LOW RISK for entreprise
Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk
The country risk assesments are your North Star metrics to make the right decision for your business and understand the risks in international trade. We have always the best solution for your needs
GDP | USD 4383bn (World ranking 3, World Bank 2015) |
---|---|
Population | 127mn (World ranking 11, World Bank 2015) |
Form of state | Parliamentary government with a Constitutional Monarchy |
Head of government | Shinzo ABE |
Next elections | December 2018, general elections |
31 January
The Free Trade Agreement between the EU and Japan (Japan-EU Economic Partnership Agreement) is expected to enter into force on February 1st 2019.
14 November
Real GDP contracted by -0.3% q/q in Q3 2018 (from an upwardly revised +0.8% q/q in Q2) as natural disasters and bad weather disrupted domestic spending and exports.
28 February
After a series of recently more mixed data, industrial production is now also likely to show a more volatile pattern
Economic activity became more stable in 2016, as private consumption showed some signs of improvement after two years of contraction and exports gained momentum in the second half.
Supported by a temporary fiscal stimulus, improved global demand conditions, accommodative financial conditions and high corporate profit margins, economic growth is expected to accelerate to 1.3% this year. Thus. it will remain above the potential growth rate (0.7%, Bank of Japan estimate).
The tight labor market - the unemployment rate has fallen to its lowest level since 1994 - should eventually exert upward pressure on wages and bring about higher inflation. To date, however, the wage trend remains soft and consumer price inflation has been hovering around the zero line in the early months of 2017. The momentum towards achieving the price stability goal of 2% is not yet firm. Thus, we do not expect the BoJ to forgo its accommodative monetary policy for the time being.
The goods and services trade balance returned to surplus last year, following deficits in the preceding five years. The reduction in the energy import bill was a key factor. Given rising commodity prices after last year’s lows and increasing import volumes, the current account surplus is expected to stabilize around 3.5% GDP. Japan will maintain a solid net foreign creditor position. On the currency front, downward pressure will prevail due to a diverging monetary policy with US central bank.
Japan stands out for the high level of government debt. Gross debt amounted to 238% of GDP in 2015 and looks set to increase further in the near term, as the fiscal policy stance will remain expansionary amid the supplementary budgets approved over the past year. For the time being, the impact of high debt is mitigated by low-interest rates, helped by large-scale government bond purchases by the BoJ and a home bias of Japanese investors.
As a result, the share of government debt held by foreign investors is still relatively low. Besides limiting government spending and a steady increase in revenues, finding a solution to Japan’s government debt problem requires higher nominal output growth. Efforts by the Abe administration to increase the female labor force participation – to counter the aging population problem – have yielded positive results. Other reforms have yet to translate into stronger domestic growth.
(% of total)
Exports | Rank | Imports |
---|---|---|
United States
20%
![]() |
1 |
![]() |
China
18%
![]() |
2 |
![]() |
Korea, Republic of
7%
![]() |
3 |
![]() |
China, Taiwan Province of
6%
![]() |
4 |
![]() |
China, Hong Kong SAR
5%
![]() |
5 |
![]() |
(% of total)
Exports | Rank | Imports |
---|---|---|
Road vehicles
22%
|
1 |
10%
Petroleum, petroleum products and related materials
|
Electrical machinery, apparatus and appliances, n.e.s.
13%
|
2 |
9%
Electrical machinery, apparatus and appliances, n.e.s.
|
Specialised machinery
7%
|
3 |
6%
Telecommunication and sound recording apparatus
|
Other industrial machinery and parts
6%
|
4 |
6%
Gas, natural and manufactured
|
Power generating machinery and equipment
4%
|
5 |
5%
Articles of apparel & clothing accessories
|
The payment culture in Japan is excellent with only a minority of invoices remaining unpaid thanks to strong cultural particularities. However, excessive DSO and significant payment disparities may be observed from one sector to another.
Low
Medium
Sensitive
High
Payments
Court proceedings
Insolvency proceedings
Although domestic courts tend to be fairly efficient in delivering timely decisions, tribunals are time-consuming, expensive and complex. Therefore, conducting well-orchestrated pre-legal collection actions is essential.
Similarly, collecting debt from insolvent debtors is overall a challenging exercise and, even though insolvency proceedings could yield dividends, these would spread over years and generate significant costs.
Download the entire collection complexity PDF:
Collection complexity Japan
Contact
Contact Euler Hermes
Economic Research Team
research@eulerhermes.com
Contact Mahamoud Islam
Senior Economist for Asia
mahamoud.islam@eulerhermes.com