Country Trade Risk Index (ERI): 101.29 Country Risk Reference Rating: 4 (4/9)
Country Risk Outlook: Negative
Economic and trade risks
Japan is a developed economy with a high degree of market economy. It began to gradually recover after experiencing the financial crisis in 2008 and the Japanese earthquake in 2011. At present, Japan’s economy has improved under the stimulation of Abe’s three major economic reform policies, but potential risks still exist. Problems such as weak exports and an aging population will plague Japan’s economic development for a long time. Bilateral trade volume declined and the trade deficit narrowed. According to statistics from the General Administration of Customs, the bilateral trade volume between Japan and my country in 2012 was US$329.45 billion, a decrease of 3.9%. Among them, my country’s exports to Japan were US$151.64 billion, an increase of 2.3%; my country’s imports from Japan were US$177.81 billion, a decrease of 8.6%. China’s trade deficit with Japan was US$26.17 billion, a decrease of 43.5%. my country is Japan’s largest trading partner, largest export destination and largest source of imports. In the first five months of 2013, the total bilateral trade between China and Japan was US$122.7 billion, a decrease of 8.9%.
The main products exported from Japan to China are mechanical and electrical products, base metals and products, and transportation equipment. In 2012, the export volume was US$60.74 billion, US$16.38 billion, and US$13.84 billion respectively, down 16.2%, 9.5%, and 13.1%. Accounting for 42.1%, 11.4% and 9.6% of Japan’s total exports to my country. The main commodities imported by Japan from my country are mechanical and electrical products, textiles and raw materials, furniture, and toys. In 2012, the import volume was US$79.7 billion, US$30.46 billion, and US$12.06 billion respectively, accounting for 42.3%, 16.2%, and 16.2% of Japan’s total imports from China. 6.4%, of which imports of mechanical and electrical products, furniture, and toys increased by 6.6% and 11.8%, while imports of textiles and raw materials decreased by 0.7%. In the Japanese market, China’s labor-intensive products still have a great advantage, such as textiles and raw materials, shoes, boots, umbrellas, luggage and other light industrial products. The import market share of these products is more than 60%.
Investment risk
In Japan, the laws applicable to foreign investment mainly include the Commercial Law, the Foreign Exchange and Foreign Trade Management Law, the Import and Investment Promotion Law, the Tax Law, the Monopoly Prohibition Law, and the Japanese Companies Law. Law” etc. According to the “Japanese Company Law”, foreign wholly-owned enterprises and joint ventures enjoy the same treatment as Japanese domestic enterprises.
In principle, Japan implements investment liberalization policies for most industries, with the exception of agriculture, forestry, fishery, mining, petroleum, and leather and leather manufacturing. The law based on which Japan examines and approves investments by foreign investors is the Foreign Exchange and Foreign Trade Administration Law. In principle, this law adopts a post-reporting system for attracting foreign investment, but industries involving national security, disrupting public order, and public safety, as well as industries that Japan wants to maintain liberalization restrictions, require prior reporting and approval.
Legal risks
According to the “Law on Promotion of Imports and Investment in Japan”, the Japanese government will provide preferential treatment to foreign companies investing in manufacturing, wholesale, retail, service and other industries in Japan if the investment ratio exceeds 1/3. Tax rates and debt guarantees, taxes owed by material enterprises within five years of establishment can be extended to seven years.
In addition, in order to encourage domestic small and medium-sized enterprises in Japan to cooperate with foreign investors or foreign-funded enterprises, after the goods and services transactions between Japanese enterprises and foreign-invested enterprises reach a certain scale and confirmed by the local government, Japanese enterprises can obtain credit from the Credit Guarantee Association. With a guarantee, you can get a loan of up to 200 million yen. In terms of finance and credit, Japan’s policy banks provide financing for foreign investors or foreign-funded enterprises to invest and build factories, conduct research and development, and corporate mergers and acquisitions in Japan. In order to encourage and attract foreign investors, local governments reduce or exempt foreign-invested enterprises from enterprise tax, fixed asset tax, real estate acquisition tax, etc. In order to help foreign-invested enterprises smoothly carry out preparatory activities, Japanese financial institutions also provide financing to foreign investors in purchasing factories, equipment and working capital needed to conduct business.
Overall risk
Generally speaking, Japan is a country with relatively low risks in East Asia. The problem with the Japanese economy is neither a currency problem nor a yen problem, but a serious structural problem. That is, aging population, aging technology and hollowing out of enterprises. Whether “Abenomics” can solve these structural problems depends on whether more powerful long-term reform measures can be introduced in the future.
Sino-Japanese economic and trade cooperation is the basis of the strategic mutually beneficial relationship between China and Japan. Strengthening bilateral economic and trade cooperation is the common interest of both China and Japan. In 2012, Sino-Japanese economic cooperation made many substantial progress, such as the realization of direct transactions between the RMB and the Japanese yen, the mutual purchase of treasury bonds between China and Japan, the signing of the China-Japan-ROK investment agreement, and the China-Japan-ROK FTA negotiations are also in progress. This shows that although Japan suppresses China in the security and political fields, it cannot do without China in the economic aspect.
Based on the analysis and assessment of the current overall situation, Japan’s country trade risk index is (ERI) 101.29, the country risk reference rating is 4 (4/9), the country risk level is medium to low, and the country risk outlook is positive .
(Issuing agency: China Export and Credit Insurance Corporation)
