Takashi “Taka” Sano of MUFG Innovation Partners (MUIP) recently appeared in a special feature in collaboration with NewsPicks, where he shared his insights into the evolving landscape of Japan’s startup market in 2025. The discussion covered the increasingly stable fundraising environment, the growing involvement of international investors, and the latent potential and emerging growth sectors within Japan’s economy—an ecosystem that he believes has much room for growth.
A maturing startup market in Japan
In 2024, Japan’s startup sector showed signs of steady growth, with total fundraising reaching approximately JPY780 billion—on par with the previous year. According to a report by NewsPicks, around 2,900 startups raised capital during the year, with the top 20 companies accounting for over JPY170 billion, or more than 20% of the total.
A notable trend is the fivefold expansion of the market over the past decade. “It is rare to find a market in Japan that has grown fivefold in ten years,” Taka noted. From approximately ¥140 billion in 2014, The market has expanded from JPY140 billion in 2014 to between JPY700 and JPY800 billion now—a growth rate that far exceeds most other industries in Japan.
Despite this growth domestically, Japan’s position remains relatively modest on the global stage. Japan accounts for only about 2% of the total global startup funding market, which is estimated at around JPY40 trillion. Still, Taka views this as a sign of potential rather than limitation: “this indicates that there is room to grow,” he remarked.
Rising economic impact
The economic influence of startups within Japan is steadily increasing. According to the Ministry of Economy, Trade and Industry, the GDP contribution of startups—both direct and indirect—is estimated at approximately JPY19 trillion, or about 3% of the national GDP. This positions Japan’s startup sector to be between Hokkaido and Fukuoka Prefectures in terms of economic scale, ranking it ninth overall by regional comparison.
Evolving global trends and growing international interest
2024 marked a pivotal point for Japan’s startup ecosystem, with a noticeable increase in international attention. Taka attributes this shift to a broader transformation in the global investment environment.
One of the key factors has been the heightened geopolitical tensions between the U.S. and China, prompting investors to seek diversification and explore new markets. Within this context, Japan has emerged as a compelling option.
Historically overlooked in favor of regions such as Europe and India, Japan has started to gain traction due to internal reforms. Japan’s structural changes, including initiatives by the Tokyo Stock Exchange to transform the capital markets and other measures to strengthen corporate governance, have improved the country’s investment appeal. These efforts have not gone unnoticed by international investors.
Simultaneously, Japanese startups themselves have become more proactive in engaging with foreign investors. As Taka observed, entrepreneurs in Japan are now more eager to appeal to global capital markets, resulting in a significant increase in cross-border funding activity.
A symbolic example of this shift is Sakana.AI, co-founded in Japan by renowned international AI researchers David Ha and Llion Jones, along with Japanese entrepreneur Ren Ito. The startup’s rapid rise to a JPY200 billion valuation within just one year exemplifies the growing appeal of Japan’s market—even for global founders.
Further evidence can be found in the interest shown by top-tier U.S. venture capital firms such as Khosla Ventures and New Enterprise Associates (NEA)—an unthinkable scenario just a few years ago. Japan’s startup ecosystem is clearly entering a new phase.
Promising companies MUIP invested in
Taka highlighted three standout companies with promising growth potential that MUIP has invested in.
First is Sakana.AI, a rapidly growing startup in the field of Gen AI. Based in Tokyo, the company aims to broaden the accessibility of AI by combining smaller models to create new, more powerful ones.
Of note is the profile of two of its three co-founders – David Ha and Llion Jones – who are prominent foreign AI researchers. They founded the company in Japan together with Ren Ito, a Japanese national who previously held key roles at the Ministry of Foreign Affairs and Mercari. Their decision to launch the company in Japan speaks to the country’s appeal and potential as a market for innovation.
According to a NewsPicks article, Sakana.AI surpassed a valuation of JPY200 billion in just over a year after its founding, making it the faster startup in Japan to achieve unicorn status.
The second company hails from the mobility sector, newmo, which is pioneering a Japanese version of ride sharing. The company, which launched its service in conjunction with the Osaka Expo 2025, is redefining traditional transportation by fusing technology with established industries. newmo founder, Naoki Aoyagi, who previously held positions at GREE and Mercari, is leading this effort by acquiring existing taxi companies rather than competing with them outright. This approach represents a broader trend among Japanese startups: integrating technology into legacy sectors to drive meaningful transformation.
The third is MNTSQ, a legal tech company pushing the digital transformation of the legal industry. MNTSQ uses AI to streamline complex legal tasks like contract review, which typically requires deep expertise. Founded by Ryuhei Itaya, who is himself a lawyer, the company’s product is already being adopted by many of Japan’s leading corporations. By using AI to handle the labor-intensive aspects of legal work, MNTSQ allows legal professionals to focus on more nuanced, human-centered tasks—delivering a value-added shift in how legal services are provided.
Looking ahead
Japan’s startup market has multiplied fivefold over the past decade and is now gaining the attention of global investors. This transformation has been driven by a combination of global macroeconomic shifts and domestic structural reforms.
Another important trend is the narrowing distance between startups and society. In Tokyo, one in every twelve people now works for a startup—indicating that working at startups as part of one’s career is becoming mainstream and a vital component of the economy.
While Japan still holds a small share of the global startup market, its prospects remain bright. As Taka noted, the country is now beginning to align the necessary conditions for growth: a supportive investment environment, talent, and an increasing appetite for innovation. Japan’s startup ecosystem is ready to enter its next stage.
