Notification vs Permission vs License: Japan's Business Licensing System Explained

Japan's business licensing system (営業許可制度, eigyo kyoka seido) is a multi-tier regulatory structure that draws sharp legal distinctions between notification, permission, registration, license, and authorization. Foreign companies often treat these terms as interchangeable, but each tier carries different scrutiny levels, processing times, and penalties for non-compliance. Misidentifying which tier applies to your business can mean criminal prosecution, forced closure, or months of wasted preparation.

The Five Tiers Explained

Japan's administrative law tradition assigns different oversight levels based on risk to public welfare. Each tier is defined by the specific statute governing each industry, not by a central licensing law. For foreign companies planning Japan market entry, identifying the correct tier is the first step in planning timelines and capital requirements. The comprehensive business licenses guide covers the full licensing landscape; this post focuses on the tier system itself.

Todokede (届出)—Notification

A todokede is the lowest regulatory tier. Defined under Article 2, Item 7 of Japan's Administrative Procedure Act, it requires submitting prescribed information to an administrative agency. The agency receives the notification but does not approve or reject it—the filing takes effect immediately. Examples include late-night alcohol service notifications (filed with police at least 10 days in advance), small-scale telecom operator filings with MIC, and food business notifications under the 2021 reform for operations outside the 32 licensed categories.

Kyoka (許可)—Permission

Under kyoka, a business activity is generally prohibited by law, and the government lifts that prohibition for applicants meeting prescribed standards. The agency reviews documentation, may inspect facilities, and issues an explicit approval or denial. Processing takes two weeks to three months. Examples: restaurant permits (飲食店営業許可) from the public health center, construction permits for projects exceeding ¥5 million, worker dispatch permits requiring ¥20 million in net assets, and secondhand goods dealer permits (approximately 40 business days to process).

Toroku (登録)—Registration

Toroku sits between notification and permission. The agency verifies the applicant against objective criteria and enters them into an official register. Unlike kyoka, there is less discretionary judgment—meeting the criteria should result in registration. The Financial Services Agency's registration system is a key example: Type 1 financial instruments business requires ¥50 million minimum capital and a 120%+ capital adequacy ratio. Travel agency registration (Type 1) requires ¥70 million in security deposits. Processing ranges from one to six months.

Menkyo (免許)—License

Menkyo is the highest tier, literally meaning "exemption from prohibition." It typically requires passing national examinations and demonstrating years of experience. The real estate transaction specialist exam (takken-shi) has a pass rate of approximately 15–16% among roughly 210,000 annual examinees. The customs broker exam passes only about 10% of applicants. Alcohol sales licenses from the National Tax Agency require three years of industry experience and a ¥90,000 registration fee.

Ninka (認可)—Authorization

Ninka is a specialized tier where government authorization supplements a private legal act. Less common in commercial licensing, it appears primarily in public welfare sectors—most notably ninka hoikuen (認可保育園), government-authorized nursery schools meeting MHLW standards. It also applies to cooperative associations and public utility rate changes.

Side-by-Side Comparison

Tier	Japanese	Legal Mechanism	Government Role	Processing Time	Examples
Notification	届出	Informing the agency of prescribed facts	Receives info; cannot approve or reject	Immediate to 10 days	Late-night alcohol service, non-licensed food businesses
Permission	許可	Lifting a general prohibition for qualified applicants	Reviews, inspects, approves or denies	2 weeks to 3 months	Restaurants, construction, worker dispatch
Registration	登録	Verification against objective criteria; entry into register	Verifies criteria; less discretionary	1 to 6 months	Financial instruments, travel agencies
License	免許	Qualification via national examination	Issues license after stringent review	2 to 6 months + exam	Alcohol sales, real estate, customs brokerage
Authorization	認可	Government completes a private legal act	Supplements private action with approval	Varies by sector	Nursery schools, cooperatives, utility rates
The governing statute for each industry determines which tier applies. A single business may require multiple tiers simultaneously.

Determining Which Tier Applies

There is no universal lookup table. The tier is set by the statute governing your specific activity. The most common mistake is applying a general industry label—"we are in food"—without analyzing the precise activity. A food manufacturer needs kyoka; a packaged food retailer may only need todokede; a company doing both needs both. The step-by-step application guide covers the filing process once you have identified your tier.

