What's the Difference Between a Subsidy and a Grant? A Complete Guide for Chinese Business Owners in Japan

The Basic Definitions of Subsidy and Grant

What Is a Subsidy?

A subsidy (補助金, hojokin) is financial support provided by Japan's central or local government, or a specific institution, to companies or individuals in order to promote the achievement of specific policy goals. This funding in principle does not need to be repaid.

Subsidies are usually managed and disbursed directly by national government departments, such as the Ministry of Economy, Trade and Industry (METI), the Ministry of Agriculture, Forestry and Fisheries, or the Small and Medium Enterprise Agency. The characteristics of a subsidy are:

• Clear objective: aimed at a specific industry, technical field, or social issue
• Fierce competition: many applicant companies, strict review
• Larger amounts: a single subsidy is usually JPY 1 million to tens of millions of yen
• Restricted use: must be used for the designated project and cannot be diverted
• Long review cycle: usually 3–6 months from application to approval

For example, the "AI Adoption Subsidy" launched by the Japanese government in 2024 offered up to JPY 10 million per grant, specifically for SMEs adopting AI technology.

What Is a Grant?

A grant (助成金, joseikin) is also government financial support, but by nature it is a "conditional subsidy." A grant requires a company to meet specific employment, investment, or operational conditions, after which the government reimburses the corresponding costs.

Grants are mainly managed by departments such as the Ministry of Health, Labour and Welfare (MHLW), and their characteristics include:

• After-the-fact reimbursement: the company pays first, and after meeting the conditions the government reimburses part of the cost
• Tied to employment: many grants are related to a company's hiring situation
• Relatively low threshold to apply: as long as basic conditions are met, the approval rate is high
• Relatively small amounts: usually in the JPY 500,000–5 million range per grant
• Shorter review cycle: generally 2–4 months from application to approval

A common example is the "Human Resource Development Grant." After a company pays to train its employees, it can apply for a government reimbursement of 50%–80% of the training cost.

The Seven Core Differences Between Subsidies and Grants

1. The Fundamental Difference in Disbursement Method

Subsidies use an "approve first, use later" model. The government reviews the company's project plan, confirms it aligns with policy direction, and disburses the funds directly; the company then uses the funds according to the approved project. This means you obtain the funds before the project even begins.

Grants use a "use first, reimburse later" model. The company first invests its own funds to carry out the project, and after meeting government-stipulated conditions (such as the number of new employees, training hours, etc.), submits supporting documents to apply for reimbursement. This places higher demands on a company's cash-flow liquidity.

Impact on Chinese businesses: If your company is short on capital in the early stages, a subsidy is more suitable; if you have ample operating capital and can invest first, a grant has a higher approval rate.

2. Strictness of Review

Subsidy review is extremely strict, because the amounts are large and competition is fierce. The review committee evaluates from multiple dimensions:

• The project's innovativeness and necessity
• The company's technical capability and financial strength
• The project's feasibility and social benefit
• A detailed financial budget and schedule

The approval rate is usually between 20% and 40%. For example, in a 2023 innovation subsidy program, 1,200 companies applied and only 280 were ultimately approved—an approval rate of just 23%.

Grant review is relatively lenient, because it mainly verifies whether the company meets statutory conditions (such as whether it really added employees or actually conducted training). The approval rate is usually between 70% and 95%, and some grants with simple conditions even approach a 100% approval rate.

3. Flexibility of Usage Restrictions

Subsidies have strict earmarking requirements. If the subsidy project you applied for is "introducing automated production equipment," you can only buy that type of equipment—you cannot use it for office renovation or marketing. Every expenditure must have supporting documents such as invoices and contracts, and the government also conducts spot checks afterward. If a diversion of funds is discovered, the company must return the money and may even be placed on a list of dishonest companies, affecting future applications.

Grants also have usage restrictions, but they are relatively flexible. For example, a training grant stipulates use for employee training, but the specific training content and method can be chosen freely by the company; afterward you only need to submit simple documents such as training records and attendance sheets.

4. The Difference in Amount Scale

This is the most intuitive difference. Subsidies are usually "large, one-time":

• Innovative technology adoption subsidy: JPY 5 million–20 million
• Capital investment subsidy: JPY 1 million–50 million
• R&D subsidy: JPY 2 million–30 million

Grants, on the other hand, are "small, ongoing":

• Human Resource Development Grant: JPY 500,000–2 million per year
• New-employee training grant: JPY 50,000–150,000 per person
• Women's employment support grant: JPY 200,000–500,000 per person

If your company needs to make a major one-time investment (such as buying production equipment or setting up an R&D department), a subsidy is the first choice; if it's an ongoing human-resource investment or a small improvement, a grant is more suitable.

