Comprehensive Startup Creation and Scale-up Package released by Council for Japan's Growth Strategy: Realizing a strong economy through innovation

The Subcommittee on Startup Policy Promotion under the Council for Japan's Growth Strategy has compiled the "Comprehensive Startup Creation and Scale-up Package," an initiative designed to reinforce the government's existing 5-year startup plan. Identifying bottlenecks such as a shortage of growth capital and a severe fundraising disparity between Tokyo and regional areas, the package aims to accelerate the societal implementation of innovation through three core pillars: scaling up startups, supporting deep-tech startups, and creating/nurturing startups that drive regional economies and societies.

Minister Minoru Kiuchi, in charge of Startups, stated: "This demonstrates the government's absolute commitment to 'generating, nurturing, and implementing innovation.' In particular, regarding government procurement and based on instructions from Prime Minister Takaichi, we have set forth a drastic reinforcement of the SBIR (Small Business Innovation Research) system. We are launching a new trial framework that goes beyond conventional R&D support to connect directly to full-scale government procurement. Relevant ministries and agencies will collaborate closely to aggressively push forward with government procurement from startups through this framework. By swiftly and steadily executing the measures compiled here, we will realize a strong economy where startups originating from Japan thrive as major players."

The 5-year startup plan, originally established in fiscal 2022, set targets to boost investment into startups to the scale of 10 trillion yen, foster the creation of 100,000 startups, and yield 100 unicorn companies in the future.

As a result of various initiatives implemented so far, the number of startups has increased to 25,000. Furthermore, the number of university-launched startups has grown 1.5-fold over the past three years, and "pre-unicorn" candidates (unlisted companies with a market valuation between 50 billion and 150 billion yen) expanded from 12 to 31 firms. The value-added generated by startups now accounts for approximately 4% of Japan's total nominal GDP, marking an increase of roughly 32% over the past two years.

However, the figures remain far from the ultimate targets for total unicorn counts and fundraising volumes, leaving the reinforcement of growth capital supply as a major challenge. Deep-tech startups, in particular, require massive capital and extended timelines before turning a profit, underscoring the need for strengthening mechanisms to help them clear these hurdles. While the foundations are steadily expanding, with approximately 60% of the growth in university-launched startups occurring outside of Tokyo, roughly 80% of total funds raised remain heavily concentrated in the capital, creating a stark regional disparity in growth opportunities.

To address these challenges, the comprehensive policy package was organized around three main pillars: scaling up startups, supporting deep-tech startups, and creating/nurturing startups that sustain regional economies and societies. To scale up startups, the government will enhance financing for companies in their growth phase through entities like the Development Bank of Japan (DBJ) and the Japan Investment Corporation (JIC). Efforts will also be made to expand capital supply to domestic startups from the Government Pension Investment Fund (GPIF). Additionally, for the 10-trillion-yen University Fund supporting Universities for International Research Excellence, alternative investments, including commitments to VC funds and buyout funds, will be expanded. Cross-over investment will be promoted through institutional revisions by the Tokyo Stock Exchange to utilize venture investment corporations, expanding the influx of capital from individual investors via NISA accounts.

To diversify exit strategies for startups, the government aims to move away from over-reliance on IPOs by formulating M&A guidance to revitalize mergers and acquisitions. From the perspective of strengthening deep-tech startups, the government will radically overhaul the SBIR system, which supports technology development (by subsidies, etc.), to generate initial demand. It is planning a new anchor-tenancy-style testing framework (via outsourcing, etc.) to transition into full-scale government procurement, through initiatives like the program for accelerating government implementation of strategic products and technologies.

To align with procurement demands in the private sector, existing large-scale technical demonstration support will be reviewed and expanded. Furthermore, the government will draft operational guidelines for contracts to make it easier for startups to participate in government procurement, while establishing a hands-on support system through NEDO (New Energy and Industrial Technology Development Organization) and other bodies to facilitate government contracts.

To foster a virtuous cycle between national defense reinforcement and innovation driven by startups, the Ministry of Defense and the Ministry of Economy, Trade and Industry will launch end-to-end support covering everything from R&D to procurement. This includes leveraging the "startup technical proposal method," which allows discretionary contracts with startups possessing superior technology, and promoting agile procurement methods where military units and corporations work as one to run feedback cycles for rapid deployment.

To enable the integration of new technologies that accurately meet operational needs, the government will introduce a new Defense-Tech SBIR System starting this fiscal year, allowing simultaneous competitive contracts with multiple companies. The procurement and verification processes in the defense sector are expected to serve as a major engine for economic growth.

Securing growth capital remains a significant challenge in creating a seamless pipeline from creation to growth and fundraising for regional startups.

"Local 10,000 Project" is a system to support the launch of new businesses utilizing local resources and capital through cooperation among industry, academia, government, and finance. Changes to the system implemented in fiscal 2026 include revising loan-to-public-funding ratios and increasing the maximum limits for public subsidies, thereby establishing an environment that draws out larger loans and further drives the launch of community-integrated businesses. Furthermore, to ensure that local governments utilize bidding and contracting processes that are accessible to startups, the government will promote flexible operations, such as allowing lower-tier ranked companies to participate in bidding eligibility settings. It will also roll out the national "Operational Guidelines for Contracts to Accelerate Public Procurement for Startups" to local municipalities nationwide.

Additionally, the package outlines the revision of guidelines for developing frameworks that consolidate procurement needs across multiple municipalities, as well as structures that leverage a startup's demonstration and adoption track record within local governments to attract "the next customer." Advice will also be actively provided to promote the use of the discretionary contract in accordance with Article 167-2, Paragraph 1, Item 4 of the Order for Enforcement of the Local Government Act on the Advancement which allows local governments to purchase new products directly from venture firms certified by the municipality.