Economic Analysis


Population 126,981 million
GDP per capita 32478 US$
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major macro economic indicators

  2014/15 2015/16



2017/18 (f)
GDP growth* (%) 0,3 1,2 1,0 1,2
Inflation (yearly average) (%) 2,8 0,8 -0,1 0.6
Budget balance** (% GDP)









Current account balance (% GDP)







Public debt** (% GDP)









(e) Estimated (f) Forecast


  • Privileged location in a dynamic region
  • Very high level of national savings (around 23% of GDP)
  • Public debt 90% owned by local investors
  • Advanced technology products and diversified industrial sector


  • Difficulty of consolidating public finances and bringing an end to deflation
  • Reduction of the workforce and increasing share of precarious workers
  • Low productivity of small and medium companies

Risk assessment

Low growth prospects for 2017

Real GDP growth increased by 0.3 % QoQ in the first quarter of 2017, driven by foreign trade, the surge in the industrial production since November 2016, and, to a lesser extent, private consumption. The latter remains lacklustre as wages have not taken off despite a tight labour market, with the unemployment rate sitting at 2.8 % in April, its lowest level since June 1994. Wage growth has been constrained by Japanese corporates’ sticky deflationary mindset, which has resulted in insufficient efforts to redistribute profits. The structure of Japan’s labour market, which features rigid permanent contracts as well as a growing number of temporary workers, has also played a role in keeping wages and productivity depressed. The low wage growth have only marginally contributed to inflation, and the boost due to higher import prices, notably due to oil prices at the beginning of the year, is not expected to persist. Private investment will remain sluggish due to significant investors’ wait and see attitude, although profits, corporate liquidity and financial conditions are still favourable. However, investment will benefit from the 2020 Olympics in Tokyo, in particular in the construction sector, and from the accommodative monetary policy of the central bank, which maintains its rate at -0.1 %.


The country is far from the consolidation of public finances

The increase in social spending significantly weighs on the state budget while revenues are insufficient. However, the government decided to postpone the VAT rise again from 8% to 10% until October 2019 for fear that another rate hike would cripple consumption. With a debt service burden representing 25% of GDP, the current trajectory of the debt accumulation does not appear sustainable, especially as health costs continue to increase with the ageing population (increase in health expenditures) and the 2020 Olympics (increase in investments).

The current account surplus will remain the same in 2017. The 2016 yen’s depreciation against the dollar boosted exports in the first half of 2017, but this is not expected to continue considering the recent appreciation. Furthermore, the relatively favourable demand from Japan’s main trading partners (China, the United States and Euro zone countries) could boost exports. Imports are expected to increase, in line with a pick-up in domestic demand and higher energy costs. After a 3-month surplus, the balance of trade recorded a deficit again in May 2017. The services account will continue its consolidation as a result of the rise of tourism, in particular Chinese tourists (at this pace, the target of 20 million tourists will be reached before 2020), and the income balance will remain significant.


Uncertainty about the Trans-Pacific Partnership (TPP) and Abe’s future

US President-elect Donald Trump withdrew from the TPP, which aimed to harmonise standards by reducing tariffs and non-tariff barriers and to counteract the growing influence of China. The Prime Minister Shinzo Abe is finally keen to revive the TPP, and on May 21st, trade ministers representing 11 of the 12 signatories met to revive the pact. Japan also wants to maintain close relations with the US so as to avoid being isolated in Asia, and works on a bilateral trade agreement.

New nuclear tests carried out by North Korea since 2016, the Senkaku islands dispute, and growing tensions in the China Sea are threats that justify Abe’s will to revise the war-renouncing Article 9 of the Constitution. However, it will not be easy as Abe’s popularity is declining. It has been impacted by the Liberal Democratic Party’s defeat in the Tokyo Assembly on July 2. Doubts are emerging among his hold on power before the Liberal Democratic Party leadership race of September 2018. As Abe has been such a strong support of Bank of Japan’s Governor Haruhiko Kuroda, his demise would almost certain have ramifications for the institution, which would call into question the sustainability of ultra-accommodative policies going forward.


Last update : June 2017 


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 inJapanis subject to the same rules as inEurope.


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 who fails twice in a period of six months to honour a bill of exchange, promissory note, or cheque collectable in Japan is subsequently 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 adefactostate 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 become significantly more common throughout the economy over 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, a 1998 law 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.


Amicable phase

A settlement is always preferable, so as to avoid a lengthy and costly legal procedure. This 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.


Legal proceedings

Fast-track proceedings

Summary proceedings, intended to allow creditors to obtain a ruling on payment (tokusoku tetsuzuki), apply to uncontested monetary claims and effectively facilitate obtaining a court order to pay (shiharaïmeireï) from the judge within approximately six months.


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


Ordinary proceedings

Ordinary proceedings are brought before the Summary Court (kan-isaibansho) for claims under JPY 1,400,000 and before the District Court (chihosaibansho) 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. These proceedings generate significant legal costs.


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 comprised of a judge and two neutral assessors – attempts to reach, by mutual concessions of the parties, an agreement on civil and commercial disputes.


In practice, 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.


Enforcement of a court decision

A court judgment is enforceable if no appeal is lodged within two weeks. If the debtor does not comply with the decision, compulsory measures can be ordered through an execution against Real Property (an Examination Court issues a commencement order for a compulsory auction) or an execution against a claim (a compulsory execution is commenced through an order of seizure).


Japanese law provides for an exequatur procedure in order for foreign awards to be recognised and enforced. The court will verify several elements, such as whether the parties benefited from a due process of law, or if enforcement will be incompatible with Japanese public policy. Furthermore, if the issuing country does not have a reciprocal recognition and enforcement treaty with Japan, the decision will not be enforced by domestic courts.


Insolvency proceedings

Restructuring proceedings

There are two types of restructuring proceedings. The first of these is corporate reorganisation proceedings (kaisha kosei), which are typically used in complex insolvency cases involving stock companies. They come with the mandatory appointment of a reorganisation trustee by the court and with a stay against enforcement by both secured and unsecured creditors. The court typically appoints a third-partybengoshi with substantial experience in restructuring cases.


The second of these is civil rehabilitation proceedings (minji saisei), which are used to rehabilitate companies of almost any size and type. The debtor-in-possession (DIP) administers the rehabilitation under supervision of a court-appointed supervisor. Enforcement by secured creditors is not stayed in principle. The debtor must enter into settlement agreements with secured creditors in order to continue using the relevant collateral to conduct their business.


Winding up proceedings

There are two winding up proceedings. In bankruptcy proceedings (hasan), the court appoints a lawyer as trustee to administer the proceedings. Enforcement by secured creditors is not stayed; rather, they can freely exercise their claims outside of the bankruptcy proceedings. The trustee will usually attempt to sell secured collateral with the agreement of the secured creditors and contribute a percentage of the sales proceeds to the estate. The debtor’s estate is distributed to creditors in accordance with prescribed statutory priorities without any need for voting by the creditors.


The second, special liquidation (tokubetsu seisan), is used for stock companies. A liquidator is appointed by either a debtor’s shareholders or the court. Distributor of the debtor’s estate to creditors has to be approved by creditors with claims to two-thirds or more of the total debt or by way of settlement. This procedure is used when the debtor’s shareholders are confident that they will obtain creditors’ cooperation for the liquidation process, and wish to control the liquidation process without involvement of a trustee.

Insolvency trend Japan
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