Japanese Economic Trends and JETRO's Activities to Attract Foreign Direct Investment to Japan

Japanese Economic Trends and JETRO’s Activities to attract Foreign

Direct Investment to Japan

9th July 2015Masakazu Tachikawa

JETRO Amsterdam

Copyright (C) 2014 JETRO. All rights reserved.

1. Achievements of Abenomics

2

2. Outlook of Japanese economy

3. JETRO’s services for attracting overseas companies

Copyright (C) 2015 JETRO. All rights reserved. 3

“Three arrows” strategy of Abenomics

1st arrow: Bold monetary policy

20 years of stagnation

○Long-lasting economic stagnation and deflation

○High level of public debt

<Annual average economic growth rate for 20 years until 2012>

(Average for 20 years)

Nominal GDP growth: - 0.2% Real GDP growth: 0.8% Real GNI growth: 0.6%

A new decade of revival

○Improved macroeconomic environment

○Improvement in corporate profits

○Revitalization of the economy, Fiscal consolidation

<Annual average economic growth rate for 10 years since 2013> (Target of the government)

Nominal GDP growth: 3.0% Real GDP growth: 2.0% Real GNI growth: 3.0%

Launch of the Abe Administration ～ Mar 2015

2nd arrow: Flexible fiscal policy

○The process of ending deflation and better economic cycle has started.

Real GDP ： Back to the positive (1.5%) after the consumption tax hike.

Improved business conditions and investment

New job openings ratio ： 1.9

Unemployment ： record low (3.3%)

The “Three Arrows” policy is bringing Japan out of deflation, and has started a positive economic cycle. In order to end deflation completely, and spread the benefits of this positive cycle, the

government will continue with the first two arrows, and launch the third arrow to ensure sustained economic growth.

3rd arrow: Growth strategy that promotes private investment

Source: Basic Policies for Economic and Fiscal Management and

Reform (decided at Cabinet meeting on June 14, 2013)Source: Basic Policies for Economic and Fiscal Management and

Reform (decided at Cabinet meeting on May 24, 2014)

Source: Basic Policies for Economic and Fiscal Management and Reform (decided at Cabinet

meeting on May 24, 2014)The Ministry of Health, Labour and Welfare


Achievements of Abenomics in numbers

＋ 4.5%

Increase

Stock prices(Nikkei Stock Average)

CPI growth rate(less food 【 except alcohol 】

and energy )

Unemployment rate

GDP(Real GDP growth rate)

Business conditions(Tankan current situation,

manufactures)

10,230 yenDec. 26, 2012

(Launch of the Abe Administration)

-0.6%2012 Oct-Dec

(before Abenomics)

＋ 3.9% 2015 Jan-Mar

20,569.87yenJune 1, 2015 (closing price)

Almost

doubled

-1.1%2010

＋ 2.2%2014

Improved

4.3%2012 average

3.3%　 2015 April

Improved

Large firms -3Medium-sized firms -5SMEs -12Survey in Dec.2012

Large firms 12Medium-sized firms 4SMEs 1

Survey in Dec. 2014

Greatly

improved

Since the launch of the Abe administration, the Japanese economy has achieved a high standard of growth even on a global scale. Stock prices, Tankan DI, and unemployment have

all improved. The GDP growth rate has also recovered from the negative downturn following the consumption tax hike in 2014 April.


-15

-10

-5

0

5

10

-4.2

-12.5

-15

7.1

0.2

7.16.1

4.5

6

-2.1

-7.4

-2.5

11.1

0.8

4.1

-1.8-1.8

-0.6

5.3

2.9

2

-0.9

4.4

-6.8

-2

1.2

3.9

5

Japan’s real GDP growth rate (quarterly, annual rate, seasonally-adjusted)

国際的に見た日本の対内直接投資の現状 The Effects of Abenomics (GDP growth rate)

Source: Cabinet Office “National Accounts of Japan (Quarterly Estimates of GDP)

Launch ofAbenomics(Dec. 2012)

Great East Japan earthquake(Mar. 2011)

Last-minute demand before consumption

tax hike

Consumption tax hike to 8% (Apr. 2014)

Lehman Brothers bankruptcy(Sep. 2008)

%

2009.1 2011.15000

7000

9000

11000

13000

15000

17000

19000

21000

The NIKKEI stock average has almost doubled since the start of the Abe cabinet and keeps its level around 20,000 yen. The NIKKEI stock average has made a historical boost

thanks to the economic stimulus and positive prospect of the Japanese economic situation and good corporate performance caused by the yen’s depreciation .


Stock market (Nikkei Stock Average)

国際的に見た日本の対内直接投資の現状 The Effects of Abenomics (stock market)

Lowest in past 20 years(Oct. 28, 2008) 6,994yen

Unit: yen

Launch of the Abe Administration(Dec. 26, 2012)

10,230yen

15 years’ high20,569.87 yen(Jun. 1, 2015 )

Based on the closing price of The NIKKEI Stock Average


2009 2010 2011 2012 2013 2014 2015-70

-60

-50

-40

-30

-20

-10

0

10

20

30

大企業 / 製造業大企業 / 非製造業中小企業 / 製造業中小企業 / 非製造業

Big improvement for large companies and SMEs. Business conditions are almost at the same level as before the consumption tax hike.