Step	Action	Where to Check
1	Define your specific business activities precisely	Internal business plan
2	Identify the governing statute for each activity	Administrative scrivener; JETRO guides
3	Check whether the statute uses todokede, kyoka, toroku, or menkyo	Japanese Law Translation database; legal counsel
4	Assess whether scale or geography changes the tier level	Governing statute; prefectural regulations
5	Pre-consult with the issuing authority	Public health center, prefectural office, or ministry bureau
6	Confirm whether multiple tiers apply to your operations	Administrative scrivener review

Case Study: The 2021 Food Sanitation Act Reform

The June 2021 revision of Japan's Food Sanitation Act is the clearest illustration of the tier system in action. Before the reform, food business licensing categories varied by municipality, creating inconsistency across prefectures. The revision standardized the system nationally into two parallel tracks:

• 32 kyoka categories—restaurants, confectionery manufacturing, meat processing, dairy, fish processing, and other high-risk food activities require explicit permission from the local public health center.
• Todokede system—food businesses outside the 32 categories (packaged food retail, food warehousing, temperature-controlled transport) file a notification that takes effect upon submission.

A company opening a restaurant must obtain kyoka—appointing a food sanitation manager, passing a facility inspection, and maintaining HACCP-based hygiene plans. A packaged food retailer files todokede but must still comply with HACCP requirements (mandatory for all food operators since June 2021) and food labeling rules.

Factor	Kyoka (32 Categories)	Todokede (Notification)
Pre-operation requirement	Must obtain permit before operating	Must file notification before operating
Government review	Application review + facility inspection	Document receipt only; no approval process
Facility standards	Prescribed requirements must be met	General hygiene standards apply
HACCP compliance	Mandatory (full or simplified)	Mandatory (full or simplified)
Validity period	5–6 years (renewal required)	No expiration (changes must be reported)
Penalty for non-compliance	Up to 2 years imprisonment / ¥2M fine	Up to ¥500,000 fine
Examples	Restaurants, bakeries, meat processors	Packaged food retail, food warehousing

Common Misconceptions

"Notification means no government interaction." Incorrect. A todokede must be filed before operations begin. While the agency cannot reject it, operating without filing is a regulatory violation.

"Permission and license are the same thing." Kyoka (permission) involves lifting a prohibition after application review. Menkyo (license) goes further—requiring national examinations or years of experience. A restaurant kyoka needs a food sanitation manager who completes a one-day course; a real estate menkyo requires staff who passed an exam with a 15–16% pass rate.

"Registration is just a formality." The toroku system for regulated industries in Japan can require ¥50 million minimum capital, detailed compliance infrastructure, and five to six months of processing.

"One license covers everything." Many businesses need multiple tiers. A restaurant selling alcohol needs both a food service kyoka (health center) and an alcohol sales menkyo (tax office). A staffing firm placing workers internationally needs a worker dispatch kyoka plus immigration compliance.

Penalties for Misclassification

Operating under the wrong tier carries criminal consequences. Under the Food Sanitation Act, running a restaurant without kyoka means up to two years imprisonment or ¥2 million in fines. The Secondhand Articles Dealer Act prescribes up to three years imprisonment or ¥1 million in fines for operating without a kobutsusho kyoka. The Financial Instruments and Exchange Act imposes up to five years imprisonment and corporate fines of up to ¥500 million for conducting securities business without toroku registration.

Beyond criminal penalties, Business Manager Visa holders whose companies lack proper authorization face visa non-renewal. License revocation triggers disqualification periods of three to five years. Changes to registered business details must be reported within 30 to 60 days depending on the statute—failure to do so is itself a finable offense.

Frequently Asked Questions

Can a todokede-based business be upgraded to kyoka if operations expand?

Yes, and it is often required. A packaged food retailer operating under todokede who begins preparing and serving food on-site must obtain restaurant kyoka before commencing those activities. Operating in a kyoka category under only a todokede filing is treated as unlicensed operation with full penalties.

Do licensing tiers differ between prefectures?

The tier classification is set by national statutes and is consistent across Japan. However, facility standards, forms, and processing practices may vary by municipality. The 2021 Food Sanitation Act reform specifically standardized the 32 kyoka categories nationally to reduce this variation.

How do I know if my business needs no license at all?

General consulting, IT services, marketing, design, and most professional services require no industry-specific license beyond standard company registration. You still need basic tax notifications (opening of business notification to the tax office within one month). An administrative scrivener (gyosei shoshi, 行政書士) can confirm whether your activities trigger any sector-specific requirements.

Getting Your Licensing Tier Right

Japan's multi-tier system is more nuanced than a simple "apply for a license" process. The distinction between todokede, kyoka, toroku, menkyo, and ninka determines your timeline, budget, and compliance obligations—and getting it wrong carries real consequences. AQ Partners provides end-to-end support for foreign companies navigating Japan's regulatory environment, from licensing tier identification through ongoing compliance management. Contact us at hello@aqpartners.jp to discuss your specific business activities and determine the right licensing path for your Japan operations.