CONFIDENTIAL WORLD WATCH® REPORT ­­ON­­ Japan Date: 01/09/2019 22:54:27 GMT / UTC UnitedHealthcare Global Risk | 14141 Southwest Freeway, Suite 500 | Sugar Land, Texas 77478 ph: (713) 430­7300 | email: [email protected] | url: www.uhcglobal.com World Watch® is confidential and is intended solely for the information and use of UnitedHealthcare Global's clients. Given the nature of the information, UnitedHealthcare Global does not guarantee the accuracy or completeness of the information because agencies outside the control of UnitedHealthcare Global contribute information to World Watch®. 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For Terms and Conditions go to Terms Of Use World Watch® Report from UnitedHealthcare Global Japan Executive Summary for Japan Japan is a prosperous country located in the Pacific Ocean, off the eastern coast of mainland Asia. Japan's territory comprises an archipelago of more than 6,000 islands, the largest of which are Hokkaido, Honshu, Kyushu and Shikoku, known as the "home islands." The country is one of the top international business and tourist destinations in the world due to its various religious, historic and natural attractions, as well as its highly developed infrastructure in major cities. Japan remains internationally renowned for its status as one of the most highly educated countries in the world, as highlighted by its contributions to advances in science and technology. Prime Minister Shinzo Abe of the conservative Liberal Democratic Party (LDP) is the current leader of Japan’s executive branch. The LDP ­­ which has historically held a majority in Japan’s bicameral legislature, the National Diet ­­ most recently won a two­thirds majority in snap elections in November 2017. Abe’s ability to see his policy goals through to completion will depend on whether he is re­elected president of the LDP in September 2018. Central to Abe’s campaign is improving Japan’s large economy through the principles of Abenomics, which have produced moderately positive results since their introduction in 2012. Nevertheless, an ageing population, high levels of public debt and decreasing competitiveness in certain sectors will challenge Japan’s status as one of the world’s top economies in the medium to long term. The overall assessment of threats in Japan is Very Low. Japan continues to maintain a low crime rate, even in major metropolitan areas. While organized crime syndicates, known as the yakuza, maintain a presence in Japanese cities, their activities infrequently affect short­term travelers. The country has not experienced any terror­related incidents in the past 10 years; nevertheless, transnational terrorism is a growing concern in Asia. Frequent seismic activity affects safety and operating conditions in Japan. Japan Information Country Facts Current Analysis Official Japan Country Name Japan is a politically stable country, although several issues will stand as Type Of Consitutional Monarchy with a challenges to Prime Minister Shinzo Abe in the short term. Government Parliamentary Government Competing claims over two disputed island chains continues to hamper Leadership Prime Minister Shinzo Abe relations with China and Russia. Capital Tokyo Japan's economy is one of the largest in the world, but it requires deep Official Japanese reforms if it wants to sustain growth in the long term. Language Political Situation Population 126.7 million Japan’s parliamentary constitutional monarchy has been one of the most stable Ethnic Japanese (98.5%), Koreans Divisions (0.5%), Chinese (0.4%), Other political systems in Asia since the country adopted its revised constitution in (0.7%) 1947. Emperor Akihito ­­ set to abdicate his throne in April 2019 ­­ stands as the Religion Shinto and Buddhist (Observe both country’s ceremonial figurehead, while executive power rests in the hands of ­ 84%), other (16% ­ including Prime Minister Shinzo Abe and his cabinet. Abe’s conservative Liberal Christian 0.7%) Democratic Party (LDP) has historically held a majority in Japan’s bicameral GDP Growth 0.7% legislature ­­ called the National Diet ­­ since the party’s founding in 1955; the LDP’s most prominent challenger, the Democratic Party, dissolved in 2017 to be Inflation ­0.5% replaced by the Constitutional Democratic Party (CDP). While recent political Unemployment 3.1% developments suggest LDP’s strong position within Japan’s political system will continue, scandals, policy disagreements and the emergence of new parties Currency yen indicate that Abe will likely face political challenges in the short term. Office Work Monday­Friday Week Key examples of such challenges to Abe’s grip on power include a general Time Zone UTC +9 World Watch® Report