to shareholders. The management of stock companies is generally administrated by a board of directors. Limited liability companies, limited partnership companies, and general partnership companies are categorized as “membership companies.” Owners and operators of the membership companies are typically identical, and all members who invested in the company have management rights. Three types of membership companies primarily differ in the degree of liabilities in case of legal action or business failure.Only stock companies are entitled to be publicly listed in the Japanese stock market. As of 2023, the number of listed companies exceeded 3,900 on the Tokyo Stock Exchange (TSE), with most companies headquartered in Tokyo Prefecture. Toyota Motor Corporation ranked first as a leading company in terms of market capitalization in 2024.
