The Japanese economy will thus remain in a state of stagnation precisely because of, rather than in spite of, the combination of economic policies pursued by the BoJ and the government. We have downgraded our 2015 growth forecast to 0.7% from 1.0%, and expect growth slow further to 0.6% in 2016.
While Japan's headline inflation continues to decline in y-o-y terms, the underlying trend is for increased price pressures, which will likely prevent the BoJ from easing further in 2015. However, the need to fund the large fiscal deficit will pressure the central bank to expand its quantitative easing programme over the medium term. Government bond yields are set to rise considerably.
Recent weeks have shown that the Japanese yen still retains some safe haven qualities despite the BoJ's efforts to keep the currency weak. The combination of a reversal in global carry trades and plunging oil prices have provided both technical and fundamental upside pressure to the yen, and further gains look likely in the near term. However, further strength is likely to be self-limiting as it could undermine domestic inflation and trigger further monetary stimulus by the BoJ.
Due to the lack of appetite for spending reforms, the Japanese government will continue to rely on the BoJ's bond buying programme to fund its fiscal deficit amid rising social security payments and interest costs. Ultimately, the cost of avoiding undertaking deep fiscal austerity measures will be slow real GDP growth, higher inflation, and the potential for more volatile financial markets.
The weakening yen continues to undermine Japan's economy by reducing export receipts in US dollar terms in spite of the rise in export volumes. However, these negative effects are being concealed by the windfall gains of lower energy imports, which look likely to remain in place over the medium term.
Japanese Prime Minister Shinzo Abe faces rising political challenges, mostly stemming from opposition to...
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).
- 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.
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:
- 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.
- 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.
- 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.
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.
- 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.
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.
- 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.