Japan Country Risk Report

Published 22 July 2015 | Quarterly

  • 62 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
$1,195.00
Japan Country Risk Report

Core Views

  • Rising geopolitical tensions over territorial disputes in the South and East China seas are raising the risk of a military clash between China on one side and the US, Japan, Vietnam, and the Philippines on the other. This could quickly escalate into a major global crisis.

  • Recently revised Q115 real GDP figures and a number of leading indicators point to stronger growth in 2015 as a whole, and we have revised up our forecast to 1.2% from 0.8% previously. However, the distortions created by ongoing monetary and fiscal policies suggest that the recovery will not be sustainable, and we expect real GDP growth to fall back to 0.7% in 2016.

  • Underlying inflationary pressures are building in Japan despite declining headline CPI, and we believe that the BoJ will refrain from expanding its QE programme in the near term. However, a still-high fiscal deficit and the upcoming huge rollover of government bonds will require the BoJ to buy JGBs as the lender of last resort, further expanding its balance sheet.

  • Japan's fiscal position shows no sign of the kind of material improvement that would reduce our concerns of a future fiscal crisis. We remain bearish on 10-year Japanese government bonds.

  • Japan's largest banks continue to expand overseas amid narrow net interest margins domestically. We expect this trend to continue, but note the risks posed to the sector from possible yen appreciation. From a medium-term perspective we continue to see banking equities outperforming the Nikkei, owing to relatively cheap valuations.

  • The surge in Japan's current account inflows and concomitant financial account outflows is buttressing the country's already huge stock of overseas assets. We expect these assets to continue growing as Japanese businesses increasingly look overseas for investment opportunities, to the detriment of the domestic economy.

  • After a 40.0% peak-to-trough decline, we believe the yen has likely already depreciated enough against the US dollar to...

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Aomori Election Highlights Voter Apathy And Stagnant Competition
8
Tab le: Politica l Overview
8
Foreign Policy
9
Rising Risk Of South And East China Seas Military Confrontations
9
Long-Term Political Outlook
12
Abe And LDP Face Colossal Challenges In 2015-2024
12
Chapter 2: Economic Outlook
17
SWOT Analysis
17
BMI Economic Risk Index
17
Economic Activity
18
Revising Up Growth But Structural Woes Remain
18
tab le: Ec onomic Activity
18
Fiscal Policy
20
Fiscal Austerity Needed But Not Likely
20
table: Fiscal Policy
20
Monetary Policy
22
CPI Fall Masks Underlying Inflation Trend
22
table: Monetary Policy
22
Exchange Rate Policy
24
JPY: Risks Evenly Balanced Despite 40% Decline
24
Table: BMI CURRENCY FORECAST
24
Balance Of Payments
26
Implications Of Surging Current Account Surplus
26
table: Current Account
27
Chapter 3: 10-Year Forecast
29
The Japanese Economy To 2024
29
Three Barriers To Growth
29
table: LONG-TERM MACROECONOMIC FORECASTS
29
Chapter 4: Operational Risk
33
SWOT Analysis
33
Operational Risk Index
33
Operational Risk
34
TABLE : Developed States - Labour Market Risk
34
TABLE : Developed States - Logistics Risk
37
TABLE : Developed States - Crime & Security Risk
40
TABLE : Developed States - Trade & Investment Risk
42
Chapter 5: Key Sectors
47
Pharmaceuticals & Healthcare
47
table: Pharmaceutical Sales, Historical Data & Forecasts
48
table: Healthcare Expenditure Trends , Historical Data & Forecasts
49
table: Government Healthcare Expenditure Trends , Historical Data & Forecasts
49
table: Private Healthcare Expenditure Trends , Historical Data & Forecasts
49
Telecommunications
50
table: Telecoms Sector - Historical Data & Forecasts
51
Other Key Sectors
53
table: Oil & Gas Sector Key Indicators
53
table: Defence & Security Sector Key Indicators
53
table: Infrastructure Sector Key Indicators
53
table: Food & Drink Sector Key Indicators
54
table: Autos Sect or Key Indicators
54
table: Freight Key Indicators
54
Chapter 6: BMI Global Macro Outlook
55
Global Outlook
55
Event Risk Mounting But Manageable
55
Table: Global Assumptions
55
Table: Developed States, Real GDP GrowtH, %
56
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
56
Table: Emerging Markets , Real GDP Growth , %
57

The Japan Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Japan. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Japan's economic, political and financial prospects through end-2019, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Japan's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Japan's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Japan, including currency volatility, the commodity price boom and protectionist policies.

The Japan Country Risk Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Japan' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Japan through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Japan Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Japan and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Japan, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Japan over the next 5-years?

BMI's Japan country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Japan Market - Political Strengths, Weaknesses, Opportunities and Threats facing Japan.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Japan's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Japan’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Japan's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Japan?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Japan against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

Key Sector Outlook*

Which industry sectors in Japan will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Japan's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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