5. Application Conditions and Thresholds

Subsidies usually have relatively high requirements for companies:

• Years in operation (usually 2 years or more required)
• Good financial condition (must submit financial statements for the past 2–3 years)
• Company size or employee count requirements
• A track record of operating in a specific industry or technical field

For example, a certain innovation subsidy required annual sales of no less than JPY 50 million and an R&D investment ratio of no less than 5%.

Grant conditions are relatively simple, mainly legal compliance:

• The company is legally registered and pays taxes
• No labor-law violation record
• Meeting specific employment or training conditions
• Social insurance paid on time

Most compliantly operated companies can apply. This is especially advantageous for newly established Chinese businesses.

6. Reporting and Inspection Requirements

Subsidy projects require regular progress reports. Companies usually need to:

• Submit monthly or quarterly progress reports
• Provide detailed accounting vouchers and expense breakdowns
• Undergo interim and final evaluations
• Accept on-site inspections by government agencies
• Submit a final results report (including project outcomes, effect analysis, etc.)

The entire process can last 1–3 years, and the company needs to devote considerable manpower to cooperate.

Grant reporting is relatively streamlined:

• Submit a simple after-the-fact application form
• Provide proof of expenditure (invoices, contracts, etc.)
• Provide proof of condition fulfillment (payroll registers, attendance sheets, etc.)
• Usually a one-time inspection, with no need for long-term tracking

This means the management burden of a grant is lighter.

7. Return and Penalty Mechanisms

Subsidies carry higher risk: If any of the following is discovered, the company must return the funds in full or in part:

• Misrepresenting project content or budget
• Using funds for purposes not compliant with the rules
• Project results falling short of the promised goals
• Falsifying financial statements

Not only must the money be returned, but the company may also face:

• Being placed on a list of untrustworthy companies (blacklist)
• Being unable to apply for any government subsidy for 3–5 years
• Legal penalties and reputational loss

Grants carry relatively lower risk: If a problem is found, usually only the corresponding amount is deducted; full return is rarely required, and blacklisting is unlikely.

A Selection Guide for Chinese Business Owners in Japan

Is Your Company Better Suited to Apply for a Subsidy?

Prioritize a subsidy in the following situations:

1. You have a major investment plan: you need to buy equipment, set up a new department, or develop a new product
2. Your company has a certain scale: annual revenue of JPY 10 million or more, with a complete financial system
3. The project is innovative enough: the product, service, or business model has clear innovativeness or social significance
4. You can handle long-term reporting: the company has dedicated administrative staff who can support 1–3 years of project tracking
5. Capital pressure is high: you need a large amount of funding but self-financing is difficult

A real case: Mr. Li, a Chinese business owner running a manufacturing company in Tokyo with annual revenue of JPY 80 million, planned to invest JPY 30 million to introduce automated production equipment. By applying for the "SME Capital Investment Subsidy," he was approved for a JPY 15 million subsidy and only needed to invest JPY 15 million himself, greatly reducing his investment risk.

Is Your Company Better Suited to Apply for a Grant?

Prioritize a grant in the following situations:

1. Focus on human resources: you plan to expand hiring or upgrade employee skills
2. A startup or small company: established less than 2 years, fewer than 10 employees
3. Relatively ample capital: you can invest your own funds first and then apply for reimbursement
4. You want a low-risk application: you don't want the pressure of heavy compliance inspections
5. You want fast approval: you need timely financial support

A real case: Ms. Wang, a Chinese restaurant owner, runs 3 restaurants in Yokohama and planned to hire 20 new employees. She applied for the "New-Employee Training Grant" and the "Women's Employment Promotion Grant," receiving a total of JPY 3 million to use for employee training and wage subsidies. The approval cycle was just 3 months and the risk was extremely low.

A Comparison of Application Processes

The Subsidy Application Process

1. Stage 1: Information gathering and preparation (1–2 months)

   • Follow subsidy information on government websites and from METI
   • Consult the subsidy's managing agency or a certified consultant
   • Prepare company materials: financial statements, organizational structure, main product introductions

2. Stage 2: Project planning and proposal writing (1–2 months)

   • Clarify project goals, outcome metrics, and schedule
   • Draw up a detailed project budget (often 50–100+ pages)
   • Invite a certified consultant to review the proposal

3. Stage 3: Formal application (within 1 month)

   • Log into the government application system (such as e-Gov)
   • Upload all required application materials
   • Pay the consulting fee (usually JPY 30,000–100,000)

