Country Insight Snapshot
Japan
April 2024

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Written 29 March 2024

Country Insight Snapshot: Japan
April 2024

OVERALL COUNTRY/REGION RISK INDICATOR
Current Risk Indicator:
Last change: October 2021 (DB2d ➔ DB3b)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is STABLESLIGHT RISK Enough uncertainty over expected returns to warrant close monitoring of country/region risk. Customers should
actively manage their risk exposure.
DB3b
SLIGHT RISKWorldWatch Headline
The Bank of Japan's March rate hike should help keep a lid on inflation, though higher borrowing costs will impact corporate
liquidity and investment; economic risks remain evenly balanced.
Recent Changes
In March, the Bank of Japan responded to inflation concerns by hiking rates for the first time in 17 years.
A number of changes to labour and employment laws will come into effect on 1 April 2024, including making working
conditions more explicit and putting limits on the amount of overtime that can be worked.
Much of Japan saw record high temperatures in February, including in northern areas, with forecasters suggesting that thecountry will see its hottest year ever in 2024.
Events to Watch
Higher interest rates will mean increased borrowing costs for private firms and may lower the ability of the government toraise capital; however, higher rates should mean better bank profits.
The likelihood of record temperatures in 2024 could see agricultural prices increase, especially for rice, soybeans and certain
speciality products such as green beans.
Data protection is about to be strengthened after the cabinet approved a bill in in late February 2024 which means that only
certain individuals will be able to access classified economic information.
Call to Action
Note that the spending reforms in the fiscal 2024-25 budget showed that the government was preparing for more volatility ininterest rates, although our view is that a series of rate rises looks unlikely at present as wage growth is set to peak this year.
﻿Become familiar with the imminent changes to labour and employment laws, and the new invoicing system; however, notethe system has been criticised for (among other things) increasing companies' workload and creating issues around dealing
with suppliers.
Watch out for further political jockeying in the run-up to the Liberal Democratic Party (LDP) leadership vote, which may takeplace in 2024; Prime Minister Fumio Kishida's faction within the party is only the fourth largest, so his position is vulnerable.

© Dun & Bradstreet2Country Insight Snapshot: Japan
April 2024

COUNTRY INSIGHT HEADLINES
CREDIT ENVIRONMENT
Current Risk Indicator:
Last change: February 2022 (DB3d ➔ DB3b)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is STABLESLIGHT RISK Enough uncertainty over expected returns to warrant close monitoring of country/region risk. Customers should
actively manage their risk exposure.
DB3b
SLIGHT RISK

Risks and Opportunities
Economic risks remains balanced: inflation appears to have peaked and higher company profits from ongoing depreciationof the yen (which remains weakened, despite the March rate rise) will help support investment activity in 2024.
Various external downside risks include increased wage costs for Japanese firms, fragile economic activity in the Chinese
Mainland, elevated geopolitical tensions, cyberattacks and the Middle East crisis (which could push up oil prices).
Higher interest rates will mean increased borrowing costs for private firms and may lower the ability of the government toraise capital; however, higher rates should mean better bank profits.
The hike in rates will not have any significant impact on Japan's debt stock in the foreseeable future, in part because the debt
profile currently has an average maturity of around nine years.
Although Japan is unlikely to see much short-term impact from the US's decision to suspend LNG export permits, there could
be an adverse impact if the policy remains in place over the longer term, especially through a possible increase in prices.
Trade Terms
Description

Terms

Minimum Terms

OA

Recommended Terms

OA

Usual Terms

0-90 days

Note: OA: Open Account; SD: Sight Draft (Documentary Collection); LC: Letter of Credit; CLC:Confirmed Letter of Credit; CiA: Cash in Advance. Source: Dun & Bradstreet

Export Credit CoverAgencyCover

US Eximbank

Full cover available

Eksport Kredit Fonden (EKF)

Full cover available, conditions apply

ECGD

Medium- or long- term cover only

Euler Hermes AG

Medium- or long- term cover available, limited short-term cover

Source: Export Credit Agencies

Call to Action
Expect a mild decline in economy-wide payments performance in 2024 on the back of a forecast slowdown in real GDP
growth, with a small rebound projected for 2025.
Consider revising payment terms when trading with firms operating in services – especially tourism, which continues toenjoy buoyant growth.
Note that the spending reforms in the fiscal 2024-25 budget showed that the government was preparing for more volatility ininterest rates, although our view is that a series of rate rises looks unlikely at present as wage growth is set to peak this year.
Track any opportunities created by the government’s efforts to accelerate digitisation across the economy; note that higher
salaries may have to be offered in order to secure workers with appropriate IT skills.
Note that climate change, a widening income gap and rising poverty levels are among the medium- to long-term challenges
facing the Japanese government and wider society.

