Japan has well-developed and high-tech manufacturing and services sectors with strong advantages in key areas such as electronics and heavy engineering. It is the world's largest creditor nation, with years of current account surpluses resulting in a huge build-up of foreign reserves and other external assets. Japan stands to benefit from rising demand from emerging markets – especially China and India – which can compensate for its own weak demand.

We keep our clients informed of the latest market moves and political developments in Japan, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 21 of Japan’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you one step ahead, so you can operate with confidence in Japan.

Country Risk

Japan Country Risk

BMI View:

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-...

To read the full article Register for Free or Login

Japan Industry Coverage (23)

Agribusiness

Japan Agribusiness

BMI View:

BMI View: The government's plans to diminish the influence of the once-powerful Central Union Agricultural Cooperative (JA-Zenchu) are a strong indication to us that much-needed structural reform of the agriculture industry is underway. Indeed, by 2019, the JA Zenchu is supposed to become a general incorporated association with co-ops having the option of engaging independent auditors instead of working with those associated to the JA Zenchu. By reducing the power of the Union, the government is sending out a clear sign that it is serious about the reforms, as further reflected in the increased openness towards a...

To read the full article Register for Free or Login

Autos

Japan Autos

BMI View:

We forecast sales in both the passenger car segment and commercial vehicle segment to fall by 10.0% and 7.1%, respectively, in 2015, which will see the overall auto market contract by 9.5%. Our bearish outlook is predicated on a weak economy, exacerbated by a tax hike on mini cars and a continued erosion of consumer purchasing power, as wage growth fails to keep up with the rise in domestic prices.

This will in turn see total vehicle production decline 5.0% in 2015 as a weak domestic market leads to cutbacks in output.

We believe this is due to the fact that carmakers have diversified a lot of their production away from the country in recent years as well as their reluctance to heavily discount their exports from Japan in order to move larger volumes. Furthermore, Japanese carmakers have invested heavily in production facilities overseas, and cutting prices on exports would mean cannibalising the profitability of these...

To read the full article Register for Free or Login

Commercial Banking

Japan Commercial Banking

BMI View:

...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

To read the full article Register for Free or Login

Defence & Security

Japan Defence & Security

BMI View:

BMI View: Landmark constitutional changes in 2014 will continue to have a significant impact on Japan's defence policy and role in regional and international security in 2015. Key reforms to Article 9 of the constitution have opened the doors to the international market for Japanese defence firms, who can now export defence systems and cooperate on joint ventures with international partners. In addition, these constitutional changes have edged Japan towards military normalisation, paving the way for a more active role in regional security. To make these amendments actionable, the Ministry of Defence has requested a record 3.5% budget increase, which will be used to fund major new acquisitions in maritime and air security.

Following a decade of defence cuts, the Ministry is seeking its third successive defence budget increase in 2015. Military expenditure will increase to USD42.3bn for FY2015,...

To read the full article Register for Free or Login

Food & Drink

Japan Food & Drink

BMI View:

BMI View: Recent data out of Japan has been particularly strong, and this momentum suggests that 2015 real GDP growth will come in higher than our initial forecast of 0.8%. As such, we are revising up our real GDP growth forecast for 2015 to 1.2%. However, economically speaking, the demographic situation facing Japan is atrocious. We believe that this factor alone will ensure the economy fails to grow above 1.0% per annum over the coming decade. Japan's population has been in decline since 2004 and this is projected to intensify over the coming years. By 2024, the population is set to shrink to around 124.0mn from 126.5mn in 2011. As Japan's population ages and its savings rate continues to fall, private consumption's share of GDP is likely to rise. From 60.5% in 2014, we expect this...

To read the full article Register for Free or Login

Freight Transport

Japan Freight Transport

BMI View:

BMI View: We expect to see a relatively mixed bag in terms of annual growth across the freight modes in Japan in 2015. Leading the way in year-on-year (y-o-y) terms will be rail freight (3.25%) ahead of road and air (0.49% and 1.20% respectively). With growth across the Japanese freight modes set to be relatively muted in 2015, echoing the malaise in the wider economy, we do caution that infrastructure is very well developed in Japan and growth across the modes is pretty much at saturation.

The bulk of the decline in Japan's savings rate will be reflected in a steady decline in net exports, as we are forecasting exports to grow at a much slower pace than imports over the coming years. The improving performance of Japanese net exports has played a part in helping the wider economy emerge from recession, providing a boost to the country's freight industry...

