Japan - Economic analysis of government's policies, investment climate and political risk.






JAPAN: Economic Policy Analysis

This site presents an analysis of the Japan government's economic policies compared to a revised list of 34 economic policies as prepared by student Satomi Tomida with the McKeever Institute of Economic Policy Analysis (MIEPA)in May 2014. To read the analysis scroll through this site. To learn more about the background policies, click here  Introduction and Policy Recommendations

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Satomi Tomida, a Japan citizen who currently [May 2014] lives in San Francisco, has completed a study of the home country government's economic policies as compared to the MIEPA list of policies as outlined above. The study on Japan is shown below. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2013. Used herein with permission]

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Comparison of Japan's economic policies to MIEPA criteria as prepared by native student of Japan, Satomi Tomida, studying in the US in May 2014.



        1               4.0          15.0             15.0       100%

        2               3.0           9.0             15.0        60

        3               5.0          15.0             15.0       100

        4               5.0          15.0             15.0       100

        5               3.5          10.5             15.0        70

        6               5.0          15.0             15.0       100

        7               5.0          15.0             15.0       100

        8               4.0          12.0             15.0        80

        9               3.5          10.5             15.0        70

        10              5.0          15.0             15.0       100

        11              2.0           6.0             15.0        40

        12              5.0          10.0             10.0       100

        13              4.0           8.0             10.0        80

        14              5.0          10.0             10.0       100

        15              5.0          10.0             10.0       100

        16              3.0           6.0             10.0        60

        17              5.0          10.0             10.0       100

        18              4.0           8.0             10.0        80

        19              4.0           8.0             10.0        80

        20              5.0          10.0             10.0       100

        21              1.0           2.0             10.0        20

        22              1.5           3.0             10.0        30

        23              5.0          10.0             10.0       100

        24              4.0           8.0             10.0        80

        25              5.0          10.0             10.0       100

        26              3.0           6.0             10.0        60

        27              4.0           8.0             10.0        80

        28              4.0           8.0             10.0        80

        29              3.5           3.5              5.0        70 

        30              4.0           4.0              5.0        80

        31              5.0           5.0              5.0       100

        32              3.0           3.0              5.0        60

        33              5.0           5.0              5.0       100

        34              3.0           3.0              5.0        60

   TOTAL             136.0          296.5            365.0        81.2%
                      =====        ======            =====        =====

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1 Freedom from internal control : 5.0

Japanese citizen are guaranteed to freedom of movement by the Japanese constitution. Citizen can travel within the country or other countries.


2 Freedom of speech : 3.0

In the 1947 constitution, Freedom of Speech was insured including Freedom of the Press and Freedom of Assembly. For the most part, free speech is similar to that of the United States. There are three major areas that regulate completely free speech. First, the major media is accessed through exclusive press clubs. This places a limitation on access for official press conferences and briefings. The second area is a on the internet which is a prohibition on child pornography. This child safety regulation is similar to that found in many other countries. The third area is regulation of academic texts by the Science, Technology, and Education Ministry. Texts must follow national curriculum guidelines.


3 Effective, fair police force : 5.0

The 1947 constitution, provides for a equal justice. This includes a fair police force with prohibitions on arbitrary arrest and detention, torture, and compelled confessions. When citizens feel that their civil rights are violated by police, they can lodge a complaint against the police or bring it to court. The judiciary is independent of executive control. There is a right to defense counsel, right to know the charges, and cross-examination. Unlike the US, trial by jury is only reserved for serious criminal cases in Japan. There is a right to appeal to higher courts and repeal convictions.

There are some areas of criminal justice in Japan which has received criticism. Suspects can be detained for long periods of time. Also, the lack of a strong jury system is criticized by nations that have such systems, but not always by nations with magistrate systems.



4 Private property : 5.0

Since 1873, citizen have the right to own private property. As the capitalist country Japan enforces private property law. Property Right Index report, rating of 80 for Japan. This measure the protection of private property rights and enforcement. This is the third highest rank in Asian countries.




