Japan: Pestle Analysis

Political Analysis
Political System: Japan is a democratic country, but it is a very different kind of democracy to that prevailing in most of Europe in countries like France and Germany. The main reason for this is the dominant position of one party the Liberal Democratic Party which held power almost unbroken for more than 50 years.

The Diet
Japan is a parliamentary kingdom governed by a Prime Minister and his cabinet. The parliament is called the Diet and is composed of the upper House of Councilors and the lower House of Representatives. The House of Representatives can be dissolved anytime by the Prime Minister. The lower house holds most of the decision power. The party which achieves a majority in the lower house can nominate the Prime Minister (usually the party president).

National Diet
House of Councillors (Upper House) House of Representatives (Lower House)
choose prime minister pass budget ratify treaties

Prime Minister & Cabinet

All are members of the Japanese National Diet Most are members of the House of Representatives

Major Political Parties

Liberal Democratic Party (LDP)
conservative catch-all party

Japan Socialist Party (JSP)

Japan Peace Party

Japan Communist Party (JCP)

anti-emperor, anti-capitalism, anti-military only party untainted by money politics

The Judicial System

The Supreme Court is the highest court in the land. The Chief Justice is appointed by the Emperor following selection by the Cabinet. Fourteen other judges are selected and appointed by the Cabinet. Every 10 years, a justice's tenure has to be confirmed by referendum. In practice, the justices are almost always reselected and are allowed to serve until the age of 70.

Economic Analysis
GDP (purchasing power parity): GDP (official exchange rate): $4.389 trillion (2011 est.) $5.855 trillion (2011 est.)

GDP - real growth rate:

GDP - per capita (PPP): Labor force: Unemployment rate: Population below poverty line: Budget: Taxes and other revenues:

-0.5% (2011 est.)

$34,300 (2011 est.) 64.97 million (June 2006 est.) 4.8% (2011 est.) 16% (2007)
revenues: $1.984 trillion expenditures: $2.483 trillion (2011 est.)

33.9% of GDP (2011 est.)

Budget surplus (+) or deficit (-):

Inflation rate (consumer prices): Central bank discount rate:
Commercial bank prime lending rate:

-8.5% of GDP (2011 est.)

0.4% (2011 est.) 0.3% 1.4%

Economic Analysis
Exports:

$800.8 billion (2011 est.) Exports - commodities: Motor vehicles 13.6%; semiconductors 6.2%; iron and steel products 5.5%; auto parts 4.6%; plastic materials 3.5%; power generating machinery 3.5% (2010 est.) Exports - partners: China 19.4%, US 15.7%, South Korea 8.1%, Hong Kong 5.5%, Thailand 4.4% (2010)

Economic Analysis
Imports: $794.7 billion (2011 est.) Imports - commodities: Petroleum 15.5%; liquid natural gas 5.7%; clothing 3.9%; semiconductors 3.5%; coal 3.5%; audio and visual apparatus 2.7% (2010 est.) Imports - partners: China 22.1%, US 9.9%, Australia 6.5%, Saudi Arabia 5.2%, UAE 4.2%, South Korea 4.1%, Indonesia 4.1% (2010)

Economic Analysis
Reserves of foreign exchange and gold: Debt - external: Stock of direct foreign investment at home: Stock of direct foreign investment abroad: Exchange rates: yen (JPY) per US dollar :79.67 (2011 est.) 87.78 (2010 est.) 93.57 (2009) 103.58 (2008) 117.99 (2007) $1.063 trillion (31 December 2010 est.) $2.719 trillion (30 June 2011) $146.7 billion (31 December 2011 est.) $880 billion (31 December 2011 est.)

Social Analysis
Nationality: Ethnic groups: Languages: Religions: Japanese Japanese 98.5%, Koreans 0.5%, Chinese 0.4%, other 0.6% Japanese Shintoism 83.9%, Buddhism 71.4%, Christianity 2%, other 7.8%

Population:
Age structure:

127,368,088 (July 2012 est.)

