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Explore Japan's latest macroeconomic trends and forecasts to inform business strategy and pinpoint opportunities and risks

Japan: Macroeconomic Country Outlook

According to GlobalData, the Japanese economy is expected to grow by 2.9% in 2022, while the household consumption is expected to grow by 0.9% in 2022.
Japan was ranked 15th out of 136 nations in the GCRI Q4 2021.
According to GlobalData analysis, Japan automotive market is anticipated to continue the recovery trail and witness a bounce back in production and exports, which in turn is expected to boost the economic growth in 2022.

PESTLE Summary

Political: Strong relations with the US. Japan maintains strong diplomatic relations with the US. Japan is a close partner of the US in several foreign policy areas, particularly international security and trade. Shared security goals involve meeting the challenge of an increasingly powerful China and countering threats from North Korea. Japan plays a central role in the US approach to boosting security in the Indo-Pacific, through the Quadrilateral Security Dialogue or “Quad” initiative.
Economic: Strong industrial and services sectors. Japan has been an industrially active nation ever since it adopted Western technologies and is one of the most technology intensive countries in the world. Japan has a strong services sector as well, with the sector demonstrating strong recovery from pandemic in November 2021. According to MarketLine, Japan’s manufacturing PMI stood at 54.3 in December 2021 and 55.4 in January 2022.
Social: High score in Human Development Indicators (HDI). According to UNDP, Human Development Report (2020), Japan scored 0.919 out of 100, which puts the country in 19th position out of 189 countries assessed. The average human development score of the East Asia and Pacific countries stood at 0.747 in 2019, which indicates that Japan is above the regional average and the country is in the very high human development category.
Technological: Excellent infrastructure for innovation. Japan has an excellent infrastructure for innovation. According to the Global Innovation Index (2021) published by the World Intellectual Property Organization, Japan ranked 13th out of 132 countries. Japan’s ranking improved from 2020 when it ranked 16th out of 132 economies.
Legal: Three new laws to promote a “digital society”. Japan’s parliament, the Diet, passed three new laws in May 2021 to promote a “digital society” in the country. The three new laws include the Basic Act on Forming a Digital Society; the Act on Establishing the Digital Agency; and the Act on Adjusting Laws Related to Forming a Digital Society. Despite having an advanced internet infrastructure, Japan lags behind other developed countries in terms of digital competitiveness. The new acts aim to fill gaps in the country’s landscape of digitization and make the IT system of the country more advanced and integrated in nature. This would help in promoting better digitization of administrative procedures and services in the country.
Environmental: Japanese government determined to increase renewable energy generation. The Japanese government has set an ambitious target that requires 36–38% of the country’s total energy to be generated from renewable sources by 2030. According to GlobalData, Japan’s power generation through renewable resources stood at 257.2 billion kilowatthours in 2020. The Japanese government is focusing on rapid development of renewable energy and has launched several policies such as the Japan Renewable Energy Policy Platform (JREPP), and formation of New Energy Development Organization (NEDO) to promote renewable energy.

Key Fundamentals

Macroeconomic Outlook

According to MarketLine, Japan’s real GDP per capita stood at $48,525.5 in 2021, which is the 20th highest among a total of 217 countries. Its real GDP per capita is higher than several other advanced economies such as the UK, France, Germany, and New Zealand. MarketLine expects Japan’s real GDP per capita to rise to $52,142.2 in 2025.
In June 2021, Japan ratified the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement between China, Australia, and the Association of Southeast Asian Nations. The new Free Trade Agreement (FTA) will strengthen Japan’s trade links with the Asia-Pacific region and support its trade diversification efforts.
The international demand for Japan’s manufactured products has been on rise. Japanese manufactured vehicles are in high demand all over the world. According to MarketLine, Japan’s merchandise exports increased from $611.5 billion in 2020 to $626.2 billion in 2021. This figure is expected to increase to $684.7 billion by 2025, as per MarketLine forecasts.

GlobalData Country Risk Index (GCRI) - Q4 2021

Japan was ranked 15th out of 136 nations in the GCRI Q4 2021. The country’s score is in the very low risk nations band (below 30). Japan’s overall risk score is lower than the Asia-Pacific nations score and the world average. Japan has a relatively high score in the environmental risk parameter as compared to regional average due to high frequency of natural calamities. The country's score in terms of macroeconomic and technology and infrastructure risk was lower than the regional average.

GCRI Methodology

GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.

The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Countries in the Asia-Pacific region, in this publication, include China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Thailand, Vietnam, Taiwan, Australia, and New Zealand.

About the report

GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.

More Details: Japan PESTLE Insights - A Macroeconomic Outlook Report

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