5 Commercial banks : 3.5

There are numerous commercial banks in Japan. Three biggest are Mitsubishi UFJ, Sumitomo-Mitsui, and Mizuho, these three rank among the top 30 in the world. In 2010, approximately 7200 of depositors per 100 adults use commercial banks.

In the last 15 years, there has been reformed in the banking system towards greater privatisation. Since the Japanese government still bail out failing banks on. This is not completely private commercial banking system. Banks in Japan loan out our deposit money and Reserve Requirement is 10%.





6 Communication systems : 5.0

Japan has well developed telecommunication network. In 2007, there were 105.297 million mobile-phones, 16.766 million IP phones, and 52,3981 other phones. That would be 1.37 phones for person. In 2004, there were 71 million users with mobile phones internet access and 34 million with broadband access . That would be 83% of the population of internet access. Certainly, this has increased by 2014.

Telecommunication is regulated by the Ministry of Internal Affairs and Communications (MIC). This government agency enforces telecommunication business law for consumer protection and competition. In general, they promote development of telecommunication infrastructures.



7 Transportation : 5.0

Japan has an efficient transportation network, especially within metropolitan area and between the large cities. Japanese public transportation is characterized by its punctually, its superb service, and the large crowds of people using it.


8 Education : 4.0

In Japan, public education is regulated by Ministry of Education. They set the curriculum for entire country. (This is different from the United States.) Thus, every students in Japan get same education. Japan has 240 days for school year (60 days more than the United States) . Do not have the long breaks. such as the United States. Japan has the number 4 in the world’s educational scores. Japan spends 3.5% of GDP on education. (132 in the world ranking) 94% of the students go to the high school. Passing the test is required to enter high school or college.

I think that Japanese education system is better than US because test scores of mathematics and science in Japan is higher than US.




9 Social Mobility : 3.5

In theory, there is unlimited freedom of social mobility in Japan due to its constitutional guaranties. A 2013 comparison of intergenerational elasticity of father and son earnings with the Gini coefficient of income distribution shows a strong correlation of the two measures. Comparing Japan with the U.S. and other countries, shows that Japan lags behind countries such as the U.S. Italy, and U.K. for both social mobility and income distribution, but is better than countries such as the Germany, Canada, and the Scandinavian countries. Furthermore, there is a steady increase in social and economic mobility in Japan throughout the past half century. The exact cause of the inherent immobility appears to be at least partially due to old social structure and customs and partially due to management customs. These may be eroding with time and with increased globalization of the economy.





10 Freedom from outside control : 5.0

Japan maintains diplomatic relations with nearly all countries throughout the world. At each country, Japan has an embassy and in some countries, one or more consulates. One of the missions of the embassies and consulates are to ensure that its citizens are protected when outside of Japan. Furthermore, Japan maintains military and economic alliances with other countries to assist in the enforcement of these protections. In particular, the Japanese military has begun to work closely with the US military on counter-terrorist maneuvers to protect its citizens abroad from terrorist activities.



11 Protection of Domestic Enterprises 2.0

Throughout most of the post-war 20th century, Japan has protected its domestic enterprises with import tariffs to develop strong export imbalances. In the past two decades, there has been a shift in policy towards one that favors Japanese consumers with a relaxation and repeal of many tariffs. Data from February 2014 indicate an ¥800 billion monthly trade deficit (¥6.6 trillion import versus ¥5.8 trillion export) which is 3.5% greater than February 2013. There are specific industries that remain highly protected. This includes the fishery, insurance, and agriculture industries.





12 Foreign country transactions : 5.0

The yen is the currency of Japan with a trade rate of ¥102 per dollar as of March 23, 2014. Foreign transactions in Japan are with yen or major international credit card brands. Personal checks are not used in Japan. Travelers checks can be used in banks as well as most lodging and major stores. Yen can be purchased at airports, banks, and Travelex exchange booths; some hotels and major department stores also exchange for yen. Only some ATMs accept cards from non-Japanese banks; these can be found at post offices, large department stores, and 7-eleven stores.



