Country Forecast Japan
The Economist Intelligence Unit, May 2013, Pages: 48
Popular support for the Liberal Democratic Party (LDP) government remains strong. The LDP's chances are thus good that it will win control of the upper house in the July election for that chamber and will complete its four-year term. Should the LDP emerge with a majority in the upper house in July, Shinzo Abe will be able to consolidate his position as prime minister and press ahead with the more hawkish elements of his agenda. Although a diplomatic solution to Japan's dispute with China over the Senkaku islands (known as Diaoyu in China) may eventually be possible, the risk of a military clash will persist in the absence of a compromise. The new governor of the Bank of Japan (BOJ), Haruhiko Kuroda, is committed to doubling the size of the monetary base over the next two years in an effort to achieve the bank's 2% inflation target. The Economist Intelligence Unit has raised its GDP growth forecast to reflect the positive impact of the weaker yen on Japan's net exports. Real GDP growth is forecast to average 1.4% a year in 2013-17. Consumer price inflation will return during the course of 2013, and will accelerate in 2014-15 as the yen remains weak and as increases in the consumption tax rate take effect.
As tensions mounted owing to North Korea's bellicose rhetoric, on April 6th Japan placed its Self-Defence Forces on standby to shoot down any missiles launched by the North should they enter Japanese air space.
At its monetary policy meeting on April 4th, the BOJ launched a programme of bond buying that is unlimited in terms of either amount or duration, in an all-out effort to end deflation in Japan. We expect the central bank to maintain an ultra loose policy stance until 2015.
Country Forecast Japan
Japan at a glance: 2013-17
OVERVIEW
Key changes from last month
Political outlook
Economic policy outlook
Economic forecast
Japan--highlights: Political outlook
Japan--highlights: Demographic outlook
Japan--highlights: Business environment outlook
Japan--highlights: Economic outlook
Japan--highlights: Market opportunities
Japan--highlights: Long-term outlook
Fact sheet
Political outlook: Political forces at a glance
Political outlook: Political stability
Political outlook: Political and institutional effectiveness
Political outlook: Election watch
Political outlook: Key players to watch
Shinzo Abe
Banri Kaieda
Toru Hashimoto
Ichiro Ozawa
Political outlook: International relations
Demographic assumptions
The fertility rate is low
The working-age population will shrink in 2013-17
Business environment outlook: Business environment rankings
The business environment will improve in the forecast period
Business environment outlook: Japan's business environment at a glance
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
Taxes
Financing
Labour market
Infrastructure
Business environment outlook: Macroeconomic environment
Pressure on the government for fiscal restraint will return in 2014
Business environment outlook: Policy towards private enterprise and competi
The electricity sector will be deregulated
The partial privatisation of Japan Post is scheduled to occur in late 2015
Business environment outlook: Policy towards foreign investment
Attempts to woo foreign investors will be redoubled
China will become an important source of FDI in Japan
Business environment outlook: Foreign trade and exchange controls
Informal barriers to trade will linger
Trade liberalisation will be pursued more vigorously
Business environment outlook: Taxes
The consumption tax rate will increase in 2014 and 2015
New corporate tax incentives to boost investment will be introduced
Business environment outlook: Financing
The government's role in banking is likely to be reduced
Business environment outlook: The labour market
The labour market faces major challenges
The mandatory retirement age will rise to 65 years by 2025
Business environment outlook: Infrastructure
The standard of Japan's infrastructure will remain high
Reconstruction will dominate infrastructure spending in 2013-15
Japan will face stiff competition as it tries to become a regional air hub
Economic forecast: Policy trends
Economic forecast: Fiscal policy
Economic forecast: Monetary policy
Economic forecast: International assumptions
Economic forecast: Economic growth
Economic forecast: Sectoral trends
Japan will continue to boast a diversified manufacturing base
Economic forecast: Inflation
Economic forecast: Exchange rates
Economic forecast: External sector
Economic forecast: Foreign direct investment in Japan
Stocks and flows
Origin and distribution
Determinants
Impact
Potential
Market opportunities: Market outlook
The rapidly ageing population offers opportunities in healthcare and finance
Japan will continue to be a challenging market for foreign companies
Market opportunities: Consumer expenditure
Market opportunities: Social indicators and living standards
Long-term outlook: The long-term outlook
The working-age population will remain on a declining trend
Boosting the economy and reviving the business sector will be a priority
Long-term outlook: Methodology for long-term forecasts
Growth projections
Definitions of variables
The independent variables include:
Summary of findings
Productivity growth
Data summary: Global outlook
Data summary: Gross domestic product, current market prices
Data summary: Gross domestic product, at constant prices
Data summary: Gross domestic product by sector of origin
Data summary: Growth and productivity
Data summary: Economic structure, income and market size
Data summary: Fiscal indicators
Data summary: Monetary indicators
Data summary: Employment, wages and prices
Data summary: Current account and terms of trade
Data summary: Foreign direct investment
Data sources and definitions
Global data
Domestic data
Abbreviations
Guide to the business rankings model
Outline of the model
Calculating the rankings
Measurement and grading issues
Indicator scores in the business rankings model
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