To read the full article Register for Free or Login

Information Technology

Japan Information Technology

BMI View:

BMI View : The Japanese IT market is well developed, with high penetration of devices and solutions, as well as a large base of domestic IT vendors that operate at the national, regional and global level. It is characterised by high per capita spending levels on IT, compared to the majority of markets in APAC, but enterprise spending as a share of revenue remains low, compared to the most advanced IT markets such as the US. Therefore, despite the relatively weak medium term economic outlook, we forecast the IT market will grow at a CAGR of 2.8% 2015-2019. The largest opportunities are in emerging technologies such as cloud computing and the Internet of Things, where adoption rates are still low. However, even in mature segments of the IT market, the Japanese market will continue to be...

To read the full article Register for Free or Login

Infrastructure

Japan Infrastructure

BMI View:

BMI View: The rapid decline in construction and infrastructure growth in Japan is a sign the government's aggressive stimulus measures have already begun to wear off. This again underscores our long-held view that Japan's fiscal stimulus programme is not sustainable for the infrastructure sector and significant structural reforms are needed to restore competitiveness. To this end, a new market on the Tokyo Stock Exchange for infrastructure funds has the potential to boost private participation in the industry, while simultaneously taking pressure off government expenditure. Following an estimated 1.6% contraction in 2014, we expect the construction industry to recover only slightly in 2015, with a forecasted real growth rate of 0.8%.

...

To read the full article Register for Free or Login

Insurance

Japan Insurance

BMI View:

BMI View: Over the course of the forecast period, Japan's colossal life insurance segment can look forward to growth in premiums of around 3% annually in local currency terms. This outcome is partly the result of higher volumes, as the insurers develop and distribute attractive medical-related products. In the non-life segment, premiums should grow by a little over 2%, thanks in part to higher prices for earthquake damage insurance and some other lines. Volume growth will continue to be limited, as a result of the slow expansion of the economy. In both segments, most companies will enjoy high levels of profitability. Particular groups will benefit from innovation in products and/or exploitation of new distribution channels. Non-life insurers will continue their expansion into the life segment. In both segments, leading Japanese companies will remain buyers - on a large scale - of insurance companies in foreign...

To read the full article Register for Free or Login

Medical Devices

Japan Medical Devices

BMI View:

BMI Industry View: The Japanese medical device market remains the second largest in the world, behind only the USA. The market has continued to exhibit a slow but positive growth in local currency terms in recent years, with under half of the market supplied by imports. The market looks set to expand by a CAGR of 2.9% in US dollar terms to 2018. Exports from Japan are likely to continue making positive gains due to the weakening local currency in the short to medium term. Japanese manufacturers are also expected to continue seeking acquisition opportunities abroad to expand their footprint and seek new opportunities for growth.

Headline Industry Forecasts

  • The Japanese medical device market remains the second largest in the world, behind only the...

To read the full article Register for Free or Login

Metals

Japan Metals

BMI View:

BMI View : Weak economic growth will lead Japan's metals industry to see minimal growth to 2018. The country's construction and infrastructure industries will see declining growth by late-2015 after recent expansion, while automotive production will be modest over the coming years. Yet a weaker yen is likely to encourage exports, supporting stable production levels.

Japanese refined metal production and consumption will see minimal growth in the coming years on account of weakening economic fundamentals. Our outlook for Japanese economic growth remains below consensus, as we currently forecast real GDP...

To read the full article Register for Free or Login

Mining

Japan Mining

BMI View:

BMI View : Japan will remain one of the smaller mining markets we monitor, with a lack of miner wealth and limited diversity combining with the downturn in commodity prices to limit the growth of the sector. We forecast the country's mining industry value to reach USD3.7bn in 2019, growing at just 0.3% a year on average over the interim.

The development of Japan's mining sector is being held back by an intrinsic lack of metals reserves, with the gold mining segment one of few exceptions to this landscape. However, even here the outlook is hardly dynamic: Japan has one major commercially active gold deposit: Hishikari, which is responsible for the vast majority of the country's total output. Until recently, this has provided Japan with the platform to be a net gold exporter; however, slowing demand from key export markets such as China and the US saw...