7

国際的に見た日本の対内直接投資の現状 The Effects of Abenomics (business conditions)

Source: Compiled from the data in the Bank of Japan “National Short-Term Economic Survey of Enterprises in Japan” known as Tankan 　 (current situation diffusion index [DI])

Launch of Abenomics(Dec. 2012)

Business conditions of companies (Tankan)Unit: “Good” or “bad” % points

Large companies (manufacturers)

Large companies (non-manufacturers)

SMEs (manufacturers)

SMEs(non-manufacturers)

Consumption tax hike （ April 2014 ）


2009 2010 2011 2012 2013.1Q 2013.2Q 2013.3Q 2013.4Q 2014.1Q 2014.2Q 2014.3Q 2014.4Q 2015.1Q3

3.5

4

4.5

5

5.5

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Unemployment rate declined and jobs-to-applicants ratio surpassed 1.0 (more job posts than job seekers). Almost fully employed since late 2014.

8

国際的に見た日本の対内直接投資の現状 The Effects of Abenomics (employment)

Unemployment rate and jobs-to-applicants ratio

Source: Ministry of Internal Affairs and Communications “Labor Force Survey” 　 Ministry of Health, Labor and Welfare “General Job Placements”

Unit: % Unit: ratio

Unemployment rate Jobs-to-applicants ratio

1990 1995 2000 2005 2010 2014

-2

-1

0

1

2

3

4

総合生鮮食品を除く総合食糧（酒類を除く）及びエネルギーを除く総合All items less fresh food All items less food (except alcohol ) and energy

After almost 20 years’ doldrums, CPI is now on the path toward ending deflation.


Consumer Price Index (year-on-year growth rate)

Source: Ministry of Internal Affairs and Communications “Consumer Price Index”

国際的に見た日本の対内直接投資の現状 The Effects of Abenomics (consumer prices)

Steep rise in global oil and grain prices

Increase in consumption tax from 3% to 5%

All items





10


2014.1Q 2014.2Q 2014.3Q 2014.4Q 2015.1Q 2015.2Q 2015.3Q 2015.4Q 2016.1Q 2016.2Q 2016.3Q 2016.4Q 2017.1Q

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

4.9

▲ 6.9

▲ 2.1

1.1

3.9

1.7 2.0 1.9 1.8 1.5 1.6 1.6

3.0

〇 The GDP real growth rate for Jan-Mar 2015 shows clear recovery of the Japanese economy.(Consumption is on the track of recovery too.)〇 After the consumption tax hike, the quarter real growth rate stayed minus for 2 consecutive periods but turned positive at 1.1% for Oct.-Dec. 2014, and stayed positive at 3.9% for Jan.-Mar. 2015. The rate is estimated to stay positive and reach 2.97% in 2017 first quarter.

国際的に見た日本の対内直接投資の現状Impact of consumer tax hike

11

Estimated quarterly real GDP growth rate by private think tank(quarterly, annual rate, seasonally-adjusted)

Apr. 2014Consumer tax

hike to 8%

Last-minute demand before

consumption tax hike

Source: Compiled from the data of Japan Center forEconomic Research “ESP Forecast Survey,” Jun. 2015

Actual Estimate

Unit: %


2015 2016 2017 20180.0

0.5

1.0

1.5

2.0

2.5

3.0

1.5

2.1

0.8

2.6

1.51.3

0.0

1.3

0.8 0.8 0.9 0.9

1.2

1.6

1.2

1.7 1.7

Japanese Government （ revaitalised case ） Japanese Government （ baseline case ） IMF

World Bank ESP forecast

国際的に見た日本の対内直接投資の現状 GDP forecast between 2015-2018

2015--2018 real GDP growth rate outlook

Japanese Government : Summary of the Cabinet Office Mid-Year Trial Calculations for FY2015 (2015/2/12 Council on Economic and Fiscal Policy)Private Sector : Aggregation of forecast by 42 Japanese economic forecasters and organizations (Japan Center for Economic Research “ESP Forecast Survey,” Jun. 2015)IMF and World Bank 12

Unit: %

■The Government’s ScenarioThe Japanese cabinet office has estimated two scenarios of GDP growth, a “revitalized case” and a “baseline case”. In the ”revitalized case”, which reflects the effects of the “three arrows”, real GDP growth rate will be more than 2%, and more than 3% in nominal terms. In the “baseline case”, the economy will grow based on potential growth rate, and real GDP will be a little less than 1% in the median-long term.


