Japan's Residency Status System: The Legal Framework of Residency Qualifications Based on Activities, Status, or Position and Its Impact on Corporate Practices

In the context of business expansion within Japan, employing foreign nationals has become an indispensable management strategy. However, for foreigners to stay and engage in any activities in Japan, a legal permission known as “residence status” is always required. The entire system is governed by the Japanese “Immigration Control and Refugee Recognition Act” (hereinafter referred to as the “Immigration Act”). This law establishes a strict framework for legally managing the activities and duration of stay of all foreigners entering and residing in Japan. Therefore, understanding this system accurately is not merely an issue of administrative procedures, but a critical element that forms the core of a company’s compliance structure and personnel strategy. Particularly important is the fact that the Immigration Act classifies all residence statuses into two major categories based on the separate tables of the underlying law. One is the “Table 1 Residence Status,” which is granted for performing specific activities, and the other is the “Table 2 Residence Status,” which is granted based on an individual’s status or position. This classification fundamentally determines the scope of permitted activities, making it extremely important for business managers and legal professionals to clearly grasp the differences. This article will explain the legal basis and specific content of these two residence status categories, as well as the legal responsibilities that companies bear, based on statutes and case law.

The Legal Basis of Japan’s Residence Status System

The Japanese residence status system is entirely constructed based on the Immigration Control and Refugee Recognition Act (Immigration Control Act). Article 1 of Japan’s Immigration Control Act states that its purpose is “to provide fair administration of the entry and departure of all persons who enter or leave Japan, and the residence of all foreigners residing in the country.” The central concept for achieving this “fair administration” is the “residence status.” Article 2-2, Paragraph 1 of Japan’s Immigration Control Act defines “residence status” as a classification of activities that a foreigner may engage in while entering and residing in Japan. Foreigners must hold one of the residence statuses specified by this law in order to reside in Japan, in principle.

The most fundamental structure of this system lies in the fact that residence statuses are broadly divided into two categories according to the Immigration Control Act’s Appended Tables. One is the residence status listed in “Appended Table 1,” which is granted based on “activities” such as specific occupational or academic activities conducted in Japan. The other is the residence status listed in “Appended Table 2,” which is granted based on an individual’s “status or position,” such as marriage to a Japanese national or being a permanent resident. This classification brings about decisive differences in the range of activities, especially work activities, that a foreigner can engage in within Japan. When a company employs a foreigner or welcomes them as an executive, the first step in all legal risk management is to confirm whether the individual holds or is likely to obtain a residence status from either category. The management of these residence statuses involves a series of administrative procedures, including the application for a “Certificate of Eligibility for Residence Status” at the time of new entry, an application for “Change of Residence Status” when changing the content of activities, and an application for “Extension of Period of Stay” to extend the stay. Companies must continuously manage these processes.

Status of Residence Based on Activities: Appendix Table 1

The status of residence defined in Appendix Table 1 is granted to allow foreigners to engage in specific professional, technical, or business activities in Japan. The most distinctive feature of this category is that the activities a foreign national is allowed to conduct are strictly limited to within the scope of the granted status of residence. This reflects the economic policy aspect of Japan, aiming to accurately accept talent with specialized skills in certain fields. When a company employs a foreigner with a status of residence under this category, it bears the responsibility to prove that the individual’s expertise and the job duties provided by the company match the specific categories legally defined. Below, we will explain the main statuses of residence particularly relevant to corporate management.

Management & Administration

This residency status is established for activities related to managing or administering trade or other business operations in Japan. Specifically, it applies to positions such as representative directors and directors of corporations, as well as branch managers and factory managers. The requirements for obtaining this residency status are stringent. Firstly, a physical office must be secured within Japan; in recent years, virtual offices are generally not accepted. Next, the scale of the business must either have a capital or total investment amount of at least 5 million yen, or employ at least two full-time staff residing in Japan. For those engaged in management, it is necessary to have over three years of experience in business management or administration, and to receive a salary equivalent to or greater than that which a Japanese person would receive for the same job. Particularly at the time of renewal of the residency period, the continuity and stability of the business are rigorously examined. For example, if the financial statements show continued deficits or insolvency, additional documentation such as business plans and financing may be required. The Immigration Services Agency of Japan evaluates not just the formal fulfillment of requirements but also the substantive soundness of the business.