4. Stage 4: Review period (3–6 months)

   • The government review committee examines the materials
   • There may be an interview or on-site inspection
   • Wait for the public announcement of results

5. Stage 5: Project implementation (1–3 years)

   • Execute the project according to the approved plan
   • Submit regular progress reports
   • Keep all expenditure vouchers

6. Stage 6: Project settlement (3–6 months)

   • Organize the final accounts and results report
   • Submit the after-the-fact report
   • Final government approval and disbursement

The Grant Application Process

1. Stage 1: Information gathering (2–4 weeks)

   • Check the MHLW website or Hello Work (ハローワーク)
   • Confirm whether the company meets the basic conditions

2. Stage 2: Material preparation (2–4 weeks)

   • Gather company materials: business license, tax certificate
   • Prepare HR materials: payroll register, attendance sheets, social insurance payment certificate

3. Stage 3: Formal application (within 1 week)

   • Fill out a simple application form
   • Upload the required documents (usually 5–10 items)
   • Mail to the relevant agency or submit online

4. Stage 4: Initial review (2–4 weeks)

   • The government agency checks the completeness and compliance of the materials

5. Stage 5: Approval and disbursement (1–2 months)

   • Receive the approval notice
   • Receive the grant disbursement

The entire cycle is usually 2–4 months, far shorter than the 6–12 months for a subsidy.

Frequently Asked Questions (FAQ)

Q1: As a Chinese business owner, will my subsidy or grant application be rejected because of my nationality?

A: It will not be directly rejected because of nationality. Japan's subsidy and grant systems place no explicit restriction on the nationality of applicant companies; as long as a company is legally registered and pays taxes in Japan, it is generally eligible to apply. But note a few points in particular: First, the company's representative can be a foreign national, but ownership must be transparent, with nothing concealed. Second, when drafting the proposal and application materials, you must express things clearly in Japanese; if your Japanese isn't professional enough, we recommend hiring a certified consultant to translate and refine. Third, the government reviews the company's financial and operational records, and any issues such as tax evasion or improper social insurance payments will directly affect the application. I've seen many Chinese business owners successfully approved for subsidies and grants—the key is compliant operation. A business owner from Shanghai, when applying for a capital investment subsidy, was smoothly approved for JPY 12 million because his books were clear and his taxes paid on time, without facing any discrimination over nationality.

Q2: Can I still apply for a subsidy or grant for a project that has already started?

A: This depends on the specific subsidy or grant type. For subsidies, you generally cannot apply for a project that has already started. The core logic of a subsidy is that the government approves it in advance and the company implements it according to the approved plan. If the project has already started, the government cannot effectively supervise the implementation process, nor can it confirm whether the funds are truly used for new investment rather than after-the-fact reimbursement of existing expenses. That said, a few subsidies do allow "projects started within the current fiscal year," but in that case it's best to consult the subsidy's managing agency first. For grants, the situation is the opposite, because it's after-the-fact reimbursement. As long as the company meets the conditions (such as adding employees or conducting training), you can apply even if the project has already been carried out—just submit the relevant supporting materials. For example, if you've already paid JPY 50,000 in training fees for 10 new employees, you can now apply for the training grant, and the government will reimburse based on the invoices and training records you submit.

Q3: After receiving a subsidy or grant, do I still need to pay income tax?

A: Subsidies and grants are usually treated in Japan as income related to business operations, and are subject to income tax and corporate tax. This is an issue many business owners easily overlook. For example, if you receive a JPY 5 million capital investment subsidy, that JPY 5 million must be counted as company income when calculating income tax. Assuming your corporate income tax rate is 30% (including corporate tax, municipal resident tax, business tax, etc.), that JPY 5 million will generate a JPY 1.5 million tax burden. Therefore, when planning a subsidy application, be sure to factor this tax cost into your financial budget. I recommend that Chinese business owners discuss with their tax advisor (zeirishi) to clarify the tax treatment once the subsidy is in hand, to avoid a cash shortfall. Some business owners, after receiving a subsidy, ended up in financial difficulty because they overlooked the tax issue.

Q4: If my subsidy or grant application is rejected, can I reapply?

A: You can reapply, but it depends on the reason for failure and the nature of the subsidy. If your application is rejected, you have the right to receive a written reason for rejection. Common reasons for rejection include: insufficient project innovativeness, an unreasonable budget, poor company financial condition, incomplete materials, etc. You should improve based on the specific reasons. For subsidies, most allow reapplication in the next fiscal year or the next application cycle, but you usually need to improve the original proposal—for example, emphasizing the project's innovativeness, optimizing the budget, or supplementing the company's qualifications. I've seen business owners rejected on the first application succeed the next year after improving the proposal. But note that some subsidies limit the number of times the same applicant can apply (for example, at most twice in 3 years), so study this carefully. For grants, if the first application doesn't meet the conditions (such as insufficient new employees), you can wait until the conditions are met and then apply. For example, if when applying for the new-employee training grant your number of new employees falls short of the required 5, you can continue hiring and reapply half a year later.