13 Border control : 4.0

Today, the work of Japan's immigration control authority faces major challenges due to changing socioeconomic conditions such as employment, social welfare policies, and public security issues. At immigration officers are engaged in various services related to the approval and rejection of applications, as well as the prosecution and deportation of offenders in the three main phases of immigration control, namely entry examination, status of residence examination, and deportation procedures.

In 2007, Advance passenger Information System and e-Passport Authentication System were made compulsory. In 2012, operation of automated gates started.

In 2013, security services at Narita International Airport in Japan seized 270 kilograms of illegal drugs. The amount of drugs seized was the highest amount recorded since the airport opened in 1978. The illegal drugs were seized in 82 cases of drug smuggling. Its street value of $184 Million (18.8 Billion Japanese Yen).




14 Currency : 5.0

The currency used in Japan is called as the Yen. The Yen, is the official currency of the Japan . There are four kinds of bills (10,000 yen, 5,000 yen, 2,000 yen, 1,000 yen) and six kinds of coins (500 yen, 100 yen, 50 yen, 10 yen, 5 yen, 1 yen) used. All of the bills and coins are different sizes.

The constitution of Japan provides that the Japan government shall have the power to print the Japanese Yen. The Japanese Yen bill uses the decimal system, consisting of 100 equal units. The Bank of Japan publishes the bill and the Ministry of Finance publishes the coin. Yen is the only money that we can use in Japan



15 Cultural, language homogeneity : 5.0

Japan is an extremely homogeneous society, and the japanese race has a large majority of the population. The Japanese people are primarily the descendants of various peoples who migrated from Asia in prehistoric times. One of the earliest groups, the Ainu, who still persist to some extent in Hokkaido, are physically somewhat similar to Caucasians.

Japanese is the official language and almost all people who grow up in Japan speak Japanese as a native language. In April 2011, English became regular subject from 5th grade. Many foreigners who lives in Japan understand Japanese.



16 Political effectiveness : 3.0

There have been four recent tests of the effectiveness of the Japanese government. The economic problems of the decades of the 1990s and 2000s, natural disaster of the 2011 Tohoku earthquake and tsunami, the international dispute over the Senkaku/Diaoyu islands, and the environmental problems of global warming.

The Tohoku earthquake and resulting tsunami and nuclear meltdown has been the biggest natural disaster in Japan in recent times. By the standards of the time, Japan had state-of-the-art earthquake preparation including building codes and scientific warning mechanisms. The Japanese government has since then bolstered building codes and invested substantially in updating and expanding scientific warning mechanisms. Immediately after the earthquake, tsunami warnings and evacuations began. Government resources then had to contend with two crises: disaster relief and containment of the nuclear reactors that were severely damage by the earthquake and tsunami. The government took quick action (i.e., within 72 hours) to deploy the military to aid relief efforts, provide necessary funds, and request foreign disaster aid. The government ordered evacuation of residents living near the plant. The main failures of the government were inadequate expectations of the potential strength of the earthquake and tsunami, the possible inadequate control of the reactor meltdown which resulted in substantial radioactive contamination, and the slowness of official information on the Fukushima Daiichi reactor meltdown.

The Senkaku/Diaoyu island dispute began after the US determined the possibility of oil reserves in the area and relinquished control to Japan in 1976. Up until 2008, the dispute was not a top level issue. Beginning at that time, Chinese fishing vessels began to actively trawl in the area and aggressively confronted the Japanese Coast Guard. The issue came to the forefront of international attention on September 2012 when the Japanese government purchased them from the owning family. Both the People’s Republic of China and the Republic of China contest the Japanese claim. The situation has since been a point of contention, primarily between Communist China and Japan. During the Lost Decade of the 1990s, which sometimes is expanded to include the 2000s, the Japanese economy entered a period of economic stagnation after several decades of sustained economic growth. The causative factor of the stagnation is the asset-price bubble collapse of the early 1990s which caused a loss to Japan equal to three years of GDP. However, much debate has occurred over the role of the Japanese government in the long economic stagnation following that. The response of the government was to reduce interest rates and increase infrastructure spending. Even with those changes, which historically helped in similar situations, there was no improvement in the economy. There are some economists that argued that the shift in consumer reaction made those government responses ineffective. Also, while Japan had economic stagnation, many other countries in the world went into recession during this time.








