Coface Group


Population 127.1 million
GDP per capita 36,222 US$
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major macro economic indicators

  2013  2014 2015 (p) 2016 (p)
GDP growth (%) 1.6 -0.1 0.5 0.5
Inflation (yearly average) (%) 0.4 2.7 0.9 0.6
Budget balance (% GDP)  -8.5 -7.3 -6.6 -6.6
Current account balance (% GDP) 0.8 0.5 1.9 2.0
Public debt (% GDP)  243.1 246.2 245.8 247.6


(e) Estimate (f) Forecast


  • Advantageous geographic situation in a dynamic region
  • Very high national savings level (around 23% of GDP)
  • 90% of public debt held by local investors


  • Difficulties to consolidate public finances and goes out of deflation
  • Reduction of the active population and growing proportion of workers without job security
  • Governmental instability
  • Low productivity of small and medium-sized enterprises

Risk assessment

Growth is likely to remain tepid in 2016 as Abenomics is struggling to reach its goals

Growth remained subdued in 2015, driven by foreign trade and public consumption (still bolstered by the stimulus). The three arrows of Abenomics have not given the expected results: growth is still weak, the deflation risk persists, and the public debt is still very high.

Growth is expected to rebound somewhat in 2016, particularly under the effect of the continuing depreciation of the yen against the dollar that should boost exports, even though they will probably be negatively affected by the Chinese slowdown (Japan’s largest trading partner) and offshoring. Private consumption should also sustain activity thanks to a slight upturn in wages (+2.2% after the negotiations in the spring of 2015, the largest increase in 17 years), the anticipation of the VAT hike in 2017 (from 8% to 10%) as well as the emergency plan announced in November which provides minimum wage increase of 3% and stimulus measures (extension of access to unemployment insurance, aid to pensioners). Nevertheless, while the unemployment rate should stay low around 3%, wage growth could still be held back by companies’ tendency to not redistribute their profits to a sufficient extent, as well as the rigid structure of the Japanese labour market (low mobility and pronounced duality). Private investment is not expected to pick up significantly in 2016, dampened by companies’ wait-and-see behaviour given the uncertainties weighing on the global recovery, but it is likely to be stimulated by the tax cuts, the good financial conditions and the progress in terms of governance.

Inflation will probably rise very slightly in 2016 since the oil price is no longer falling (the drop in the price curbed the rise in inflation in 2015, but inflation excluding food and energy is struggling to stay in positive territory), and mild inflationary pressure due to the recovery in domestic demand. However, it will in all likelihood stay far below the central bank’s 2% target, which the BoJ believes will be reached in late 2016/early 2017.

A Chinese hard landing and a failure of wages to rebound are the main downward risks to growth. However, additional monetary policy easing cannot be ruled out, beyond the current asset purchase programme (JPY 80,000 billion per year), but its positive impact would be moderate given the massive liquidity that has already been provided.


Consolidating public finances remains a crucial challenge

The fiscal deficit will probably stabilise at a high level in 2016. The increase in welfare spending (healthcare) weighs heavily on the State budget while revenues are insufficient. The government has therefore decided to increase the VAT rate again (postponed in 2017) and to continue the corporate tax reform (tax cut and broadening of the tax base). Fiscal consolidation remains a key challenge for the country to put its debt back on a sustainable trajectory. In June 2015, the government reasserted its determination to reach a primary surplus by 2020, but greater efforts will be required to reach this objective.

The current-account surplus should stay around 2% in 2016. The reason is that the trade deficit will remain limited thanks to the energy bill which has been considerably reduced in 2015 (under the assumption that the oil price stays at a low level). The services balance should improve under the effect of an increase in tourism (because of the easing of rules on granting visas in Asia), with FDI remaining stable on the whole.


Shinzo Abe was re-elected, but his popularity is declining

In September 2015, Shinzo Abe was re-appointed as head of the LDP (the Liberal Democratic Party currently in power). The opposition’ role remains weak, as the parliament member Seiko Noda failed to obtain the required support to stand as a candidate. She was particularly opposed to the planned law on national security (which would enable the country to send troops abroad for the first time since the Second World War), which has also given rise to protests in the population, but which was ultimately adopted by the parliament. Senate elections are scheduled for July 2016. In the event of a victory, Shinzo Abe could remain in power until 2018. Nevertheless, the lack of results of Abenomics could once again reduce his popularity rating.   

Concerning the business environment, the authorities announced a simplification of procedures to encourage SMEs to invest in the emergency plan in November. Moreover, an agreement in principle was concluded in October concerning the Trans-Pacific Partnership for free trade (12 countries involved). The challenge is to harmonise standards by reducing customs tariffs and to counterbalance China’s growing influence.