from UnitedHealthcare Global dissatisfaction with continued economic stagnation in the country, concerns over Offset the prime minister’s hawkish approach to handling North Korea, and continued Country Phone 81 questions surrounding several corruption allegations. Abe secured a fresh Code popular mandate for his policies in a snap election in 2017, in which the LDP Capital City 3 party secured the two­thirds majority required to achieve constitutional revisions. Phone Code Citing increased threats posed by North Korea, Abe’s campaign centered on his Nationwide 110 (police), 119 (medical) longstanding goal to reform Japan’s post­WWII pacifist constitution. The status Emergency of the constitution’s war­renouncing Article 9, as well as the informal status of Number(s) Japan’s Self­Defense Forces, is expected to be submitted for referendum vote Electricity 100 V, 50­60 Hz sometime in 2019; if supported by the public, the referendum will then require a two­thirds majority vote in the Diet to pass. The success of this policy goal Plug Styles Types A, B depends largely on Abe’s ability to win re­election as president of the LDP in September 2018, which would allow him to stay in office until 2021; however, recent diplomatic progress with North Korea, as well as the reemergence of concerns regarding past corruption scandals, stand as significant obstacles to securing election victory. International Relations Japan’s imperial history before WWII and the legacy of that conflict continues to shape its relationship with neighboring countries. Both Russia and Japan hold competing claims to the Kuril Islands, located off the coast of Hokkaido, which the Soviet Union annexed in the aftermath of a Soviet military operation during WWII. While the dispute continues to prevent Japan from concluding a peace treaty between the countries, Abe and Putin have laid the groundwork for conducting joint economic activities on the islands. Meanwhile, Japan’s relationship with China remains strained over a territorial dispute involving the Senkaku/Diaoyu Islands in the East China Sea. Potential hydrocarbon resources on the islands have prompted both nations to deploy naval vessels to the area in a show of force. While Abe and President Xi Jinping have expressed their willingness to implement a conflict hotline to prevent military incidents in the disputed area, the leaders have yet to reach a formal agreement on the matter. Japan’s relationship with South Korea remains tainted by the country’s treatment of South Korean “comfort women” during Japanese colonial rule. While the relationship between the two countries has improved since Japan issued a formal apology in 2015, the topic remains sensitive to both parties. Economic Situation Japan has the third largest economy in the world, trailing only the United States and China, and its per capita GDP is among the world’s highest. Despite holding these indicators of economic success, Japan continues to face challenges that are expected to significantly affect the country’s rank among the world’s top economies in the long term. Abe’s administration has been characterized by his three­“arrowed” strategy to revive the economy known as Abenomics. The government has implemented the “arrows” ­­ which consist of an increase in monetary stimulus, fiscal stimulus and structural reforms ­­ to varying degrees since their introduction in 2012, and modest progress has been recorded as a result of Abenomics so far. The most immediate effect of the policy was the weakening of the Yen against most other major currencies, making Japanese exports comparatively less expensive, and leading to an expansion of the manufacturing sector and drop in unemployment. Other positive signs include a well­performing stock market, and steady GDP growth over the past several quarters. In another positive development, Abe’s reforms to increase corporate governance and reduce funding costs have opened up Japan to private equity with the potential to result in increased investment. Japan continues to face serious challenges to sustained economic growth and resiliency amid increasing global competition. The country’s ageing demographic, low birth rate and harsh working conditions have eroded the working population’s ability to care for the elderly, and have put a strain on social security and other government resources. In addition, Japan continues to suffer from low consumer prices while public debt is estimated to be approximately 240 percent of GDP, well above what is widely considered to be sustainable. However, almost 90 percent of that debt is owned by Japanese citizens, so a massive sell­ off is considered less likely than in similarly debt strapped countries.