This paper will examine the status quo of the startup world, innovation systems and venture capital in Japan. Historically, Japan has always been special, and that seems to be the case even today. Whereas many European countries are plagued by high unemployment, driving people to entrepreneurship, Japan is experiencing a labour force shortage. Moreover, what is known about Japanese companies is that they constantly invested in in-house R&D for continuous innovation and new products, thus keeping one step ahead of the competition. This does not seem to be the case anymore – many Japanese companies are having trouble competing with Korean and Chinese corporations. So what drives entrepreneurial innovation in Japan today, what form does it take, in which fields? What is the role of venture capital, if any? These are some of the questions explored by this paper.