Overseas business risk: Japan
Updated 13 June 2023
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This page provides information on important security and political risks which UK businesses may face when operating in Japan.
1. Political
Japan is a constitutional monarchy. The power of the Emperor is limited to ceremonial duties, though he acts as head of state on diplomatic occasions. The government is composed of the Executive, the Legislature and the Judiciary, with separation of powers. Executive power is vested in the Cabinet, led by the Prime Minister as head of government. Legislative power is vested in the National Diet, a bicameral parliament, consisting of a House of Representatives (Lower House) with 465 seats, elected by popular vote every four years or when dissolved; and a House of Councillors (Upper House) of 248 seats, whose popularly elected members serve six-year terms, with elections every three years for half of the members.
In September 2021, then-Prime Minister Yoshihide Suga announced that he would not run for re-election in the upcoming Liberal Democratic Party (LDP) leadership contest. Former Foreign Minister Fumio Kishida defeated three other candidates to become the new LDP leader and Prime Minister. In the subsequent Lower House elections in October 2021, the LDP retained the largest number of seats. The government remains a coalition of the LDP and the centrist Komeito party.
Prime Minister Kishida’s current focus is on tackling the rising cost of living and declining birth rate. Wider policy platforms include economic recovery, diplomacy and security.
2. Regional and international issues
Japan is a member of the G7, G20, APEC, and ASEAN+3, and is a strong supporter of the current rules-based international system. Japan’s alliance with the United States is the cornerstone of its foreign and security policy. The US maintains a significant military presence in Japan, and is committed through the alliance to guaranteeing Japan’s security, including via extended deterrence.
Although Japan and China remain major trading and investment partners, relations remain strained by disagreements, including over the sovereignty of a group of uninhabited islands in the East China Sea, over which Japan has administrative control. They are known as the Senkaku islands in Japan (the Diaoyu islands in China, and the Diaoyutai in Taiwan, which also claims the islands). The Japanese and Chinese Coast Guards have operated in close proximity around the islands in recent years, leading to fears of an accidental clash. Japan and China have now operationalised a new military hotline for the first time in May 2023 as a new measure to manage tensions, although the potential for miscalculation remains high.
Japan and Russia contest the sovereignty of four islands located between the Japanese island of Hokkaido and Russia’s Kamchatka Peninsula, known as the Northern Territories in Japan and the Southern Kuriles in Russia. Japan also disputes the sovereignty of a group of islets between South Korea and Japan, known as Dokdo in South Korea and Takeshima in Japan. Neither of these disagreements is currently the cause of direct security confrontations, although they have strained political ties between the claimant countries. Japan’s pursuit of negotiations with Russia to resolve their territorial dispute has been put on hold by after Russia’s invasion of Ukraine and Japan’s adoption of sanctions and other measures against Russia.
Japan’s 2022 Defence White Paper noted continued North Korean development of missile and launch technology, alongside the continued threat from nuclear weapon development. Japan supports continued pressure on the DPRK, including by pressing China to use its influence on Pyongyang, and through enforcement of UN Security Council Resolutions.
Prime Minister Kishida has continued Japan’s priority of maintaining a free and open international order based on the rule of law, with strong emphasis on the Indo-Pacific region, working with the US and others including Australia, India, ASEAN states and Europe to realise Japan’s Free and Open Indo-Pacific (FOIP) concept. Japan’s FOIP framework aims to promote free trade, support multilateral organisations and underpin the international rule of law.
Domestically PM Kishida has outlined his intention to enhance Japan’s defence capabilities via a new National Security Strategy, published in December 2022, and associated defence strategy documents. The new approach includes ‘active cyber defence’ and the purchase of ‘counter-strike’ missile capabilities.
Japan also passed the Economic Security Promotion Act in May 2022, which includes provisions to strengthen Japan’s supply chains and review providers of critical national infrastructure. This Act sits alongside Japan’s existing FDI screening regime and export control regulations, as contained in the Foreign Exchange and Foreign Trade Act.
