Japan's renewal and future agenda by 2020
Political stability bodes well for economic progress. Japan's economic expansion is set to continue over the medium term, even if only modestly. Prices will also rise gently over the remainder of this decade, whereas trade is set to expand considerably thanks to a global uptick in trade activity. An expected trade deal with the EU has the potential to help the government to push through much-needed structural reforms.
Japan's labour market remains tight, although wages are stubbornly flat. The combination of an expanding economy and a shrinking population has pushed Japan's worker shortage to record levels. The government has tried to remedy this by raising the participation of women and the elderly in the workforce. This has, however, created a dual labour market of regular and irregular workers, which, in turn, has been depressing wages.
The government's drive on corporate governance reform faces resistance from the country's powerful interest groups. Meanwhile, businesses are also faced with challenges from megatrends such as ageing and digitisation/automation. Interestingly, in Japan's case both of these megatrends are also interrelated opportunities.
Japan continues to be a leading global innovator, with most of its innovation coming from large companies. The country's start-up scene, although growing, is still young and faced with socio-cultural and institutional barriers. Business sentiment, both among domestic and foreign companies, is positive. Firms are expecting the economy to grow and their operations in Japan to expand.
Finland's strong brand reputation in areas such as nature, craftsmanship and design is valued in Japan. Finnish companies that can offer products that evoke these characteristics can find a receptive market in Japan, especially in the consumer goods industry.
The EU-Japan EPA will create opportunities for Finnish companies, as will the marking of the 100th anniversary of bilateral relations in 2019.
For details, take a look at Future Watch report attached.