Engineering, Humanities & International Services

This residency status targets a wide range of professional occupations and is one of the most commonly utilized work qualifications in Japan. It is broadly divided into three categories. The first is the ‘Engineering’ field, which includes jobs requiring technical knowledge or skills in the natural sciences such as physical science, engineering, and other related fields, with typical examples being IT engineers and mechanical design engineers. The second is the ‘Humanities’ field, which encompasses jobs requiring knowledge in the humanities such as law, economics, sociology, and other related fields, including roles in planning, marketing, and accounting. The third category is ‘International Services,’ referring to jobs that require thinking or sensitivity based on foreign cultures, such as translation, interpretation, language instruction, and international business transactions. The most crucial aspect in the evaluation of this residency status is the direct and rational connection between the applicant’s educational background or work history and the job they intend to perform in Japan. As a rule, the educational requirement is to have graduated from a university or to have completed a specialized course at a Japanese vocational school and obtained the title of specialist. Even if these requirements are not met, in the ‘Engineering’ or ‘Humanities’ fields, over ten years of work experience, and in the ‘International Services’ field, over three years of work experience are considered to satisfy the work history requirements. The legal revision in 2015 (Heisei 27) integrated the previously separate ‘Engineering’ and ‘Humanities & International Services’ residency statuses, allowing for more flexibility in modern career paths that merge knowledge from both science and humanities, such as an engineer being promoted to a managerial position in sales.

Intra-Company Transfers in Japan

This residency status is established for employees who are transferred from a foreign office to an office in Japan for a fixed period. The activities targeted are those that fall under the residency status of “Engineering, Humanities Knowledge, or International Services” in Japan. Forms of transfer include not only movements between the head office and branches within the same company but also transfers between parent companies, subsidiaries, and affiliated companies. The most critical requirement for this residency status is that the applicant must have been continuously employed for more than one year at the head office, branch, or other business establishment abroad immediately before the transfer to Japan. The strategic importance of this residency status lies in the fact that it does not impose educational requirements. For example, while an excellent manager or engineer with many years of practical experience but without a university degree cannot meet the educational requirements for the “Engineering, Humanities Knowledge, or International Services” residency status, they can be transferred to Japan under the “Intra-Company Transfer” status by fulfilling the requirement of more than one year of employment. However, this residency status is strictly based on the premise of movement within the same corporate group, so it is not possible to change jobs and work for a different company while maintaining the same residency status. If one wishes to change jobs, a new application for permission to change to a different residency status, such as “Engineering, Humanities Knowledge, or International Services,” is required.

Highly Skilled Professional System in Japan

The “Highly Skilled Professional” system is not a specific visa status but a preferential treatment program established to attract foreign nationals with advanced skills. This program adopts a point-based system, where points are awarded for an applicant’s educational background, career history, annual income, research achievements, and other criteria. If the total score reaches 70 points or more, the individual can be granted the status of “Highly Skilled Professional (i) (Research activities, etc.),” “Highly Skilled Professional (ii) (Specialist/Technical activities),” or “Highly Skilled Professional (iii) (Business Management activities),” depending on the underlying activity. Holders of this status are entitled to several privileges, such as permission to engage in activities across multiple visa statuses, a uniform five-year period of stay, and a significantly reduced period of stay required for permanent residency applications (from the usual 10 years to as short as 1 to 3 years). Furthermore, foreign nationals who have been active under the “Highly Skilled Professional (i)” status for three years or more can apply to change their status to “Highly Skilled Professional (ii),” which provides an indefinite period of stay and virtually eliminates activity restrictions. This system reflects Japan’s clear policy intention to attract and retain particularly outstanding talent in the global competition for skilled professionals, and it can serve as a powerful tool for companies to secure excellent foreign talent and ensure their long-term contribution.

Residence Status Based on Personal Status or Position: Appendix Table 2

While the residence statuses listed in Appendix Table 1 are based on specific “activities” permitted, the statuses defined in Appendix Table 2 are granted based on the applicant’s own “personal status or position.” For example, being the spouse of a Japanese national or a permanent resident are grounds for these statuses. The most decisive and significant personalityistic of this category of residence status is that, in principle, there are no restrictions on activities within Japan. This applies to work activities as well, and legally, one can engage in any occupation, from professional duties to simple labor, within the scope of the law.

From a business management perspective, foreign nationals holding a residence status from Appendix Table 2 are considered the most flexible and legally low-risk candidates for employment. Employers do not need to act as sponsors to obtain this status for them, nor do they need to constantly manage whether the individual’s job duties fall within the scope of a specific residence status. Since the maintenance of the residence status does not depend on the employment relationship, the hiring process can proceed almost the same as when employing Japanese nationals. Therefore, when there are multiple candidates with equivalent abilities, those holding a residence status from Appendix Table 2 become very attractive to companies due to the simplicity of the hiring procedures and legal stability.

Below are the main residence statuses from Appendix Table 2.

