Japan

GLOBAL POSITION

Japan has a prominent position on the world stage as the third largest global economy in terms of nominal GDP and one of the major leaders in technological innovation. Its influence extends to key sectors such as the automotive industry, electronics, robotics and renewable energy, where it is an established benchmark in terms of quality and efficiency. Furthermore, its political stability, robust institutions and active role in international institutions such as the G7 and G20 bolster its relevance in global decision making. Despite demographic challenges, Japan continues to be a model for sustainable development and a linchpin in international diplomatic and trade relations, particularly in Asia-Pacific.

ECONOMY

The Japanese economy is noted for being one of the most advanced and diversified in the world; it is known for its great focus on innovation, technology and quality, thanks to which it has become an industrial powerhouse in sectors such as the automotive industry, electronics, robotics and precision machinery. Japan combines a robust industrial sector with an export-oriented economy, endorsed by world famous brands. Even though it is facing challenges such as its ageing population and high public debt, its ability to adapt, high productivity and business culture focused on continuous improvement have meant that it remains a key player in the global economy.

Moderate growth of the GDP is expected and which is going to be underpinned by greater consumer spending, a drop in inflation and further government support for strategic industries. The depreciation of the yen will mean that exports will exceed imports. This greater external demand is expected to lead to GDP showing sustainable growth from 2025 to 2028. The Japanese automotive and machinery sectors will continue to be positioned favourably – even with competition from China – mainly due to a strong R&D sector.

EXTERNAL SECTOR

Japan’s external sector is one of the cornerstones of its economy, noted for a strong focus on exports of value added and high technology products, such as vehicles, electronics, precision machinery and chemical products. Japan has a prominent position in global trade, and is known for the quality and innovation of its goods.
Its trade balance has shown to be resilient and the Japanese GDP is continued to be in surplus from 2024 to 2028, with much of surplus underpinned by the huge diversification of Japanese investment abroad. Japan has good relations with many countries of the region which has allowed it to give momentum to free trade agreements, such as the EPA with the European Union, and the RCEP and CPTPP in Asia-Pacific, which facilitate access to international markets. However, Japan also depends on imports of raw materials and energy, given its limited availability of natural resources, which highlights its strategic integration in the global supply chains.

MARKET

The Japanese market is one of the most sophisticated and demanding of the world, known for consumers with high purchasing power, preference for high quality products and their importance to innovation and design. Its diversified and advanced economy makes it an attractive destination for sectors such as technology, the automotive industry, luxury items, gourmet food and renewable energy. However, entry to the Japanese market requires in-depth knowledge of its business culture, high regulatory standards and ability to adapt to local preferences.

Thanks to trade agreements such as the European Union-Japan EPA, foreign companies have increasing opportunities to access this market. The growing demand for IT hardware and software, along with the increase in the demand for parts for its machinery and automotive industries, driven by government support for business digitalisation and for the shoring up of its global supply chain, are an opportunity for European companies. The Japanese government has also announced grants for renewable energy and investments in infrastructures, and has expressed its interest in foreign companies being involved in those fields.

COUNTRY RISK FOR TRADE AND INVESTMENTS

Japan offers a favourable climate for foreign investment, noted for great economic openness, government support and a clear legal framework. Key sectors such as the manufacturing industry, health and green technologies benefit from incentives such as tax advantages and subsidies, along with strategic trade partnerships such as the CPTPP and the RCEP. The legal system, shored up by the improved intellectual property rights and the coming anti-monopoly reforms, is likewise backed by a favourable business landscape.