The UK and Japan are each other’s closest security partners in Europe and Asia respectively. In the Hiroshima Accord, published in May 2023, Prime Minister Sunak and Prime Minister Kishida committed to “strengthen our shared security capabilities to help safeguard global peace and stability.” Japan is a member of the Global Combat Air Programme, alongside the UK and Italy.
3. Economic
Japan is the third largest economy in the world. Japan is the UK’s 14th largest trading partner and one of the leading inward investors in the UK. With a GDP more than one and a half times the size of the UK and GDP per person about three times that of China, Japan remains a high-tech powerhouse Asian economy – with the third highest spend worldwide on R&D, a keen appetite for developing intellectual property and new trends, and an increasingly globalised outlook. Japan’s households hold financial assets of 2000 trillion yen (around 300% of GDP). CPI inflation has recorded an average of 0.3% since 1992, with periods of deflation especially in the early 2000s, although it did exceed its inflation target of 2% in 2022. Japan’s debt to GDP increased to over 260% by 2022.
A crucial long term challenge for Japan is its rapidly ageing and declining population, projected to drop from 125 million people to below 100 million in 2056 and to 88 million people in 2065.
PM Kishida’s flagship economic policy, “a New form of Capitalism” focusses on five pillars: ‘Investment in Human Capital’, ‘Science technology and Innovation’, ‘Acceleration of start-ups’, ‘Green Transformation’, and ‘Digital transformation’. These wide-ranging pillars aim to simultaneously reduce wealth inequality, tackle climate change, improve economic security and further promote innovation across Japan.
Japan continues to focus on progressing free trade agreements, including signing the UK- Japan Comprehensive Economic Partnership (CEPA) in 2020 and joining the Regional Comprehensive Economic Partnership (RECP) in 2021. Japan is also a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to which the UK is in the process of acceding. Japan intends for these agreements to raise the economic growth of Japan and strengthen links with the wider region.
As a country with limited natural resources, Japan is dependent on imports, especially oil and gas, food, and raw materials for industrial production. This dependence increased in the aftermath of the 2011 tsunami that resulted in the closure of all nuclear reactors in Japan causing a massive increase in energy imports. Some nuclear reactors have since resumed operation, with ten restarted as of June 2023.
Japan’s economy continues to be highly ranked in recent major global economic studies, including being ranked 29th in the World Bank’s Ease of Doing Business Ranking in 2020.
4. Human rights, transparency and corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national nor resident in the UK nor a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
Japan rates highly in personal freedoms. Japan has an independent judiciary and a strong commitment to the rule of law. Japan meets the majority of international standards on civil and political rights, although periodic reports by the UN Human Rights Committee amongst others continue to raise concerns surrounding issues like gender equality, hate speech and racial discrimination, media freedom, Japan’s application of the death penalty, very high conviction rates and accusations of the use of forced confessions during interrogation.
In 2022 Japan was ranked 18 out of 180 countries and territories in Transparency International’s corruption perception index (CPI). However, it lags behind many western countries in terms of civil service governance and anti-corruption law, in public procurement and whistleblower protection. Business gifts are exchanged in Japan much more than in Europe, and this can cause unease among newcomers to the Japanese market. Visit the Business Anti-Corruption portal page providing advice and guidance about corruption and some basic effective procedures you can establish to protect your company from them and see the information provided on the GOV.UK Bribery and corruption page.
5. Crime
Crime levels in Japan are low. It is generally safe to walk about at night and travel on public transport, but you should maintain the same level of vigilance as you would at home and take sensible precautions. Personal attacks, including sexual assault and rape are rare, but do happen. Reports of inappropriate touching of female passengers on commuter trains are fairly common. Police advise victims to shout out to attract attention and ask fellow passengers to call train staff.
