Business Improvement Grant (Gyomu Kaizen Josei-kin): Raise Your Minimum Hourly Wage and Still Get Subsidized — A Must-Read for Chinese Businesses in Japan

The Core Mechanism of the Business Improvement Grant

What Is the Business Improvement Grant?

The Business Improvement Grant is a support scheme established by Japan's Ministry of Health, Labour and Welfare for small and medium-sized enterprises (SMEs). Its purpose is to encourage companies to improve their operating environment and raise productivity while also improving employee compensation. The grant places particular emphasis on raising the minimum wage — when you increase your employees' minimum hourly wage, the government subsidizes part of the associated cost, typically covering a portion of the actual increase in labor costs.

This grant is especially advantageous for Chinese businesses in Japan, because many Chinese SMEs are in an expansion phase and face pressure to recruit and retain staff. Through this grant, you can both align with the Japanese government's policy direction of raising the minimum wage and ease your company's burden.

The Logic Behind Calculating the Grant Amount

The Business Improvement Grant amount is usually calculated using the following formula:

Grant amount = Hourly wage increase × Number of eligible workers × Annual working hours × Subsidy rate (typically 2/3 or 3/4)

For example: Suppose your food-manufacturing company has 5 employees, currently paid 1,000 JPY/hour, and you plan to raise this to 1,100 JPY/hour — an increase of 100 JPY. Each employee works an average of 1,900 hours per year, and the subsidy rate is 2/3, so:

• Hourly wage increase: 100 JPY/hour
• Number of eligible workers: 5
• Annual working hours: 1,900 hours
• Subsidy rate: 2/3
• Grant amount = 100 × 5 × 1,900 × 2/3 ≈ 633,333 JPY

This means your company can receive roughly 630,000 JPY in support — enough to cover most of the extra cost created by the wage increase.

Conditions and Requirements for Applying

Company Eligibility Criteria

Not every company can apply for the Business Improvement Grant. You need to meet the following basic conditions:

1. Company size requirement

• SME certification: capital of 300 million JPY or less, or 300 employees or fewer (manufacturing)
• Capital of 100 million JPY or less, or 100 employees or fewer (services)
• Capital of 50 million JPY or less, or 50 employees or fewer (retail)

Most Chinese businesses meet this standard. If your company is a branch of a larger group, you'll need to confirm whether it qualifies as an SME.

2. Employment insurance enrollment requirement

• All eligible employees must be enrolled in employment insurance
• The company must have paid employment insurance premiums continuously for 6 months or more

3. Labor management compliance requirement

• Written employment contracts with employees, clearly stating wages, working hours, and other conditions
• An attendance record book that accurately logs employee working hours
• Complete payroll documentation that can verify wage payments

These requirements may seem strict, but they are really just the foundation of sound company management. Many Chinese businesses fail their applications because of irregular labor management, so it's essential to have your documents fully in order.

The Core Contents of the Business Improvement Plan

When applying, you must submit a Business Improvement Plan. This document must clearly explain:

Specifics of the wage-increase plan

• Hourly wage details before and after the increase
• The number and job types of eligible workers
• The specific date the increase takes effect

Background and necessity of the improvement

• Why you are raising wages (attracting talent, retaining staff, improving productivity, etc.)
• The labor shortage or high turnover issues your company faces

Details of your productivity-improvement measures

• Introducing new business processes or systems
• Enhancing employee training and skills development
• Improving equipment or the office environment

Many Chinese business owners make one mistake here: they assume that simply raising wages will qualify them for the grant. In reality, the government requires companies to also propose business improvement measures. This is not an extra burden — it's what helps your company achieve genuine, sustainable growth.

The Actual Application Process for Chinese Businesses in Japan

Preparation Before Applying (Months 1–2)

Step 1: Confirm company eligibility

• Verify that your company qualifies as an SME
• Confirm that employment insurance has been paid as required
• Gather payroll records, attendance books, and employment contracts from the past 6 months

We recommend inviting a professional social insurance and labor consultant to run a compliance check before you apply. Many Chinese businesses have issues in the details of their labor documents (e.g., non-standard attendance book formats, unclear wage calculation explanations), and finding and fixing these in advance can greatly improve your success rate.

