How Japan is championing a regional startup economy

As population growth in Japan continues to concentrate in Tokyo, regional cities are making efforts to build startup ecosystems to retain talent and boost their local economies.

According to the Report on Internal Migration in Japan Derived from the Basic Resident Registers, released by the Ministry of Internal Affairs and Communications in 2024, there were only three prefectures, Tokyo, Chiba and Osaka, that experienced an increase in net migration compared to the previous year. Tokyo had 29 consecutive years of net population inflow, while the greater Nagoya area had net outflow for 12 straight years.

The report also highlights that over 90% of people moving into Tokyo are between the ages of 20 and 29, with women making up 53% of this group. Many young people and women relocate to Tokyo for education or job opportunities, as rural areas often offer fewer options, further fuelling the concentration of people in the capital.

Meanwhile, regional cities are struggling with labour shortages and declining birth rates, posing serious challenges to their economies. In response, many are fortifying efforts to create vibrant startup ecosystems in hopes of attracting and retaining talent, fostering innovation and revitalizing their communities.

One notable example of Japan’s growing startup ecosystem is STATION Ai, the country’s largest open innovation base, which opened in Nagoya, the capital city of Aichi Prefecture in central Japan, in October 2024. As part of the prefecture’s Aichi-Startup Strategy, the facility is operated by STATION Ai Corporation, a subsidiary of SoftBank, with the goal of supporting start-ups, fostering new businesses and managing investment funds.

Aichi Prefecture is home to many of Japan’s top manufacturers and their headquarters, and serves as a key hub for industry. With its strong manufacturing base, advanced research infrastructure and access to skilled talent from institutions, including Nagoya University, the region has significant potential for startup growth. “Aichi is a promising region for start-ups,” says Hirotaka Sahashi, President and CEO of STATION Ai Corporation.

Spanning 23,000 square metres, the facility has already attracted more than 700 start-ups, venture capital firms, universities and other support organizations. Its tenants include businesses from a diverse range of industries tied to the region, including automobiles, aerospace, robotics, textiles, ceramics, healthcare and AI. While it aims to become a major hub for startup innovation not just in Japan but across Asia, STATION Ai is also expected to help local industries address key challenges through collaboration.

In December 2024, the Kobe Chamber of Commerce and Industry launched a new initiative, the Kobe Innovation Community, to support and foster local start-ups. The city has already taken a proactive approach to startup development through projects including KOBE STARTUP VALLEY and Life-Tech KOBE. These initiatives have led to the emergence of successful businesses in fields such as medical technology and AI. One such example is Sagri, a company that has expanded its operations beyond Japan, providing services that leverage satellite data analysis and machine learning.

Hiroya Kawasaki, President of the Chamber, acknowledges that while Kobe may not rival Tokyo in terms of funding, it can create a competitive advantage by offering comprehensive management support. “Rather than competing on capital, Kobe’s strength lies in fostering business networks, securing sales channels and connecting start-ups with potential collaborators,” he explains. In addition to city-led initiatives, the Chamber aims to leverage its network to accelerate startup growth, ultimately linking innovation with broader business opportunities across various industries.

Fukuoka City, the largest city of the Kyushu island in southern Japan, has been actively fostering a startup-friendly environment, and its efforts are beginning to take root in the region. In 2012, the city declared itself Startup City Fukuoka and has since placed startup support at the core of its economic growth strategy. Through initiatives such as the public-private startup support facility Fukuoka Growth Next and STARTUP CAFE, nearly 1,000 companies have been founded so far. In addition, Fukuoka City has enhanced its efforts to support the public listing of start-ups, selecting six companies for special support in the fiscal year 2024.

Designated as a National Strategic Special Zone for Global Startups & Job Creation by the Cabinet Office, Fukuoka benefits from regulatory exemptions that offer the city a competitive advantage. The city has been particularly forward-thinking in targeting international markets, becoming the first in Japan to introduce a Startup Visa to attract foreign entrepreneurs.

In Sapporo, in northern Japan, the STARTUP CITY HOKKAIDO initiative was launched in 2019 to strengthen the city’s startup ecosystem. Since 2023, the city of Sapporo, the Hokkaido government and the Hokkaido Bureau of Economy, Trade and Industry have been working together through the STARTUP HOKKAIDO Executive Committee to create an environment where start-ups can thrive not just in Sapporo, but across the entire prefecture.

The widening gap between regions with ageing, shrinking workforces and those experiencing growth, as highlighted in the World Economic Forum's Future of Jobs Report 2025, is also evident within Japan. Large cities like Tokyo continue to attract young talent, while rural areas face population decline. By supporting the development of startup ecosystems in local cities, these regions can revitalize their economies and address workforce shortages.

Startup initiatives not only help solve local problems but also create job opportunities and foster work environments that enable women to thrive. This, in turn, can help prevent the exodus of women to major cities by offering fulfilling career options closer to home. Promoting start-ups in local cities is a powerful tool for boosting the local economy, maintaining population and increasing regional resilience in the face of demographic challenges.