Last update : January 2016



Japan has ratified the International Conventions of June 1930 on Bills of Exchange and Promissory Notes and of March 1931 on Cheques. As a result, the validity of these instruments in Japanis subject to the same rules as in Europe.


The bill of exchange (kawase tegata) and the much more widely used promissory note (yakusoku tegata), when unpaid, allow creditors to initiate debt recovery proceedings via a fast-track procedure, subject to certain conditions.

Although the fast-track procedure also applies to cheques (kogitte), their use is far less common for everyday transactions.


Clearing houses (tegata kokanjo) play an important role in the collective processing of the money supply arising from these instruments. The penalties for payment default act as a powerful deterrent.

A debtor failing twice in six months to honour a bill of exchange, promissory note, or cheque collectable inJapan, is barred for a period of two years from undertaking business-related banking transactions (current account, loans) with financial establishments attached to the clearing house. In other words, the debtor is reduced to a defacto state of insolvency.


These two measures normally result in the calling in of any bank loans granted to the debtor.


Bank transfers (furikomi), sometimes guaranteed by a standby letter of credit, have developed greatly throughout the economy in recent decades thanks to widespread use of electronic systems in Japanese banking circles.


Various highly automated interbank transfer systems are also available for local or international payments, like the Foreign Exchange Yen Clearing System (FXYCS, operated by the Tokyo Bankers Association) and the BOJ-NET Funds Transfer System (operated by Bank of Japan).


Payment made via the Internet site of the client’s bank is also increasingly common.


Debt collection


In principle, to avoid certain disreputable practices employed in the past by specialised companies, only lawyers (bengoshi) may undertake debt collection.

However, the law of 16 October 1998, which came into force on 1st February 1999, established the profession of “servicer” to foster debt securitisation and facilitate collection of non-performing loans (NPL debts) held by financial institutions.


Servicers are debt collection companies licensed by the Ministry of Justice to provide collections services but only for certain types of debt: bank loans, loans by designated institutions, loans contracted under leasing arrangements, credit card repayments, and so on.


Out-of-court settlement is always preferable to avoid a lengthy and costly legal procedure and involves obtaining, where possible, a signature from the debtor on a notarised deed that includes a forced-execution clause, which, in the event of continued default, is directly enforceable without requiring a prior court judgement.


The standard practice is for the creditor to send the debtor a recorded delivery letter with acknowledgement of receipt (naïyo shomeï), the content of which must be written in Japanese characters and certified by the post office.


The effect of this letter is to set back the statute of limitation by six months (which is five years for commercial debts).

If the debtor still fails to respond, the creditor must start legal action during that period to retain the benefit of interruption of the limitation period.


Summary proceedings intended to allow creditors to obtain a ruling on payment (tokusoku tetsuzuki), applies to uncontested monetary claims and effectively facilitates obtaining a court order to pay (shiharaï meireï) from the judge within about six months.

Court fees, payable by the claimant in duty stamps, vary according to the size of the claim.

If the debtor contests the order within two weeks of service of notice, the case is transferred to ordinary proceedings.


Ordinary proceedings are brought before the “summary court” (kan-i saibansho) for claims under 1,400,000 yen (JPY) and before the “district court” (chiho saibansho) for claims above this amount.


Those proceedings, partly written (with submission of arguments and exchanges of type of evidence) and partly oral (with respective hearings of the parties and their witnesses) can take from one to three years as a result of the succession of hearings and generate significant legal costs.

Court fees, payable in duty stamps, depend on the size of the claim.


With the 1st January 1998 revision of the civil procedure code undertaken to reduce the duration of legal proceedings, the new amendment adopted on 1st April 2004 is notably intended to speed up submission of evidence to both the adverse party and judge during the preliminary examination phase.


The distinctive feature of the Japanese legal system is the emphasis given to civil mediation (minji chôtei). Under court supervision, a panel of mediators, usually comprising a judge and two neutral assessors,attempt to reach, by mutual concessions of the parties, a negotiation on civil and commercial disputes.

In practice, the litigants often settle the case at this stage of the procedure, before a judgment is delivered.


While avoiding lengthy and costly legal proceedings, any transaction obtained through such mediation becomes enforceable once approved by the court.


Similarly, disputes can be resolved via arbitration (chusai), an approach recently well appreciated and not involving excessive formalism, due to the adoption in August 2003 of the Arbitration Law and the updated rules in 2004 under the Japan Commercial Arbitration Association.

Insolvency trend Japan
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