Country Risk Assessment on Japan

Introduction

Japan is an island country located in East Asia that has the world’s third largest economy, a major trading partner of the United States, and a primary country for foreign direct investment (“Japan country profile,” 2016). The country is still recovering from the lasting effects of deflation from the past twenty years with economic policies in place that are making an effort to stimulate economic growth. The government in Japan is structured as a constitutional monarchy with an Emperor that carries out ceremonial duties and a Prime Minister that controls the government. Currently, the Liberal Democratic Party Government of Prime Minister Shinzo Abe is promoting economic recovery and growth that will be sustainable. The population of the country is over 127 million people that have a high education rate and a per capita income of $42,000 which is one of the highest in the world (Doing Business, 2016). The country continued its trend of very little inflation for 2015 at 0.1% (Historic inflation Japan, 2016) and current GDP growth is minimal at 0.2% (Japan GDP Growth Rate, 2016). The finance ministry of Japan allocated $213.5 billion for interest payment and debt servicing which indicates “ballooning national debt” (“Japan eyes record debt,” 2015) and as of August 2016 Japan recorded a 18.71 JPY billion deficit (“Japan balance of trade,” 2016). These figures are a reflection of the struggling economic environment that Japan is trying to overcome. The stagnant interest rates and the national debt are areas that should be monitored, but Japan’s environment to foster Foreign Direct Investment (FDI) makes it appealing to businesses seeking to expand globally.

The national language is Japanese and the primary religions of the population are Shintoism and Buddhism (MSE-CIBER globalEDGE, 2016). Japan, in terms of size, is relatively small but has several dense urban cities with eleven cities with more than one million people. The country has climate that consists of four different seasons and the weather can vary from subartic to subtropic depending on the region one is located. (Japan National Tourism Organization, 2016). Trade Blocs are intergovernmental agreements where barriers of trade such as tariffs are reduced or eliminated to members in order to stimulate imports and exports between participants. Japan is a major member of the Trans-Pacific Partnership, a twelve country trade bloc that incorporates 40 percent of the global economy (Bergsten, 2015). With Japan as a member of the TPP and an environment that is not saturated with FDI, is has a lot of potential to be developed.

Recent news in Japan that has impacted the economy include weather related events and the criticisms of the prime minister’s economic policy implementation. Earthquakes and volcanic activity have complicated business transactions in the nation. Naturally, an unstable geographic