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Kansai, Japan’s Next Deep Tech Hotspot, Attracting Global Attention

Currently, the Japanese government is actively promoting a startup policy aimed at creating new industries. In 2020, the Japan Cabinet Office designated eight cities as startup ecosystem hubs and is building a system that will produce startups in each of these regions. 

This article focuses on the Kansai region, Japan’s second-largest commercial metropolitan area, which is slated to host the Expo 2025 and introduces its culture, regional characteristics and a few startups that are attracting attention.

Kansai: A metropolis of culture, history and commerce

The Kansai area—which is being coined as “Deep Tech Valley Kansai”—has immense historical value. The area includes culturally significant cities such as Kyoto, which flourished as Japan’s capital for more than 1,000 years; Osaka, which developed as a commercial center; and Kobe, which was a key trading hub with foreign countries. 

Kansai has the second-largest economy and population in Japan, with a gross domestic product of $795 billion in its area alone. When compared to the nominal GDPs of other major countries, the Kansai area ranks just behind the Netherlands (ranked 18th in the world) in terms of economic size.

Outstanding manufacturing technology and the 2025 Expo

The Kansai area, which has long flourished as a key commercial center, has many town factories that specialize in machine parts and metal processing. It has a higher volume of shipping manufactured goods such as steel, chemicals and fabricated metal products than the rest of Japan. Town factories have brought high-quality products to market based on their superior technological capabilities and corporate networks. The technology in Kansai for manufacturing parts that require precision, such as for bullet trains, aircraft and satellites, is a world-class asset that contributes to the development of Japan.

In addition to the concentration of companies, the Kansai area is also home to a large number of universities and research institutes, conducting research in various fields including biotechnology, health care, life sciences, manufacturing, information, AI and robotics.

Deep Tech Valley Kansai is expected to become one of Japan’s leading R&D startup locations and a world-class startup ecosystem, modeled after Boston. Currently, Kansai has not caught up to Boston as a startup ecosystem hub. Looking at 2021 data, there were 4,867 startups in Boston, but only 865 in Kansai.

Number of startups in Boston and Kansai (Units: companies) (Source: Boston City Data Crunchbase, Kansai City Data STARTUP DB)

However, in order to bridge this gap, those in Kansai are focusing on fostering startups and young industrialists through collaboration among universities, research institutes, the business community and government agencies, with the goal of creating innovations that can solve global problems.

A major symbol of the public and private sectors’ concerted efforts to boost the Kansai economic zone is the 2025 Osaka Expo. The Expo, which aims to create a cluster of life science and biomedical companies in the Kansai region, and to discover innovations, is expected to generate an economic benefit of 2 trillion yen, attracting the attention of Japanese and foreign investors alike.

Japan’s first Expo, held in Osaka in 1970, was a symbol of the country’s rapid economic growth and generated a great deal of excitement. Many companies are now eager to show the world the development of the Kansai area and its new industries at the 2025 Expo. The Expo represents a milestone for many companies in the Kansai region, and startups are no exception. Deep Tech Valley Kansai is also working toward the 2025 Expo, providing information on a global scale and holding workshops and awards for entrepreneurs.

Nurturing a home for startups based on the latest technology from universities

The Kansai region is home to startups with strengths in a variety of specialized fields, including biotechnology, manufacturing, information, AI and robotics. This is because the region is home to some of Japan’s most outstanding universities, including Kyoto University and Osaka University. These schools have produced numerous Nobel Prize winners, and have some of the best laboratories in Japan, making the creation of university-launched companies based on the latest technologies easy. 

These companies often have research, commercial products and businesses that are related to solving sustainable development and environmental, social and governance issues, and have high growth potential. Oftentimes, this results in them being more likely to receive cooperation from governments and local authorities, and being more likely to develop joint experiments and projects with major companies. The following companies are startups in Kansai that specialize in biology and engineering.

  • Kyoto Fusioneering is a technology startup established as a spinoff from Kyoto University, which focuses on developing advanced technologies for commercial fusion reactors. Supporting both public and private fusion developers around the world, the company is accelerating the realization of fusion as the ultimate energy source for humankind.
  • Sagri Co., Ltd. provides a service that utilizes satellite data and AI to instantly grasp and digitize the cultivation and growth conditions of farmland. It contributes to the management of abandoned farmland and large-scale farming and has a track record of adoption by municipalities and other public organizations.
  • Setsuro Tech is from the University of Tokushima that supports research and development in the field of agriculture and livestock breeding using genome editing technology. It also supports the development of high-value-added varieties and produces programs.
  • Luxna Biotech is a startup company from Osaka University that conducts research and develops therapeutic drugs for neurological diseases and genetic disorders with the aim of practical application of nucleic acid drugs. The company is actively collaborating with pharmaceutical companies and has already established cooperative relationships with five partners, in addition to one biotech and a major pharmaceutical company.

A culture of support and encouragement for entrepreneurs

Another major characteristic of the Kansai region is a culture in which senior business professionals nurture young entrepreneurs. Even some of the largest companies in Kansai, such as Panasonic, Keyence, Nidec, Omron and Nintendo, started out as small startups. As a commercial city, Kansai has a culture of supporting and nurturing entrepreneurs and small businesses.

In addition, there is a strong sense of camaraderie and a culture of valuing human relationships in Kansai. This is probably due to the fact that Kansai, as a prosperous commercial city, tends to value communication and relationships with others, and has a culture of helping junior colleagues and fellow countrymen in particular.

In Kansai, there is a program to support young entrepreneurs that was launched by a group of founders of established companies. Startups that pass the screening process can participate in workshops and receive mentoring for free. Senior businesspeople are often involved in these programs on a volunteer basis. They function as a positive community with a vision to support junior entrepreneurs and to produce the next unicorn company from Kansai.

In this way, Kansai’s climate is one in which startups can succeed, with generous support from the public and private sectors, the upcoming 2025 Expo, and businesses with advanced technologies and research that are expected to progress even further. Kansai’s cultural and commercial environment makes it an area to watch and a region with tremendous potential to create a new era of startup ecosystems and produce the world’s next top players.

Visit the Kansai Startup Ecosystem Portal Site to learn more.

  • Originally published October 21, 2022