Tokyo, Japan - March 15, 2015: People waiting the traffic lights at Shinjuku Kabukicho in the night.
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The economy of Japan’s capital rivals that of the whole of South Korea and the city is home to many of the country’s top companies and universities, a combination that produces a large and diverse pool of talent and intellectual resources.

The case for: Tokyo is one of the world’s most cosmopolitan, high-tech and efficient cities yet office rents are lower than in other leading Asian tech hubs.

As a home to Japan’s leading universities, including Tokyo, Keio and Waseda universities, the city is a hive of ideas. Willingness by Tokyoites to adopt new trends in fashion, consumer tech and culture, means Tokyo is an effective testing ground for innovative products. It has an efficient public transportation system and is one of the safest metropolises in the world.

Japan has a relatively high level of intellectual property protection, while for consumer-oriented start-ups, Tokyo’s sizeable population and their relative affluence are attractions.

The case against: The venture capital sector is under-developed in Japan, where many of the large VC firms tend to be risk-averse. VC investments in Japan have increased since the global financial crisis but fell 35 per cent last year to Y117bn, according to the Venture Enterprise Center.

For outsiders, despite the general wealth of skills, it is not easy to find fluent English speakers with strong presentation skills.

Local heroes: Masayoshi Son, founder of SoftBank, the Japanese internet and telecoms company, has shown that determined outsiders (Mr Son is of Korean descent) can succeed in Tokyo. Hiroshi Mikitani, who founded online marketplace Rakuten, is the entrepreneur many young Japanese would like to emulate. Not only did he build a high-profile company but he confounded sceptics by starting a baseball team.

Support for start-ups: Prime minister Shinzo Abe’s government is planning measures such as tax incentives, research and development schemes and deregulation to encourage venture capital investment.

The government also has plans for pension funds and the Innovation Network Corporation of Japan to invest in start-ups. Other support includes schemes that range from backing low-interest loans to providing advice.

Private accelerators and incubators have emerged in Tokyo, from independents, such as Samurai Incubate, to entities affiliated with big companies, such as DoCoMo Innovation Village, part of NTT DoCoMo, the mobile phone operator. Movida Japan, run by Mr Son’s brother, supports founders through an accelerator initiative and s.school, a community hub.

What the locals say: Matthew Romaine, co-founder and CEO of Gengo, an online translation service, says: “There are more start-up incubators, many more meetups and events such as weekend hackathons and better short-term and shared-office facilities.”

The acronym VC tends to stand for “very conservative”, says William Saito, an entrepreneur and consultant who advises the government, but this is becoming less true, he adds.

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