The entertainment districts of Tokyo are considered higher risk areas for crime, in particular at night. British nationals have been arrested following disputes with bar staff and doormen. There have also been reports of drink spiking, credit card fraud, extortion, robbery, assault and sexual assault in clubs and bars. Victims have described waking up, often in an unknown location, with no memory of the preceding hours and finding out that large amounts have been billed to their credit card.
6. Terrorism and protective security
Despite no recent history of terrorism, attacks can’t be ruled out. You should be aware of the global risk of indiscriminate terrorist attacks, which could be in public areas, including those frequented by foreigners. There is considered to be a heightened threat of terrorist attacks globally against UK interests and British nationals, from groups or individuals motivated by conflicts in the Middle East. You should continue to be vigilant.
There are regular small-scale public demonstrations about the United States presence in Okinawa and the government’s restart of nuclear power plants, but these have been peaceful, with the people’s right to peaceful protest respected. Trucks with mounted loudspeakers are occasionally seen in urban areas espousing a variety of, usually right-wing, political positions, but these are not usually associated with violent acts.
Please ensure you check the FCDO travel advice for latest information on risks and precautions. The Centre for the Protection of National Infrastructure also provides protective security advice to businesses.
7. Intellectual property
The intellectual property framework in Japan is based on similar principles to the UK. Legislation is relatively clear and well enforced.
The Japan Patent Office website contains useful information in English. The average waiting time in Japan for first actions on patent applications was reported in 2019 to be less than 10 months.
Please refer to the World Intellectual Property Organisation (WIPO), and the Madrid Protocol for the international registration of marks, to which Japan is a party.
Further information on trading overseas is provided by the Intellectual Property Office on GOV.UK .
8. Natural disasters
8.1 Earthquakes and tsunamis
Japan is in a major earthquake zone, and visitors should familiarise themselves with safety procedures in the event of an earthquake or tsunami, and take note of instructions in hotel rooms.
Tsunami warnings are published by the Japan Meteorological Agency. Information on natural disasters is also available at NHK WORLD – JAPAN. More information on what to do before, during and after an earthquake is available on the US Federal Emergency Management Agency website. There is also information and advice on disaster prevention available on the Tokyo Metropolitan Government website.
8.2 Tropical cyclones
Japan’s tropical cyclone (typhoon) season runs from June to December with most activity between July and September. Southern parts of the country are particularly at risk. You should monitor the progress of approaching storms on the website of the Japan Meteorological Agency.
Typhoons that hit Japan are often accompanied by damaging high tides. People living in coastal areas are particularly at risk. Landslides and flooding can occur anywhere. The dangers increase when an earthquake occurs shortly after a typhoon has saturated an area.
See our tropical cyclones page for information and advice about what to do if you’re caught up in a storm.
8.3 Nuclear incident in Fukushima in 2011
There are some exclusion zones around the Fukushima Daiichi nuclear power plant, which are clearly identified by the Japanese authorities. These exclusion zones are kept under review and have reduced in area over the past several years. Areas where evacuation orders are ready to be lifted (marked green on the map) are still subject to some restrictions - for instance visitors aren’t allowed to stay overnight. Follow local guidance.
The exclusion zone around the Fukushima Daiichi Nuclear Power Plant has been designated a restricted area.
The Japanese authorities carry out comprehensive checks to monitor radiation in the area surrounding Fukushima and to monitor possible contamination of water, and food and produce. They impose strict controls where necessary.
Although the decommissioning of the Fukushima Daiichi site and full clean-up of the surrounding area will take many years, the risks are gradually declining.
9. Contact
British businesses who are interested in exporting to or doing business in Japan can access advice and information at www.exporttojapan.co.uk or contact the Department for Business and Trade for export support by filling out this form.
The government can provide finance or credit insurance specifically to support UK exports through UK Export Finance – the UK’s export credit agency. For up-to-date country specific information on the support available see UK Export Finance’s country cover policy and indicators.