To read the full article Register for Free or Login

Oil & Gas

Japan Oil & Gas

BMI View:

BMI View: Continued push for greater consolidation and efficiency in the refining sector will further reduce Japan's refining capacity through to 2017. The government's preference to shift to cleaner energy sources - such as nuclear energy and renewables - for power generation, coupled with fuel efficiency gains in the automotive sector, will gradually curb oil and oil products consumption over the next decade. Demand for LNG will remain elevated in the short to medium term as Japan continues to fill in the nuclear void.

Headline Forecasts (Japan 2013-2019)
...

To read the full article Register for Free or Login

Petrochemicals

Japan Petrochemicals

BMI View:

Japanese cracker capacity is being drastically cut as the country's ageing petrochemicals industry struggles to compete in an increasingly competitive Asian market, according to BMI's latest Japan Petrochemicals report.

Japanese olefins production has been adversely affected by a drop in Japanese polymer output. Polymer production but has failed to return to levels witnessed before the 2008 financial crisis. The trends spell trouble for Japanese petrochemicals producers, who are grappling with falling competitiveness and squeezed margins.

Half of cracker capacity is fed by imported naphtha, which has risen in cost in recent years, losing competitiveness against ethane-fed production being established in the Middle East and the US. BMI calculates that crude distillation capacity fell considerably in reaction to new refining laws - this has affected the domestic naphtha...

To read the full article Register for Free or Login

Pharmaceuticals & Healthcare

Japan Pharmaceuticals & Healthcare

BMI View:

BMI View: Japan's delayed entry into the medical tourism industry will see the country facing significant headwinds in developing the sector. Leading medical tourism hubs in the Asia Pacific region, such as Malaysia and Thailand, have already firmly established their sectors, offering medical treatments at a significantly lower cost. Moreover, Japan faces distinct challenges, including the country's considerable distance from the growing South East Asia markets and the limited inclusion of medical tourism in the business plans of the country's healthcare providers.

Headline Expenditure Projections

  • Pharmaceuticals: JPY11,239bn (USD106bn) in 2014 to JPY11,490bn (USD95bn) by 2015 with a year-on-year (y-o-y) growth of 2.2% in local currency terms and -10.5% in USD terms. The contraction in the US...

To read the full article Register for Free or Login

Power

Japan Power

BMI View:

BMI View: Our view that reactors will start to go online in 2015 is still very much in play. We expect roughly 20 reactors to come online by the end of our forecast period in 2024, accounting for around 10% of the generation mix. The risks to this view lie largely in the continued strong public opposition to nuclear energy. Additionally, growing renewable fleet will add an upside to Japanese power output.

At the time of writing all 50 of Japan's nuclear reactors are offline, but Shinzo Abe's commitment to nuclear energy will see the first reactors return to the grid in 2015. Japan has faced significant financial implications from switching off nuclear and consequently having to rely more heavily on costly imported diesel and liquefied natural gas (LNG) to fill the nuclear void.

We believe that nuclear restarts will begin by the end...

To read the full article Register for Free or Login

Real Estate

Japan Real Estate

BMI View:

BMI View: Interest in Japan's commercial real estate market remains strong, particularly for office property. While a significant portion of investor interest centres on the capital, Tokyo, investors are increasingly looking for opportunities elsewhere. Japan is seen as a safe haven for investment, and is attracting attention from international firms and institutional investors alike, as well as domestic operators. The country has a mature real estate investment trust market.

With a focus on the three principal cities of Tokyo, Yokohama and Osaka, the Q1 2015 Japan Real Estate report covers the property fundamentals of the commercial real estate market rental market and examines the office, retail, industrial and construction segments throughout the country.

Japan's economy continues to struggle, and we expect growth to be slow over the next few...

To read the full article Register for Free or Login

Renewables

Japan Renewables

BMI View:

BMI View: Japan's nuclear restarts threaten to cloud the country's renewable industry, which was previously one of the fastest growing, and most attractive in the world, owing primarily to the lucrative financial incentives on offer to developers. We have witnessed slight policy slippage over the last year, headwinds to the incorporation of solar onto the grid system and reductions to government financial incentives. This underpins our moderating forecast for renewables capacity growth over our 10-year forecast period to 2024.

Feed-in tariffs (FiTs) are the main subsidy mechanism for renewable energy in Japan and have been in place for solar from 2009. In the aftermath of the Fukishima disaster and the subsequent turning off of nuclear power in the country, the government approved new rates, covering a wide range of renewable...