© Dun & Bradstreet3

Country Insight Snapshot: Japan
April 2024

SUPPLY ENVIRONMENT
Current Risk Indicator:
Last change: April 2022 (DB2d ➔ DB2c)
Green indicates that Positive factors/influences dominate
High Risk (DB7)
Low Risk (DB1)
Rating outlook is STABLELOW RISK Low degree of uncertainty associated with expected returns. However, country/region-wide factors may result inhigher volatility of returns at a future date.
DB2c
LOW RISK

Risks and Opportunities
The likelihood of record temperatures in 2024 could see agricultural prices increase, especially for rice, soybeans and certain
speciality products such as green beans.
In December 2023, Japan lifted its operational ban on the Kashiwazaki-Kariwa nuclear plant, the largest in the world; this will
increase nuclear power output and cut Japan's dependency on imported LNG. (which accounts for 90% of its LNG needs).
Ports and other infrastructure are becoming increasingly vulnerable to cyberattacks, given their critical role in the day-today functioning of Japan's economy; IT giant Fujitsu was hacked in mid-March 2024.
The government is introducing a security clearance system, which will give only a limited number of individuals access toclassified official data, a move designed to stop the leakage of such information overseas.
Call to Action
Factor in the possible reopening of additional nuclear power plants by Japan if importing LNG becomes more difficult,especially given the January 2024 suspension of LNG export permits by the US.
Have contingency plans and backup facilities in place for catastrophic events, especially natural disasters, including flooding,earthquakes and extremely hot weather.
Consider revising payment terms on any Japanese counterparts operating in the agricultural sector, given the likelihood ofcrops being damaged this year by extreme temperatures.
﻿Become familiar with the imminent changes to labour and employment laws, and the new invoicing system; however, notethat the system has been criticised for (among other things) increasing companies' workload and creating issues around
dealing with suppliers.
Ensure that you regularly assess the digital capabilities of potential business partners in Japan, especially their defences
against cyberattacks.

© Dun & Bradstreet

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Country Insight Snapshot: Japan
April 2024

MARKET ENVIRONMENT
Current Risk Indicator:
Last change: August 2023 (DB3c ➔ DB3b)
Amber indicates that there is a Balanced mixture ofHigh Risk (DB7)
Low Risk (DB1)
negative/positive factors/influences
Rating outlook is STABLESLIGHT RISK Enough uncertainty over expected returns to warrant close monitoring of country/region risk. Customers should
actively manage their risk exposure.
DB3b
SLIGHT RISK

Risks and Opportunities
Sectors that will benefit from the EU-Japan data deal are financial services, transport, machinery and e-commerce, while anagreement between Japan and Mercosur would boost Japanese exports of cars, machinery and electrical equipment.
Data protection is about to be strengthened after the cabinet approved a bill in in late February 2024 which means that only
certain individuals will be able to access classified economic information.
Japan has an ongoing significant exposure to the Chinese Mainland in the semiconductor space, especially in electric vehicles(EVs); at the same time, Chinese firms continue to buy assets or set up subsidiaries in Japan's domestic semiconductor supply
chain.
Japan is highly dependent on importation of food, oil and gas, and raw materials for industrial production; imports grew
0.5% y/y in February 2024, the first monthly increase since March 2023.
A weaker yen is boosting exporters' corporate profits, a situation likely to continue through 2024 and into 2025 as the central
bank holds off on any further rate rises.
Call to Action
Track the passage of proposed legislation on access to classified economic information; in order to be granted access,individuals will have to go through a rigorous screening process, including an assessment of their personal history.
Closely monitor developments in Japan's semiconductor industry, as the sector continues to be the focus of attention
because of the commercial sensitivity around its technology.
Note that a dispute over water discharge from the damaged Fukushima nuclear power plant could drag on for a long time;
the release of water from the plant could take up to 30 years to complete.
Factor into your commercial calculations the likelihood that Japanese interest rates are unlikely to increase any further for
the foreseeable future.
Continue to carefully check the often-changing framework of Japan's sanctions applied against Russia to make sure that you
are compliant.

