Can Didi crack Japan’s taxi industry with SoftBank’s help?

Chinese ride hailing giant Didi Chuxing said it will set up a venture with SoftBank Group Corp to provide ride-hailing and other services for the Japanese taxi industry.

The move into Japan underscores a recent push by Didi to strengthen its presence in markets outside China, although it will face challenges to expand its services in a country where existing taxi companies are lobbying hard against deregulation.

In Japan, ride-hailing companies face strict rules that effectively bar non-professional drivers from offering taxi services on safety grounds, and are limited to services that “match” users to existing taxi fleets via mobile platforms.

The two firms said in a statement they aim to begin trial services in Japan this year. SoftBank is an existing investor in Didi, which raised $4 billion to fund its global push in December at a valuation of more than $50 billion.

Didi has expanded overseas rapidly in the past year since sealing its dominance in China with the purchase of Uber Technologies Inc’s local business in 2016, ending a cash-burning subsidy war that cost the US firm roughly $2 billion.

Didi is, however, facing rising challenges at home, including a slower pace of growth, new rivals entering the market and drivers complaining that reduced subsidies mean they are working longer hours for the less pay.