To read the full article Register for Free or Login

Retail

Japan Retail

BMI View:

BMI View: Although the outlook for the Japanese retail sector was rather dim at the start of 2015, with sales falling every month, April and may have seen this trend reverse, and retail sales are seeing a modest rebound. In particular, according to government data, electronics and cars are the main sectors seeing stronger spending levels. We expect consumer appetites to continue to recover over the remainder of 2015 and into 2016, but overall growth will remain subdued.

Consumer spending in Japan has gone down after the hike in consumption tax to 8% in April 2014, affecting the economy and forcing the government to postpone a second sales tax increase due in October 2015. In previous quarters, one of the main reasons for the contraction of output was the depreciation of the yen against the US dollar. In addition, the April 2014 consumption tax hike...

To read the full article Register for Free or Login

Shipping

Japan Shipping

BMI View:

BMI View: Over 2015, annual growth in the Japanese shipping industry is pencilled in to be relatively mixed with year-on-year (y-o-y) tonnage gains this year ranging from 1.33% at the port of Chiba to 4.59% at the port of Tokyo. The port of Nagoya, which will see growth around the middle of this range (2.91%) will remain the country's outperformer in terms of total tonnage handled. News that the Japanese economy has emerged from recession thanks in part to a recovery in net exports, should provide a boost to the country's shipping industry over the short term at least.

Japan is currently making efforts to regain lost market share in the global shipbuilding industry by focusing on building fuel-efficient engines for liquefied natural gas (LNG) carriers. LNG trade is set to exceed USD120bn in 2015, overtaking iron ore, according to analysts from Goldman...

To read the full article Register for Free or Login

Telecommunications

Japan Telecommunications

BMI View:

BMI View : Japan's telecommunications market is one of the most advanced in the world, characterised by migration to higher speed internet connections. In the mobile sector, this takes the form of 4G growth cannibalising the 3G market and in the fixed sector, FTTH has replaced ADSL. Trends in Japan give an insight into where the rest of the world is heading, and 4G connections will overtake 3G over the next few years. The operators are investing heavily into new networks to increase the internet speeds. NTT Docomo recently launched 'Premium 4G', which provides a peak 225Mbps connection, and aims to enhance its speed to 300Mbps in the medium term. Other operators are expected to follow suit.

...

To read the full article Register for Free or Login

Tourism

Japan Tourism

BMI View:

BMI View: The Japanese tourism market has recovered well over the last few years, and is set to continue to do so in the lead-up to the 2020 Tokyo Olympic Games. Bolstered by economic growth in key source markets, strong government support and well-developed hotel and transport infrastructure, the outlook for Japan's tourism industry is promising.

The tourism industry in Japan is well developed, with considerable investment from domestic and international sources. Underpinned with excellent transport infrastructure and various tourism sites, the country is well positioned to attract the growing middle classes of other countries in Asia Pacific. The tourism offering is diverse, ranging from beach holidays...

To read the full article Register for Free or Login

Water

Japan Water

BMI View:

BMI View:  This quarter has seen the expansion of our water forecasts and the revision of our existing forecasts following the release of new historical data. In addition, we now forecast mains and non mains water extraction by source, household and non mains water consumption, and water losses. We view the overall state of the Japanese water sector as relatively strong, with good water availability for industrial usage. However, in the wake of the continued controversy surrounding the Fukushima leakages, which have not only contaminated Japan's ground water but are also affecting the Pacific Ocean, we expect to see more stringent industrial water consumption and water treatment legislation. Japan has a good track record for enforcing stricter water sector legislation when needed. 

An overall increased...

To read the full article Register for Free or Login

Latest Japan Articles

  • China's equity crash is far from over, and is likely to expose the weak und...

  • North East Asia will experience increasing geopolitical tensions as China r...

  • Three major global events have occurred more or less simultaneously in July...

Latest Japan Blogs

  • Rising geopolitical tensions in the South China Sea and East China Sea betw...

  • Latest opinion polls in Japan point to a big victory by Prime Minister Shin...

  • Japanese Prime Minister Shinzo Abe's decision to call an early general elec...

Latest Japan Podcasts

  • The Trans-Pacific Partnership is a proposed trade agreement which woul...

  • The future of Japan's nuclear energy sector looked highly uncertain fo...

  • The increasingly important economic relationship between Asia and Sub-...