- 1 THE RISING
- 2 FRIENDLIER
THAN EVER TO DO
JAPAN: FRIENDLIER THAN EVER TO DO BUSINESS
The Abenomics economic revitalization policy,
an open market
and world-class innovation
are turning Japan into a hub for
businesses. Overseas investment is
drawn by the rapidly
changing business environment
in Japan, which is committed
THE BUSINESS IMPACT OF ABENOMICS
Four years ago, Japan’s economy experienced an inflection point when Prime Minister Shinzo Abe unveiled a comprehensive package of economic policies to counter two decades of economic stagnation. Abenomics, as it is better known, created the right conditions for businesses to thrive. Corporate profits rose, as did new investments and employment opportunities.
THE ABENOMICS EFFECT 1
Four Years On
The centerpiece of Abenomics has been its three “policy arrows” of aggressive monetary policy, flexible fiscal policy and growth strategies rooted in structural reforms aimed at liberalizing the business climate and raising the country’s profile overseas.
THE EFFECTIVE CORPORATE TAX RATE FELL BY 7 PERCENTAGE POINTS FROM 2013, BRINGING THE CURRENT RATE TO LESS THAN 30 PERCENT 1
The impact of these reforms has been felt particularly in industry sectors once thought to be out of reach to foreign-affiliated businesses.
“20 years ago, Japan was not even on the map for foreign construction companies. Right now, there have been a lot of openings. For example, the Osaka (and Kansai) airport has been opened to business for French companies. There’s a lot of talk about foreign investments in building infrastructure for local prefectures.”
PRIVATE FINANCE INITIATIVES
FOR PUBLIC INFRASTRUCTURE2
THE GROWING VALUE OF JAPAN’S
The agricultural sector illustrates how the structural reforms of Abenomics have relaxed bedrock regulations and drafted forward-thinking policies to revitalize formerly stagnant industries.
Abenomics introduced the first reforms of the country’s agricultural cooperatives in 60 years, aiming to encourage their entrepreneurialism.
As a result, between 2012 and 2016 the agricultural sector saw an influx of 104,000 new farmers under the age of 49, drawn by measures to stimulate entrepreneurialism and the creation of new businesses.
Between the 2012 and 2016 fiscal years, the value of Japan’s agricultural, forestry, fishery products and foods exports grew from 450 billion yen to 750 billion yen, and is on course to hit a target of 1 trillion yen by 2019
With more of the world turning to Japan
for business opportunities, Japan turns
to the world to expand its economy.
The latest EU-Japan Economic
a good example
“When we talk about free trade, I feel Japan is opening very fast and it has only happened in the last five years or so.”
In addition to eliminating 99 percent of tariffs between parties, the EU-Japan EPA aims to strengthen cooperation among regulatory bodies, and expand markets for services and public procurement. At its core, the partnership effectively creates one of the world’s largest free-trade zones among advanced economies.
GDP AND TRADE:
JAPAN AND THE EU 3
“The government is making sure the rules are there so that foreign companies have an equal footing with the local competition.”
Japan’s free-trade ambitions extend far beyond the EU to the Pacific Rim. The world’s third-largest economy is taking the lead through accelerated negotiations to bring the Trans-Pacific Partnership into force expeditiously. Once sealed, the pact would open the floodgates for commerce to flow almost unhindered between the 11 member nations in the fast-growing Asia-Pacific region.
This mindset shift toward trade signals an abandonment of Japan’s inward-looking ways of old, replaced by a willingness to embrace free and fair markets and to be an active facilitator of global growth.
Ongoing reforms at home, which are already unwinding protectionism in the local economy, demonstrate a strong leadership commitment to this open economic philosophy.
INNOVATION IS PART OF JAPAN'S DNA
Structural reforms are also facilitating a more open stance toward innovation, where the government is becoming increasingly receptive to new ideas.
AMAZON JAPAN G.K
“When it came to our primary initiative on using drones to do deliveries, the government invited our VPs to come and talk about how to think about drones in Japan for commercial applications. That was hard to imagine years ago.”
Prime Minister Abe (the fourth from the right),
Paul E. Misener, Vice President of Global Public
Policy, Amazon.com, Inc. (the first from left)
at Public-Private Dialogue towards Investment
for the Future, November 5, 2015
“We will aim to make parcel delivery by drone a reality, as soon as three years from now. For this purpose the government will immediately establish the Public-Private Council, in which users and the relevant ministries and agencies will discuss the specific structural and systemic requirements.”
Prime Minister of Japan
Japan recognizes the role regulations play in cultivating an environment for innovation to thrive. Plans are already in place to create a “regulatory sandbox” for firms to conduct trials for certain periods of time without conforming to existing regulations, and extract data from these trials to inform future policymaking.
UNLESS WE HAVE THE DATA TO HELP US UNDERSTAND WHY REFORMS ARE NECESSARY,
IT IS DIFFICULT TO PUSH FOR REGULATORY CHANGE.
WE CAN’T CONVINCE AUTHORITIES TO RELAX THEIR STANCE AS EXISTING REGULATIONS IMPEDE US FROM CONDUCTING TRIAL-AND-ERROR EXPERIMENTS THAT PRODUCE IMPORTANT DATA.
Foreign companies in search of mature markets that pay top dollar for high-quality innovation should also turn their gaze to Japan.
“Japanese customers value innovation and product quality, and they are willing to pay more for a product that helps them solve their issues. We’ve been here 63 years and we operate manufacturing assets here. Dow has been successful by focusing on differentiation, innovation and research.”
Peter M. Jennings
Dow Chemical Japan
Japan comes out top among leading Asian economies for geographical competitiveness when it comes to establishing an overseas R&D base. 4
JAPAN SUBMITS THE MOST PATENT APPLICATIONS IN THE WORLD PER MILLION POPULATION 5
THE WORLD ECONOMIC FORUM RANKS JAPAN NO. 1 IN ASIA FOR INNOVATION 6
SET FOR 2020
To the world, the Tokyo 2020 Olympics
represents a homecoming for a city
that last hosted the sporting event
more than 50 years ago. To Japan,
it is the podium to showcase
how far the country will
come as a nationwide
“Dow is a Worldwide Olympic Partner, including Tokyo 2020. I actually think there are some parallels between 1964 and 2020 because the world will see from an international, technology and sustainability standpoint that 2020 is going to be the coming out party for Tokyo and Japan.”
Peter M. Jennings
Dow Chemical Japan
Just as the greatest athletes will compete and make record breakthroughs, so will foreign companies when they realize the potential of Japan.
The 27.8 trillion yen ($254.56 billion) of foreign direct investment (FDI) logged in 2016, the highest on record, demonstrates growing confidence in Japan’s business environment. Japan plans to continue pursuing reforms with a spontaneous and proactive attitude as it bids to increase FDI inflows to 35 trillion yen ($320.61 billion) by 2020.
The outlook for doing business in Japan is certainly shining bright.
27.8 Trillion Yen in 2016
- (1) http://www.japan.go.jp/abenomics/_userdata/abenomics/pdf/170630_abenomics.pdf
- (2) http://www8.cao.go.jp/pfi/pfi_jouhou/pfi_genjou/pdf/pfi_genjyou.pdf
- (3) http://www.jftc.jp/monthly/feature/detail/entry-400.html
- (4) https://www.jetro.go.jp/ext_images/en/invest/reports/report2006/pdf/report2016_3.pdf
- (5) http://www3.weforum.org/docs/GITR2016/WEF_GITR_Full_Report.pdf
- (6) http://reports.weforum.org/global-competitiveness-index/competitiveness-rankings/#series=GCI.C.12