Step 2: Draft the wage-increase plan

• Determine the specific hourly wage increase
• Define who it applies to (all staff? a specific department?)
• Set the implementation date

At this stage, we recommend consulting an accountant or HR specialist to ensure the wage plan both qualifies for the grant and fits your company's financial planning.

Step 3: Plan your business improvement measures

• List 3–5 specific improvement measures
• Assess the implementation cost and expected effect of each measure
• Draw up a detailed execution timeline

Common improvement measures include:

• Introducing an attendance management system (reducing manual data entry)
• Organizing employee training courses (improving skills and efficiency)
• Improving the work environment (purchasing new equipment, optimizing office layout)
• Establishing a performance evaluation system (to complement the wage increase)

The Formal Application Stage (Months 3–4)

Step 4: Prepare the application materials

Key document checklist:

1. Business Improvement Plan (designated format)
2. Company overview (company size, current operations, staff composition)
3. Financial statements (settlement statements from the past 2–3 years)
4. Labor management documents (employment contracts, attendance books, sample payslips)
5. Proof of employment insurance enrollment
6. Copy of the corporate registration certificate

For Chinese businesses, pay special attention to the following:

• If your business location differs from your head office, you need to provide business certificates for both locations
• Foreign business owners must provide a copy of their residence card and My Number card
• All Japanese-language documents must be clear and legible; using the officially prescribed formats is recommended

Step 5: Submit the application

You can submit through the following channels:

1. The Business Improvement Grant Administration Office (the officially designated intake body)
2. The Prefectural Labour Bureau
3. Online application system (supported in some regions)

You must submit both paper and electronic versions. Be sure to keep your submission receipt for later follow-up.

The Review and Payment Stage (Months 5–10)

After submission, the review period is usually 2–3 months. During this time, the authorities may request additional documents, so be sure to respond quickly.

Once approved, the grant is paid in installments:

• First installment: usually 50% of the total (at the start of implementation)
• Second installment: the remaining 50% (after the business improvement measures are completed)

The grant is paid into the company's designated bank account, and the entire cycle usually takes 6–10 months.

The Relationship Between the Business Improvement Grant and Minimum Wage Policy

The Upward Trend in Japan's Minimum Hourly Wage

The Japanese government has raised the minimum wage standard year after year, putting real pressure on businesses. Take Tokyo as an example:

| Year | Minimum Hourly Wage | |------|--------| | 2018 | 985 JPY | | 2020 | 1,013 JPY | | 2022 | 1,072 JPY | | 2024 | 1,184 JPY |

Rate of increase: about 200 JPY over 6 years, a rise of more than 20%

For a Chinese-owned restaurant with 20 employees and monthly revenue of 5 million JPY, this means:

• If each employee works an average of 160 hours per month
• 20 employees × 160 hours × 200 JPY = 640,000 JPY/month in extra cost
• An annual cost increase of about 7.68 million JPY

This constant upward pressure forces many companies either to cut working hours or seek subsidies. The Business Improvement Grant is precisely the mechanism the government designed to raise wages while keeping businesses viable.

A Concrete Case of the Grant Offsetting Costs

Case: An Apparel Import Trading Company

A Chinese business owner runs an apparel import trading company with 12 employees. In early 2024, he faced the following predicament:

• The minimum hourly wage was about to rise from 1,100 JPY to 1,150 JPY
• Employee turnover was high (30% annually on average), and new hires needed time to adjust
• The company wanted to raise pay to retain core staff

Reform plan:

• Raise all employees' hourly wage by 50 JPY (from 1,100 JPY to 1,150 JPY)
• Give an additional 100 JPY raise to employees with 3+ years of tenure (from 1,150 JPY to 1,250 JPY)
• A total of 8 employees receive the additional raise