0-14 years: 13.1 15-64 years: 64% 65 years and over: 22.9% -0.077% (2012 est.) 8.39 births/1,000 population (2012 est.) 9.15 deaths/1,000 population (July 2012 est.) urban population: 67% of total population rate of urbanization: 0.2% annual rate of change 9.3% of GDP 3.5% of GDP 99%

Population growth rate: Birth rate: Death rate: Urbanization: Health expenditures: Education expenditures: Literacy:

Technology Analysis:
Japan is one of the most technologically advanced countries in the world. The most important asset is its strong knowledge base, which has earned accolades for the country. Japan is also the nation with the third highest R&D expenditure in the world. Japan also has the advantage of having technology giants like Sony, Mitsubishi, and Canon, among several other players, which have a global presence as technologically advanced companies. Japan is also the world leader in robotics. The ageing population and corresponding rise in wage costs are the major problems presently faced by the country in the technology arena. In the coming years, emerging nations like China and India may soon become competitors with their low cost research facilities and wages.

Technology Analysis:
Current strengths Strong knowledge base Presence of large global players Leader in robotics Future prospects Increasing patents Eco-friendly technologies Increasing R&D expenditure Future risks Growing threat from China and India Declining technical workforce Current challenges High wage costs

Advancements in the medical sector

Legal Analysis:
Japanese law was previously based on ancient Chinese law, but later adopted a system similar to that of Germany and the US in the beginning of the 20th century. This turned out to be advantageous for Japan, as it made its legal system compatible to that of the Western world. The knowledge of western law has also brought a growing legal services market into Japan, a market which had a revenue base of $4.1 billion in 2008. The judicial system of Japan is criticized for its leniency towards the political classes. The system is also plagued with human rights violations, especially of prisoners

Legal Analysis:
Current strengths Legal system similar to the US and Germany Strong legal service market Future prospects Tax relief for foreign firms Future risks Declining judicial reviews Violation of human rights Current challenges Slow legal procedures Weak prosecution system

Legal Analysis:
The legal framework of Japan is based on the German system of civil laws. It uses a unitary judicial system, with ultimate authority residing in the Supreme Court. The justice system is divided into five major categories: summary courts, district courts, family courts, high courts and the Supreme Court. The judicial process is quick, and judges are well educated and expected to make judicious decisions in the interest of the common people. Setting up and running a business is fairly easy, but there is too much regulation. It takes eight procedures and 23 days to get a business up and running in Japan. All Japanese residents have to pay taxes to the government according to their employment status, assets, income and source of income.

Legal Analysis:
Tax regulations: Japanese taxation is based on the self-assessment system taxpayers must calculate their taxable income, file returns and pay taxes due. The Corporation Tax Law governs the principal taxes that companies pay in Japan. The corporate tax burden is high compared to that of other countries in the region. The national standard corporation tax rate is 30% for all the corporations with capital exceeding JPY 100 million ($1.07 million). There is also local enterprise tax with three components constituting of a 7.2% of taxable profits, 0.48% of a value added factor and 0.2% of share capital and capital surplus. The effective tax rate for corporations is around 41%. Other kinds of corporate taxes are capital duty, payroll tax, real property tax, social security, stamp duty, registration tax and license tax.

Environmental analysis
Japan has strong environmental policies in place. The country has raised its environmental protection standards by increase corporate accountability regarding the environment. Many standards like environmental accounting and reporting have been introduced to tighten the emission levels in the country. The country is also taking serious measures to control the ozone layer depletion. The Japanese government has put various control measures in place and, as a result, the overall environmental quality standards (EQS) of the country have improved. However, issues like persisting air pollution and the heat island phenomenon still plague the country. There is also evidence that suggests Japan's pollution problems are exacerbated by the rise in pollution in China.

Environmental analysis
Current strengths Strong environmental policies Current challenges Air pollution

Ozone layer protection law

Improved water quality Future prospects Emerging technologies for reduction of CO2 emissions Low-pollution diesel vehicles

Heat island phenomenon

Future risks Chinas pollution levels affecting Japan