© Dun & Bradstreet

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Country Insight Snapshot: Japan
April 2024

POLITICAL ENVIRONMENT
Current Risk Indicator:
Last change: N/A ➔ DB2a
Green indicates that Positive factors/influences dominate
High Risk (DB7)
Low Risk (DB1)
Rating outlook is STABLELOW RISK Low degree of uncertainty associated with expected returns. However, country/region-wide factors may result inhigher volatility of returns at a future date.
DB2a
LOW RISK

Risks and Opportunities
Changes to the defence framework will give Japan more room to act in the military sphere, especially given growing concerns
over North Korea's nuclear programme and the Chinese Mainland's approach to Taiwan Region.
A Japan-NATO cooperation agreement signed in mid-2023 will be a cause for concern in Moscow and Beijing, in particular its
recognition that security in Europe and Asia Pacific are closely linked.
The dismissal of four government ministers in December and ongoing fallout from the fundraising scandal will serve tofurther undermine confidence in a government whose opinion poll ratings are plunging.
Political intervention in the judicial process is not an issue; contractual rights are respected, but slow procedures usually leadto out-of-court settlements.
Current barriers to entry in Japan include regulations around foreign ownership of companies related to national security
and public safety.
Call to Action
Factor in continued poor relations between Japan and Russia; in this context, Moscow has accused Tokyo of getting too close
to Washington.
Expect a consolidation of Japan's support for Taiwan Region and the US’s security alliance system in Asia Pacific as Japan
looks to spend more on military modernisation.
Watch out for further political jockeying in the run-up to the LDP's leadership vote, which may take place in 2024; Prime
Minister Kishida's faction within the party is only the fourth largest, so his position is vulnerable.
Be sure to use local legal and consultancy services if investing in Japan; expect any legal action to last longer than in mostOECD countries.
Track new investor protections arising from bilateral and multilateral agreements; note that Japan prioritises security for its
large overseas investment base.

© Dun & Bradstreet

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Country Insight Snapshot: Japan
April 2024

STATISTICAL REFERENCE
KEY INDICATORS AND FORECASTS

Historical Data/Forecasts
Metric

2019

2020

2021

2022

2023

2024f

2025f

2026f

2027f

2028f

Real GDP growth (%)

-0.4

-4.1

2.6

1

1.9

1.2

1.3

1.4

1.5

1.6

Nominal GDP in USDbn

5,117

5,056

5,034

4,348

4,280

4,401

4,492

4,792

5,051

5,336

Nominal GDP in local currency

557.9tn

539.8tn

552.6tn

571.7tn

601.3tn

620.6tn

642.3tn

666.1tn

692.0tn

720.4tn

GDP per Capita in USD

40,67940,36940,39635,082

34,71635,89036,82939,51041,88544,503Population (year-end, m)

125.8

125.2

124.6

124

123.3

122.6

122

121.3

120.6

119.9

Exchange rate (yr avge, USDLCU)

109

106.8

109.8

131.5

140.5

141

143

139

137

135

Current Account in USDbn

176.3

149.9

196.4

84.5

144.8

165

185

200

220

240

Current Account (% of GDP)

3.4

3

3.9

1.9

3.4

3.7

4.1

4.2

4.4

4.5

FX reserves (year-end, USDbn)

1,285

1,344.3

1,356.2

1,178.3

1,238.5

1,260

1,290

1,305

1,326.1

1,335

Import Cover (months)

16.9

20.1

17.3

13

14.8

15.5

15.9

16

16

16.4

Inflation (annual avge, %)

0.5

0

-0.2

2.5

3.3

2

2.2

2.3

2.4

2.5

Govt Balance (% GDP)

-3

-9.1

-6.2

-6.9

-5.6

-4

-2

-0.5

0.5

1

Source: Haver Analytics/Dun & Bradstreet

Comparative Market Indicators
Indicator

Japan

Mainland China

S. Korea

Germany

US

Income per Capita (USD)

35,89013,54733,22856,254

83,673

Country Population (m)122.6

1,425.2

51.7

83.3

341.8

Internet users (% of population)

90.2

70.1

96.5

89.8

90.9

Source: Various sources/Dun & Bradstreet

Transfer Situation
Type

Delay

Potential FX/Bank Delays

0-1 week

Potential Local Delays

0-1 week

Note: Length of delay for completion of local and foreign transfers Source: Dun & Bradstreet

Trade Payment Restrictions
Trade Payment Restriction

Japan

Asia PacificWorld

Restrictions on non-Residents' Accounts

0

0.18

0.22

Restrictions on Payments for Imports

0

1.18

0.73

Restrictions on Payments for Invisible and other Current Transfers

3

1.55

1.08

Note: for a definition of the Trade Payment Restrictions please see the online user guide Source: International Monetary Fund

© Dun & Bradstreet

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Country Insight Snapshot: Japan
April 2024

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Country Insight Snapshot: Japan
April 2024

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