Applying for the Business Improvement Grant:

• 12 employees × 50 JPY × 1,900 hours × 2/3 = 760,000 JPY
• 8 employees × 100 JPY × 1,900 hours × 2/3 = 1,010,000 JPY
• Total grant amount: about 1,770,000 JPY

Implementing business improvement measures:

• Invest 200,000 JPY in an import/inventory management system
• Enroll employees in international business training (200,000 JPY, with the company covering 50,000 JPY)
• Optimize the office layout (50,000 JPY)

Financial impact:

• Additional annual labor cost: 3,200,000 JPY
• Grant received: 1,770,000 JPY
• Actual outlay: 1,430,000 JPY (after deducting the grant)
• The company's true cost burden is only 45% of what was originally expected

At the same time, thanks to the pay raise and improved work environment, employee turnover fell from 30% to 15%, saving about 600,000 JPY per year in recruitment and training costs. All in all, this plan let the company both meet policy requirements and achieve real cost control.

Frequently Asked Questions (FAQ)

Q1: My company was founded less than 6 months ago — can I still apply for the Business Improvement Grant?

A: No. The Business Improvement Grant explicitly requires that a company must have paid employment insurance premiums continuously for 6 months or more. This is to ensure the company has a certain level of operational stability and a sound labor-management foundation. If your company was just founded, we recommend you start standardizing all labor management and insurance payments now, and submit your application after 6 months. While you wait, you can prepare your Business Improvement Plan, financial statements, and other materials so you can file quickly once the application window opens. If you're in a hurry to raise wages, you can raise them on your own first, then apply for a retroactive subsidy once you meet the conditions (supported in some regions).

Q2: I previously didn't enroll my employees in employment insurance — if I enroll them now, on a temporary basis, can I apply?

A: This situation is complicated. Strictly speaking, if you didn't pay employment insurance as required before applying, you'll be deemed ineligible. But we recommend taking action immediately: enroll all your employees and pay the back premiums now, and prepare a detailed explanation of the back-payment along with supporting documents. Be candid about the situation in your application materials and state that the company has now fully rectified it. Many regulators will take a company's proactive rectification into account. Rather than concealing it, it's better to rectify it proactively — this demonstrates the company's commitment to compliance and avoids later administrative penalties. We recommend consulting a professional Sharoshi (Japanese social insurance and labor consultant) to handle the back-payment; the fee is usually 50,000–100,000 JPY, but it greatly reduces the risk of your application being rejected.

Q3: I already raised wages back in 2023 — can I still apply for a subsidy on that past increase?

A: Possibly, but you need to meet specific conditions. Applications for the Business Improvement Grant usually need to be made before and after the wage increase, but the grant programs in some regions and years allow retroactive applications. The retroactive window is usually within 1–2 years after the increase, but you'll need to prepare complete supporting documents: payslips from before the increase, payslips from after, and an implementation notice or related announcement. The key is to clearly prove the timing, magnitude, and scope of the increase. We recommend first contacting your local Labour Bureau or grant administration office to ask whether the retroactive application window is still open, and if so, start organizing your materials immediately. Missing this opportunity may mean you can no longer apply, so acting quickly is the wise choice.

Q4: If my company undergoes changes during the grant payment period (such as being acquired or relocating), can I still continue to receive the grant?

A: It depends on the nature and timing of the change. If you simply relocate your business premises but the corporate entity and legal representative remain unchanged, grant payments are usually unaffected. However, if there is a substantive change such as a corporate merger, a change of representative, or a change in major shareholders, you must notify the grant administration authority immediately. In some cases, such changes can cause you to lose grant eligibility. If you anticipate a major change in the next 1–2 years (such as a planned acquisition), we recommend delaying your application or consulting a professional advisor in advance to assess the risk. When a change occurs during the grant period, you must report it to the administering authority within 30 days, or you may face a demand to repay the grant.