• Permanent Resident: The period of stay is indefinite, and there are no restrictions on activities. Continuous residence in Japan for at least 10 years, good conduct, and the ability to support oneself independently are some of the requirements for approval.
• Spouse of a Japanese National, etc.: This category includes the spouse of a Japanese national, a person born as a child of a Japanese national, or a special adoptee of a Japanese national. There are no restrictions on work activities.
• Spouse of a Permanent Resident, etc.: This status applies to the spouse of a “Permanent Resident” or “Special Permanent Resident,” as well as children born in Japan. There are no restrictions on work activities for this residence status either.
• Long-Term Resident: This residence status is mainly for people of Japanese descent and others who are permitted to reside in Japan for special reasons. The Minister of Justice grants permission considering individual circumstances, and there are no restrictions on work activities for this status as well.

Differences Between Appendix Table 1 and Appendix Table 2 Under Japanese Immigration System

As we have detailed thus far, the Japanese residency status system is divided into two fundamental categories: Appendix Table 1 and Appendix Table 2. This distinction determines the degree of freedom foreign nationals have in their activities in Japan and directly affects the legal obligations of companies employing and managing foreign workers. Residency statuses under Appendix Table 1 are granted on the premise of engaging in specific professional activities, and the scope of these activities is strictly defined. Employers are responsible for ensuring that the foreign national engages only in the tasks permitted within the scope of their status. On the other hand, residency statuses under Appendix Table 2 are based on personal status or position and do not restrict activities. Therefore, employers can freely determine job responsibilities, and the burden of managing residency status maintenance is significantly reduced. Understanding these fundamental differences is essential for devising appropriate HR strategies and avoiding legal risks.

To summarize the differences between the two, the following table is presented:

Management of Residency Status and Corporate Legal Responsibility in Japan

When employing foreign nationals, companies in Japan are legally obligated to ensure that the activities engaged in by these individuals fall within the scope permitted by their residency status. Engaging in activities, especially work-related activities, outside the permitted scope constitutes “unauthorized activities,” which is a violation of Japanese Immigration Control and Refugee Recognition Act. Should a company breach these regulations, it could face significant legal liabilities.

The most direct risk companies face is the “Promotion of Illegal Employment Crime” as stipulated in Article 73-2 of the Japanese Immigration Control Act. This provision imposes a penalty of imprisonment for up to three years or a fine of up to 3 million yen, or both, on those who have made a foreign national engage in illegal employment activities or who have brokered such activities in the course of business operations. Importantly, this liability can extend not only to the direct employer but also to companies that accept dispatched workers. There have been cases where companies that received foreign nationals from staffing agencies were investigated for the Promotion of Illegal Employment Crime because the dispatched individuals were engaged in tasks not permitted by their residency status. This suggests that companies must verify that the residency status of all foreign nationals working on their premises aligns with their actual job duties.

The responsibility of companies does not end with criminal penalties. There is also the potential for civil liability for damages, as indicated by legal precedents. A significant judgment on this matter was provided by the Hiroshima High Court on March 26, 2021 (2021). In this case, a foreign national residing under the “Technical Intern Training” residency status was arrested for engaging in activities outside the scope of the permitted technical intern training plan. The court held that not only the direct employer, the training institution, but also the supervisory organization, which had a duty to oversee the institution, failed to fulfill their duty of care to prevent unauthorized activities and were therefore liable for damages based on tort. This precedent clearly indicates that even if a company delegates the acceptance of foreign talent to external organizations, it cannot escape ultimate responsibility for compliance. Accepting companies have a duty to supervise whether the activities of foreign nationals working under their management are legal, and failure to do so may expose them to civil liability.

Conclusion

The Japanese residency status system strictly defines the legal status of foreigners based on the type of activities they engage in within Japan. At its core are two fundamental distinctions: the “Status of Residence listed in Appendix 1,” which is granted based on specific activities, and the “Status of Residence listed in Appendix 2,” which is granted based on personal status and comes without restrictions on activities. For business owners and legal professionals in Japan, accurately understanding the differences between these two categories is essential for the strategic utilization of foreign talent, building compliance systems, and avoiding serious legal risks such as the crime of promoting illegal employment. Managing residency status is not a one-time procedure but an ongoing management issue that requires continuous attention and specialized knowledge.

Monolith Law Office has a wealth of experience in addressing complex legal issues related to Japanese immigration law for numerous domestic clients. Our firm is staffed with bilingual Japanese attorneys proficient in both Japanese and English, as well as experts with foreign legal qualifications, enabling us to provide robust support to companies expanding globally. From new applications for residency status to building compliance systems and responding to any potential issues that may arise, we can offer optimal legal services based on our specialized expertise. If you have any inquiries regarding this topic, please do not hesitate to contact our office.