17 Institutional stability : 5.0

The executive branch of the Japanese government is headed by the Prime Minister and Cabinet who are selected by the legislative branch, the Diet. This government, which is a parliamentary constitutional monarchy has been largely unchanged since start of the 1947 Constitution. During that time there have been 32 Prime Ministers whose times of service have ranged from 2 months to 7.7 years. All Prime Minister and cabinet changes have been peaceful during that time. During some time periods there is higher turnover of the executive branch which may represent some degree of instability. From September 2006 to now, there have been 7 Prime Minister changes, which is relatively high turnover compared to the 4 year terms of the US President. In general executive branch turnover seems to follow economic prosperity (more stable) or difficulty (more turnover).

The government of Japan has separate bicameral legislative branch, executive branch, and judicial branch. The legislative branch is generally more powerful and is the only branch directly elected by the citizens of Japan.




18 Honest government : 4.0

According to The Corruption Perception Index in 2013, Japan was ranked 18th of 177 countries as having the lowest perceive levels of corruption. The rank became lower than 2012, so Japanese government needs to improve for public confidence.

Japanese history textbook controversies refers to controversial content in government-approved history textbooks used in the secondary education of Japan. The history textbook controversies have been an issue of deep concern both domestically and internationally, particularly in countries which were victims of Imperial Japan during the war. Despite the efforts of the nationalist textbook reformers, by the late 1990s the most common Japanese school books contained references to, for instance, the Nanking Massacre, Unit 731, and the comfort women of World War II, all historical issues which have faced challenges from ultranationalists in the past. The most recent of the controversial textbooks, the New history textbook, published in 2000, was shunned by nearly all of Japan's school districts.



19 Common laws : 4.0

The law of Japan consists of the principal of the statute law and there are six kinds of statute laws which are the Civil Code, the Commercial Code, the Criminal Code, the Constitution of Japan, the Code of Criminal Procedure, and the Code of Civil Procedure. In order to prevent both statute laws being contradictory. Article 14 of the constitution states that all of the people are equal under the law and there shall be no discrimination in political, economic, or social relations because of race, creed, sex, social status, or family origin.

There is difference between rich people and poor people for a judge. The criminal Procedure states that the defendant can choose a counsel.

There are private defence counsels and court-appointment defense counsels. Rich people can choose better private defense counsels.



20 Central bank : 5.0

The Bank of Japan has been the central bank for Japan since 1882. It is the sole institution that controls money supply and monetary policy. Thus, it is one of the main controllers of the Japanese economy and has a large degree of independence of action separate from the Japanese government.


21 Domestic budget management : 1.0

National tax revenue is only about 40 percent of national annual revenue, and national annual revenue depends on flotation of government bond 50 percent. Finances of Japan continue budget deficit that annual expenditure exceeds tax revenues.

Year: National Tax Revenue : National Expenditure : The Rate of Tax Revenues to Expenditure

2011 : 40.9 trillion JPY (486 billion USD): 94.7 trillion JPY (1.1 trillion USD) : 43.2%

2012 : 42.3 trillion JPY (417 billion USD): 90.3 trillion JPY (891 billion USD) : 46.8%

2013 : 43.1 trillion JPY (425 billion USD): 92.6 trillion JPY (914 billion USD) : 46.5%




22 Government debt : 1.5

In 2013, the public debt of the Japanese government was over ¥250 billion. This is among the highest in proportion to GDP in the world. In terms of overall government debt as a proportion of the GDP, Japan has 2-3 times as much as most other highly developed nations. In 2013, Government debt to GDP in Japan reaching 222.7.20 percent.