Q5: If my company has multiple projects, can I apply for multiple subsidies or grants at the same time?

A: In theory yes, but there are strict restrictions and risks. For subsidies, to prevent companies from over-profiting, the government usually stipulates that the total amount of the same type of subsidy a single company can receive within the same fiscal year cannot exceed a certain cap (for example, JPY 30 million), and if the same project has already received another government subsidy, it cannot apply again. For example, if your new-product R&D project has already received a JPY 1 million subsidy from the local government, you cannot then apply for a national-level R&D subsidy, nor can you reapply by renaming or splitting up the project. For grants, because the amounts are smaller and the different types vary greatly, in most cases you can apply for different grants at the same time. For example, you can apply for both the human-resource training grant and the women's employment promotion grant, because these two programs have different conditions and uses. However, if two grants involve the same expenditure (such as the wages of the same employee), you cannot apply for both. I recommend that Chinese business owners consult a professional advisor first and draw up a comprehensive application plan to avoid non-compliance.

Practical Advice for Chinese Business Owners

Step 1: Take Stock of Your Company's Current Situation

Before applying for any subsidy or grant, first conduct an internal diagnosis:

• How long has the company existed? What is its financial condition?
• Is there a major investment plan or human-resource expansion plan?
• Does the company pay taxes and social insurance in accordance with the law?
• Is there dedicated administrative or financial staff?
• What is the main motivation for applying for a subsidy or grant?

Step 2: Understand Government Information Channels

• Ministry of Economy, Trade and Industry (METI): www.meti.go.jp — rich in subsidy information
• Small and Medium Enterprise Agency: www.chusho.meti.go.jp — subsidies aimed at SMEs
• Ministry of Health, Labour and Welfare (MHLW): www.mhlw.go.jp — grant information
• Japan Chamber of Commerce and Industry: www.jcci.or.jp — local subsidy information
• Local government websites: Tokyo, Kanagawa Prefecture, etc. all have local subsidies

Step 3: Hire a Professional Advisor

Subsidy applications are quite difficult for non-specialists:

• Certified subsidy consultant (SME Management Consultant, 中小企業診断士): skilled at designing subsidy proposals, fee JPY 50,000–100,000
• Tax advisor (Zeirishi, 税理士): assists with financial compliance review, fee JPY 30,000–50,000
• Lawyer (弁護士): assists with contracts and legal issues, fee depends on the case

For Chinese business owners, finding an advisor who understands Japanese and is familiar with the characteristics of Chinese businesses is especially important.

Step 4: Establish a Records Management System

Whether applying for a subsidy or a grant, you need to keep complete expenditure vouchers:

• All invoices, contracts, and purchase documents
• Bank transfer records and statements
• Employee payroll registers and social insurance payment certificates
• Project progress records and photos

We recommend classifying and storing them in folders or an electronic system, keeping them for at least 5 years.

Step 5: Draw Up a Long-Term Plan

Don't view a subsidy or grant as a one-time opportunity:

• Years 1–2: apply for project-based subsidies (such as capital investment)
• Years 2–5: continuously apply for human-resource training grants
• Year 5 and beyond: apply for innovation and R&D subsidies

This way you can continuously receive government financial support.

Summary

Although subsidies and grants are both government financial support, they differ enormously in nature, application process, and risk. A subsidy is "large, upfront, fiercely competitive, high-risk," suitable for companies with a major investment plan and a larger scale; a grant is "small, after-the-fact, low-threshold, low-risk," suitable for startups and companies making ongoing human-resource investments.

For Chinese business owners in Japan, the key points are:

1. Understand your company's type and stage, and choose the appropriate funding-support tool
2. Keep your company operating in compliance—this is the foundation of any application
3. Hire a professional advisor to raise your success rate and manage risk
4. Establish a long-term plan, and don't miss any round of subsidy opportunities

Finally, to emphasize: applying for a subsidy or grant requires effort and time, and comes with a certain administrative burden. But if planned well, this financial support can significantly reduce your investment costs and accelerate your development. Many Chinese business owners have successfully achieved business upgrades and expansion by making use of these systems.

If you have a specific company situation and subsidy application questions, you are welcome to consult our professional team for free. We will tailor the most suitable application plan to your company's characteristics.