Japan - Market OpportunitiesJapan - Market Opportunities
Why do business in Japan
Prime Minister Abe’s economic revitalization plan (“Abenomics”) consists of a three-pronged strategy that combines expansive fiscal policy, monetary easing, and structural reform with the aim of lowering corporate taxes, increasing wages, and increasing consumption. Japan has gradually reduced its support to the agricultural sector, but structural change and productivity growth remain limited.
Demographics
Japan’s population is declining as it ages rapidly. The population may decrease by as much as one third by 2060, from 127 million to 87 million. The proportion of the population older than 65 will rise from 27% today to 40% by 2060. The Japanese Government and business community seek to offset its effects on economic growth and government budget resources. The aging population shapes demand and opportunities in various segments:
Japan’s economy has enjoyed steady albeit slow growth since Prime Minister Abe came to power in 2012. Starting in December of that year, Japan has seen the longest economic expansion since the end of World War II. But consistent and sustained growth may continue to be a challenge as Japan deals with large government debt and a declining and aging population. Decreasing exports, especially to China, as well as the scheduled October 2019 consumption tax hike (from 8 to 10 percent), are other headwinds.
Entry into force of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the successor to TPP without the United States, in December 2018, as well as the Japan-EU Economic Partnership Agreement in February 2019, has placed some U.S. exporters at a competitive disadvantage, particularly in agriculture. In April 2019, the United States and Japan began the first in a series of negotiations toward a bilateral trade agreement (U.S.-Japan Trade Agreement, or USJTA). Those talks are ongoing. The United States has stated its interest in a comprehensive agreement. Discussions to date have been on goods, including agriculture, as well as the need to establish high standards in the area of digital trade.
Key Facts
- Japan is the third largest economy in the world after the United States and China. It is the fourth largest importer of U.S. products after Canada, Mexico, and China. Japan is a key member of the international trade system with a market that respects the rule of law and provides strong protections for intellectual and real property rights.
- Japan’s consumer economy is large, broad-based, and sophisticated. Per capita income of $43,118 underpins its strength as a consumer market.
- Japan is highly dependent upon the import of natural resources. For example, it is the world’s largest net buyer of food products in the world. The United States is the leading supplier of its agricultural imports, as well as agricultural capital equipment and related technologies. Total U.S. food, agricultural, and fishery exports to Japan were worth more than $13 billion in 2018. Japan is the world's largest importer of liquefied natural gas (LNG) and the third-largest coal importer.
- Japan’s rapidly aging population, which has begun to decrease overall, continues to send ripple effects through its society and economy, shaping present and future demand in economic spheres as disparate as robotics and pharmaceuticals, franchise and real estate.
- Japan’s role as host of the 2020 Olympic and Paralympic Games may present related opportunities for U.S. firms as economic activity expands in anticipation of the Games.
- Japan’s strategic alliance and deep economic integration with the United States presents opportunities in advanced sectors such as space, defense, and security. Japan is a leading importer of U.S. aerospace and defense equipment and, increasingly, an integrated co-developer. Related growth sectors include defense procurement, advanced manufacturing, and cyber security solutions.
- With global reach and deep knowledge of Japan’s economic, political, cultural, and commercial landscape, the U.S. Commercial Service is uniquely positioned to help U.S. companies engage with Japanese companies at home or abroad.
Prime Minister Abe’s economic revitalization plan (“Abenomics”) consists of a three-pronged strategy that combines expansive fiscal policy, monetary easing, and structural reform with the aim of lowering corporate taxes, increasing wages, and increasing consumption. Japan has gradually reduced its support to the agricultural sector, but structural change and productivity growth remain limited.
Demographics
Japan’s population is declining as it ages rapidly. The population may decrease by as much as one third by 2060, from 127 million to 87 million. The proportion of the population older than 65 will rise from 27% today to 40% by 2060. The Japanese Government and business community seek to offset its effects on economic growth and government budget resources. The aging population shapes demand and opportunities in various segments:
- Medical devices and equipment
- Pharmaceuticals
- Healthcare facilities and infrastructure, including in-home care
- Biotechnology
- Healthcare information technology
- Safety-related products and services
- Robotics
- Leisure and travel
- Educational services
- Home delivery services
- Financial services
Japan’s economy has enjoyed steady albeit slow growth since Prime Minister Abe came to power in 2012. Starting in December of that year, Japan has seen the longest economic expansion since the end of World War II. But consistent and sustained growth may continue to be a challenge as Japan deals with large government debt and a declining and aging population. Decreasing exports, especially to China, as well as the scheduled October 2019 consumption tax hike (from 8 to 10 percent), are other headwinds.
Entry into force of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the successor to TPP without the United States, in December 2018, as well as the Japan-EU Economic Partnership Agreement in February 2019, has placed some U.S. exporters at a competitive disadvantage, particularly in agriculture. In April 2019, the United States and Japan began the first in a series of negotiations toward a bilateral trade agreement (U.S.-Japan Trade Agreement, or USJTA). Those talks are ongoing. The United States has stated its interest in a comprehensive agreement. Discussions to date have been on goods, including agriculture, as well as the need to establish high standards in the area of digital trade.
Key Facts
- National Capital: Tokyo
- Population: 126.2 million (May 2019)
- Land Area: 364,485 sq. km
- GDP (official exchange rate): $4.96 trillion (2018)
- Real GDP Growth: 0.9 % (2018)
- GDP per Capita (Purchasing Power Parity): $43,118 (2018)
- Household Consumption Percent of GDP: 55.5% (2017)
- Unemployment Rate: 2.4% (May 2019)
- Key Industries: among world's largest and most technologically advanced producers of motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles, and processed foods
- Exports: $814.7 billion (2018)
- Leading Export Destinations: Leading Sources of Imports: China 19.5%, U.S. 19.0%, South Korea 7.1%, Taiwan 5.7 % Hong Kong 4.7% (2018)
- Value of Imports: $827 billion (2018)
- Major Import Categories: Petroleum, liquid natural gas, clothing, semiconductors, coal
- Leading Sources of Imports: China 23.2%, U.S. 10.9 %, Australia 6.1%, Saudi Arabia 4.5%, South Korea 4.3% (2018)
- Global Trade in Goods Balance: $11.2 billion (2018)
- Global Services Balance: -$7.2 billion (2018)
- U.S. Exports to Japan: $121.1 billion (2018)
- U.S. Imports from Japan: $179.1 billion (2018)
- U.S. Trade Balance with Japan: -$58.0 billion (2018)