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This publication is available at https://www.gov.uk/government/publications/overseas-business-risk-japan/overseas-business-risk-japan
This page provides information on important security and political risks which UK businesses may face when operating in Japan.
Japan is a constitutional monarchy. The power of the Emperor is limited and is restricted mainly to ceremonial duties, though he acts as the de facto head of state on diplomatic occasions. The government is composed of the Executive Branch, the Legislative Branch and the Judicial Branch, with separation of powers between them. Executive power is vested in the Cabinet, led by the Prime Minister as head of government. Legislative power is vested in the National Diet. It is a bicameral parliament, consisting of a House of Representatives (Lower House) with 480 seats, elected by popular vote every 4 years or when dissolved, and a House of Councillors (Upper House) of 242 seats, whose popularly elected members serve 6-year terms.
In Lower House elections during October 2017, the centre-right Liberal Democratic Party (LDP) retained the largest number of seats. Its leader, Shinzo Abe, remains Prime Minister. The government remains a coalition government (originally formed after the December 2012 elections) of the LDP and the pacifist Komeito party.
Prime Minister Abe has promised to ‘restore Japan’, both domestically and on the international stage, following 2 decades of deflation in the Japanese economy and a rather insular outlook. His policy platform is based on 2 main strands – 1, a major package of economic stimulus and structural reform (‘Abenomics’ – see economic section below), and 2, a series of security reforms and increased diplomatic activity.
2. Regional and international issues
Japan is a member of the G7, G20, APEC, and ASEAN+3, and is a strong supporter of the existing international rules-based system. Japan’s close relationship with the United States, in particular the US-Japan Alliance, is the cornerstone of Japan’s foreign and security policy. The US maintains significant military deployments in Japan, and is committed through the alliance to guaranteeing Japan’s security. President Trump reiterated this commitment during his visit to Japan in late 2017.
Although Japan and China remain major trading and investment partners, relations are currently strained by disagreements 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, although there are signs that both sides wish to take steps to reduce tensions.
A territorial dispute exists between Japan and Russia over the sovereignty of 4 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. Prime Minister Abe is currently engaged in negotiations that aim to conclude a peace treaty with Russia, resolving the dispute over the Northern Territories, however there has been little progress to-date.
Japan’s 2017 Defence White Paper identified North Korea as the main potential threat to Japan’s security, due to its nuclear and ballistic missile tests. As these have increased in recent years, including markedly in 2017, Japan has sought to increase the pressure on the DPRK, including by pressurising China to use its influence on Pyongyang, and through UN Security Council Resolutions.
Prime Minister Abe has travelled widely as part of his ambition to promote Japan as a ‘proactive contributor to international peace and security’. As well as seeking to reinforce close ties with the US, he has sought out new partners in countries such as Australia, India, the UK, France and ASEAN states. Domestically he has undertaken a number of security reforms. These include the creation of a National Security Strategy and National Security Council, and legal reinterpretations which will allow Japan’s Self-Defence Forces to cooperate more with the US, including in aspects of collective self defence, and with the UK and Australia through bilateral Acquisition and Cross-Servicing Agreements that allow for increased co-operation on logistical and medical support.
Japan is the 3rd largest economy in the world. It is the UK’s largest export market after Europe, the US and China, and one of the leading inward investors in the UK. With a GDP 1.5 times the size of the UK and GDP per person about 6 times that of China, Japan remains the high-tech powerhouse economy of Asia – with the 2nd 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 1,645 trillion yen (more than 300% of GDP). Japan’s major growth driver is exports, despite external demand accounting for 16% of its GDP. Average annual economic growth since 2012 has been around 1%. The IMF expects the economy to grow by 1.5% in 2017 and 0.6% in 2018.
A crucial long term challenge for Japan is its rapidly ageing and declining population, projected to drop from 127 million people to below 100 million in 2053 and to 88 million people in 2065.
To help address these issues, drive growth and combat deflation the Japanese government initiated in 2012 an economic policy known as ‘Abenomics’, deploying the 3 ‘arrows’ of monetary easing, a flexible fiscal policy, and structural reforms. These were augmented by additional ‘arrows’ in 2015, which included measures to address population decline.
In pursuit of these policies, the central bank has adopted bold and unconventional monetary policy. Japan’s public sector debt, the world’s largest, currently stands at over 245% of GDP. The consumption tax is planned to rise from the current 8% to 10% in October 2019. Some progress has been made with structural reforms, notably energy market liberalisation, agricultural co-operatives, and corporate governance. Japan has also focussed on progressing free trade agreements. Despite US withdrawal, prospects for the Trans-Pacific Partnership (TPP) are being investigated by the remaining members, including Japan. Agreement in principle was reached on the EU-Japan Economic Partnership Agreement (EPA) trade deal in summer 2017 and a final text concluded in December 2017. Both agreements should help raise Japan’s economic growth.
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 4 now restarted.
Japan’s economy was ranked highly in 2 recent major global economic studies:
- Japan was ranked 9th in the 2017 to 2018 World Economic Forum’s Global Competitiveness Report which gives significant attention to Japan’s current economic environment
- Japan ranked 34th in the 2017 World Bank’s ‘Ease of Doing Business’ report
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 or resident in the UK or 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 and press 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 continue to raise concerns surrounding issues like gender equality, hate speech and racial discrimination, Japan’s application of the death penalty, very high conviction rate and the use of forced confessions during interrogation.
In 2016 Japan was ranked 20 out of 176 countries and territories in Transparency International’s corruption perception index (CPI). It lags behind many western countries however 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.
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 (chiefly Roppongi and Shinjuku) 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
Although there’s no recent history of terrorism in Japan, 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 conflict in Iraq and Syria. You should be vigilant at this time.
There have been recent public demonstrations about the United States presence in Okinawa, the government’s restart of nuclear power plants, and legislation relating to security and justice reforms, 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 FCO 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. Recent updates to the IP system have had a focus on supporting and encouraging business innovation.
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 2016 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 is provided on the GOV.UK intellectual property page.
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. 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
Based on guidance from UK government scientists, the FCO advise against all travel to the exclusion zones around the Fukushima Dai-ichi Nuclear Power Plant identified by the Japanese authorities. These exclusion zones are kept under review, and anyone entering illegally is liable to be fined.
Japanese authorities carry out comprehensive checks to monitor radiation in the area surrounding Fukushima and possible contamination of water, food and produce. Strict controls are imposed where necessary. Reports continue about leaks of contaminated water from the site. These are being monitored by UK government scientists.
While the situation at Fukushima will remain of concern for some time, risks are gradually declining. There may be some disruption to transport and other infrastructure in the parts of north-eastern Honshu most affected by the 2011 earthquake and tsunami.
9. DIT contact
British businesses who are interested in exporting to or doing business in Japan can contact the Department for International Trade: email@example.com for advice and assistance.
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.