Q5: My company has both full-time employees and dispatched (temp) workers — can wage increases for both types qualify for the grant?

A: Only wage increases for directly employed regular staff (employees who have signed an employment contract with the company) qualify for the grant. Dispatched workers are employed by the dispatch agency and are not eligible. However, if you plan to convert dispatched workers into regular employees and raise their wages at the same time, these newly added regular employees can also be included in the grant's scope. This actually gives your company a great opportunity: through the incentive of the grant, you can keep costs relatively low while increasing the proportion of directly employed staff and improving your company's workforce structure. When drafting your business improvement plan, we recommend clearly distinguishing between regular and dispatched workers and describing any planned conversions. This both maximizes your grant benefit and demonstrates the company's long-term talent strategy.

Common Reasons Applications Fail — and How to Avoid Them

According to statistics from Japan's Ministry of Health, Labour and Welfare, about 20–30% of applications are rejected due to incomplete or non-compliant materials. Chinese businesses are especially prone to falling into the following traps:

Non-Standard Labor Management Documents

Many Chinese business owners are used to "rule-by-person" management, and their employment contracts, attendance books, and payslips are irregular or incomplete. When you apply for the grant, these documents are scrutinized one by one.

How to avoid it:

• Immediately standardize the format of all employment contracts, ensuring they include every necessary clause: wages, working hours, probation period, etc.
• Set up an electronic attendance system to avoid the chaos of handwriting or Excel spreadsheets
• Prepare detailed wage calculation statements that clearly show base pay, bonuses, benefits, and other items
• Keep complete payslips and attendance records for 6 months or more

Business Improvement Measures That Are Too Vague

Some applicants write vague statements in their plan such as "improve management efficiency" or "improve the work environment." Government reviewers will find these measures insufficiently specific and inadequate to prove the company's genuine intent to improve.

How to avoid it:

• List 3–5 specific, quantifiable improvement measures
• Draw up a detailed implementation plan, timeline, and budget for each measure
• Describe the specific expected effect of each measure (e.g., "monthly efficiency will improve by 15% after introducing the system")
• Ideally, provide supplier quotes or purchase contracts as evidence

Confused Timing Across the Application Materials

Some companies submit applications where the wage-increase date in the Business Improvement Plan does not match the actual implementation date, or the timing of the improvement measures doesn't match the plan, leading reviewers to doubt the authenticity of the materials.

How to avoid it:

• Ensure all dates in the plan are accurate and fully consistent with actual implementation
• If you already implemented some measures before submitting, clearly explain in your materials the timeline of what has been implemented and what is planned
• Keep proof of all implementation steps (purchase receipts, training certificates, system usage screenshots, etc.)

Summary and Action Plan

The Business Improvement Grant is an important policy benefit for Chinese businesses in Japan. Through this grant, you can not only offset the cost pressure of wage increases but also use it as a springboard to drive genuine improvement in your company — whether that's standardizing labor management, raising productivity, or building an employee training system.

Actions you can take right now:

1. This month: Check your company's labor management documents, especially the compliance of employment contracts, attendance books, and payslips. If you find gaps, fix them immediately.

2. Next month: Consult a professional social insurance and labor consultant or accountant to pre-assess your company's eligibility and calculate a preliminary grant amount.

3. Within 2 months: Draft a specific wage-increase plan and business improvement plan. Determine the size of the increase, who it applies to, and the implementation date.

4. Within 3 months: Contact your local Labour Bureau or grant administration office to obtain the latest application guidelines and forms, and prepare your formal application.

Don't give up on this grant just because the procedure is complex. Many Chinese business owners who have successfully applied report that, while the entire application and review process is time-consuming, the grant they ultimately receive can cover 1–2 years of key investment for the company. And through this process, the company's management practices become far more standardized — an intangible asset in itself.

If you still have questions about the application process, or would like professional application guidance, we welcome you to contact us for a free consultation. We have extensive experience with subsidy applications for Chinese businesses in Japan and can help you maximize this policy support.