Market volume of smartphone gaming is growing ; 547bio\(2013) → 658bio\(2014) → 746bio\(2015) → 824bio\(2016)Source : CyberZ/Sead Planning figures for 2014 – 2016 are estimates Market of smartphone gaming is growing, whike market of gaming hard- and software for family is decreasing

Rank 6th of the Global Competitiveness Index (up from 9th 2013-2014)

Rank 1st of “Business sophistication” Rank 4th of “Innovation” Rank 2nd of “Company spending on R&D” Rank 3rd of “Availability of Scientist and engineers”

国際的に見た日本の対内直接投資の現状Opportunity of Japanese Market

13

■The Global Competitiveness Report 2014-15

■For Gaming Industry



14




Abenomics 3 ： Growth strategy

Strategy of Global

Outreach

Strategic promotion of international commerce and economic partnership

> Promoting economic partnership such as TPP and FTA.> Targeting trading FTA ratio of 70% by 2018.

Strategic plan to gain access to the growing global market > Integrating global markets though infrastructure export. > Targeting infrastructure exports of approximately 30 trillion yen by 2020.

Preparing capital and talent base that sustain the growth

of Japan.> Promoting globalization from within.> Doubling inbound investment by 2020.

Actively and strategically gaining access to the global market and nurturing growth sectors,so that Japanese enterprises and people can gain from the growing global market.


Website ・ SeminarProvide information on “INVEST JAPAN” website

Organizing seminars and symposiums

Overseas Offices ：Finding Potential Investors

Headquarter ：Individual Support

Finding potential investor companies

Consultation for potential investor companies

Provide information on Japanese market and industry ;

Support developing business model

Provide information on related rules and regulations

and mediation with related authorities

Support solving various problems

IBSC （ Invest Japan Business Support Center) ： Provide temporary office facilities

Consultation by professionals

Domestic Offices ：Provide information of local economies

Provide information of incentives of local municipalities

Support “Top Sales” of local municipalities abroad

INVEST JAPAN website

Provide temporary office facilities

Seminars and symposiums

国際的に見た日本の対内直接投資の現状JETRO’s activities to attract foreign direct investment

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Conference room

To increase inward FDI

The center unifies the procedures that foreign companies and startups need to complete to establish a business. This is a first for our country. （ Run by the Cabinet Office and Tokyo Metro. Govt.)

Through personalized service provided by staff knowledgeable in administrative procedures and experts, the center helps to facilitate the prompt completion of various filing procedures required when starting a business, including those for company registration and notification of incorporation, taxes, social security, and immigration.

Tokyo Business Establishment One-Stop Center (Opened on Apr. 1, 2015)

Facilitate fast startups with face to face service.

Company Registration

National and Metropolitan Tax Immigration

Employment Insurance

Labor Insurance

Health and Pension Insurance


To increase inward FDI

TOBEC opening ceremony on March 31, 2015Attended: Prime Minister Abe, Mr. Masuzoe, Governor of TokyoMr. Ishiba, Minister of State for Special MissionsMr. Ishige, Chairman and CEO of JETRO


03-3582-4684 http://www.jetro.go.jp/en/invest/hotline/

Invest Japan Hotline

JETRO will arrange meetings with the relevant authorities and provide comprehensive support.

Consultation regarding 　 investing in Japan

Consultation regarding investing in Japan and regulatory reform requests from foreign companies

JETRO will submit requests for regulatory reforms to the Cabinet Office and METI.

Requests for regulatory reforms

国際的に見た日本の対内直接投資の現状Invest Japan Hotline


Further Information

□Japan Economic Policies (Abenomics)<Abenomics: We Are Accelerating the Implementation of Our Committed Reforms> http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/kaikakudankouEN.pdf

<Achievements of Abenomics>http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/seika02shousaiEN.pdf

<Revision of Japan Revitalization Strategy>http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/10challenge02shousaiEN.pdf □Outlook of Japan EconomyGovernment Estimates: http://www5.cao.go.jp/keizai1/2014/0124mitoshi-e.pdf

Japan Centre for Economic research: http://www.jcer.or.jp/eng/(ESP Forecast July Survey): http://www.jcer.or.jp/eng/pdf/esp/fcst1407_eng.pdf

□JETRO’s Services“How to set up business in Japan”: http://www.jetro.go.jp/en/invest/setting_up/

“JETRO IBSCs”: http://www.jetro.go.jp/en/invest/ibsc/

http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/kaikakudankouEN.pdf

http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/kaikakudankouEN.pdf

http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/seika02shousaiEN.pdf

http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/seika02shousaiEN.pdf

http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/10challenge02shousaiEN.pdf

http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/10challenge02shousaiEN.pdf

http://www5.cao.go.jp/keizai1/2014/0124mitoshi-e.pdf



http://www.jcer.or.jp/eng/



http://www.jcer.or.jp/eng/pdf/esp/fcst1407_eng.pdf

http://www.jcer.or.jp/eng/pdf/esp/fcst1407_eng.pdf

http://www.jetro.go.jp/en/invest/setting_up/

http://www.jetro.go.jp/en/invest/ibsc/

http://www.jetro.go.jp/en/invest/ibsc/