23 Economic statistics : 5.0

Various statistics are created by the Statistic Bureau and the Director-General for Policy Planning. The economic Statistic is in charge of executing and tabulating statistical surveys pertaining to establishments and enterprises. The surveys are the Economic Census for Business Activity, the Survey of Research and Development, and the Monthly Survey on Service Industries. Statistic created are promptly released in the Internet or booklet. These statistics are intelligence infrastructure used not only by administration use but by a society as a whole. Business people believe that the statistic numbers.



24 Protection of public health and safety : 4.0

Life expectancy for newborn Japanese are 84 years, among the highest in the world and higher than other major highly developed countries (US life expectancy is 78 years). There are many proposed reasons for this including diet, culture, and government programs. However, it is difficult to determine what role each plays.

The Ministry of Health, Labour, and Welfare is the main part of the Japanese government regarding public health and safety. It regulates and sets policy for food and drug safety as well as health insurance, workplace safety, sanitation, and social services. Other government agencies such as the National Institute of Public Health (responsible for research and training) and the National Institute of Infectious Disease (responsible for infectious disease research and control) also play a role in public health. Overall, the Japanese government spends about $2200 per capita on health or about 8% of its GDP (compared to $3000 per capita, 15% of GDP for the US).

Medical services in Japan are universal access through public and private hospitals although there are space issues that sometimes cause patient rejection. All residents are enrolled in either the Employees’ Health Insurance or the public National Health

Insurance program.

The safety of Japan’s food is “guaranteed” by the world’s strictest tests introduced after the Fukushima nuclear disaster, the government said in a statement that follows the discovery of leaks of radioactive water in recent weeks.








25 High wage policies : 5.0

Minimum wage policy is set on a regional and industry level and overseen on a national level by the Ministry of Health, Labor, and Welfare. Japan’s average minimum wage is 642 to 821 yen per hour ( $6.33 to $8.09 US on 03/03/14 exchange rate $1=1.01yen). It’s depending on where you live. In general, except for the minimum wage, wages are usually set by companies rather than the government. Most people can afford the necessary to live comfortably.



26 Environmental protection : 3.0

The Ministry of the Environment is the cabinet-level ministry of the Japanese government. This ministry oversees environmental conservation, pollution control, and nature conservation. This includes the environmental damage caused by the 2011 earthquake- and tsunami-caused nuclear pollution from the Fukushima dai ichi nuclear reactors.

In the 1950s and 1960s, industrial waste led to environmental disasters. Early efforts for greater environmental responsibility began in the early 1970s. In the 1980s Japan has made substantial improvements in its environmental protection. The 1993 Basic Environment Law substantially promoted conservation and recycling as well as restricted pollution. Japan was also the host of the 1997 Kyoto Protocol conference and demonstrated leadership in global warming and climate change policy issues.



27 Strong Army : 4.0

After the end of post world war 2, The Japan Self-Defense Forces, which are a defence organization instead of the armed forces based on Constitution of Japan Article 9 Clause 2, were established. The Self-Defense Forces are organized in Grand, Maritime, and Air Self-Defense Forces. They work on disaster dispatch and international peacekeeping operations in others of the defence activity of the country. For instance, Japanese Self-Defence Force soldiers had worked on in clean up operations and to search for people missing since the March 11, tsunami in Fukushima. As of 2013, Japan currently has the fifth largest defense budget in the world.



28 Foreign trade impact : 4.0

In 2013, total Import was 81.259.403.000.000JPY ($794.347.859.700) In 2013, total export was 69.786.759.000.000 JPY ($682.177.507.300) In 2013, GDP was 609.708.000.000.000 JPY ($5.960.000.000.000)

Total Import + Total Export / GDP = Percentage of Total trade 81.259.403.000.000+69.786.759.000.000/609.708.000.000.000=25%




29 Management of foreign current budget : 3.5

Total Exports - Total Imports = -11472644 69.786.759.000.000-81.259.403.000.000= -

In January 2014, export increased by 9.5% to 5.25 trillion (yen) while imports rose 25% to 8.04 trillion (yen). This led to a trade deficit of 2.79 trillion (yen) $27 billion much of which can be explained by fossil fuel costs and loss of nuclear energy.

In the Japanese government, trade is primarily the domain of the Ministry of Economy, trade and Industry. As Japan is a primarily capitalist country, much of the trade balance is out of the control of the government and subject to market factors.



30 Layers of collective action : 4.0

Everyone in Japan can votes at the age of over 20 years old. Election of the 2 Houses of the Diet, House of Representatives and House of Councilors, stands by popular vote in cities. In addition, each 47 prefectures in Japan has governor who are chosen by a direct election by local inhabitants.

Their responsibilities include providing education, walfare, and other services and building and maintaining infrastructure, including utilities. Their administrative activities bring them into close contact with local people.

http : // en.wiki/Japan#Government)_and _Politics


31 Pro business climate : 5.0

Japan is a capitalist country that encourages individual’s success on Business so People can do business freely. The country has well defined investment policies and support from government and industry associations which encourage free trade. The professionals whom Japan recognizes officially are certified public accountants ,doctors ,dentist ,veterinarians ,lawyers ,first class authorized architects ,pharmacists , real estate appraisers ,patent attorneys ,professional engineers , social insurance consultants and licensed tax accountants . System consultants with higher income who has worked for 5 years as system engineers are also recognized as professionals. A person with high income tends to be recognized as the successful person.


http://www.chugoku-np.co.jp/News/Sp201202160059.html ;

http://www.jfc.go.jp/k/sinkikaigyou/index.html ;


32 Government enterprises : 3.0

As with many countries utilities and transportations are government owned businesses. Nippon Telegraph and Telephone Public Corporation, Japanese National Railways, Japan Post, and Japan Tobacco are some of the biggest government owned businesses. However, over the last 30 years there has been a trend towards privatization on NTT, JR, and JT have been privatized in 1980s. Japan Post is undergoing privatization.

http:// en.wikipedia.org/wiki/Japanese_public_coporations

33 International security agreements : 5.0

In 1960 Japan and the United States signed the Treaty of Mutual Cooperation and Security. This was a follow up of the 1952 treaty of San Francisco. The United States and Japan act meet common dangerous and in force until one of the countries wants to stop the alliance.

In 2006, India and Japan signed the Joint Statement Towards Japan-India Strategic and Global partnership. This is primarily an economic agreement Japan and India also have strong cooperation against international crime and terrorism.

Since 1956, Japan has been a member of the United Nations and participates in the General Assembly. The United Nations resolves disputes between member nations.

http:// en.wikipedia.org/wiki/India-Japan_relations


http:// en.wikipedia.org/wiki/Japa_and _the_United_Nations

34 Protection of domestic enterprises from government mandated costs : 3.0

Japan national corporate tax is currently 38.01% It’s higher than most countries. For instance, taxation in China is 25%. In addition to corporate tax, there are two classes of local tax, Inhabitant Tax and Enterprise Tax, paid by the corporation in Japan. These significantly increase the rate of Japan corporate tax. While Inhabitant Tax is not recognized as a deductible expense, Enterprise Tax may be deducted as an expense.




All the information and conclusions in each country analysis are solely the responsibility of the individual student and have not been verified, corrected, checked for copyright infringement or evaluated in any way by MIEPA or Mike P. McKeever. You are solely responsible for the results of any use you make of the information and conclusions in these studies. Use them at your own risk as interesting supplemental information only instead of seasoned judgements about the policy factors contained herein. Each student has granted permission for his or her work to be displayed here under his or her own name or wishes to remain anonymous and have either created a pen name or used no name at all; if you wish to contact them for any reason, forward your request to MIEPA and the student will be notified of your interest.

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