Exploring Japan's International Political Economy & Trade Dynamics

This report provides an overview of Japan's international political economy, highlighting its significant role in Asian and global trade. It examines the influence of Japan's political climate, characterized by government regulations and bureaucratic support for international trade, on its business and market environment, which is largely a free market economy. The report explores the structure of Japan's financial system, emphasizing the stability of its institutions and the impact of its banking practices on international transactions. Furthermore, it delves into the ethical standards prevalent in Japanese business culture, focusing on commitment, responsibility, and customer satisfaction. The analysis extends to the impact of Japanese culture on international trade, particularly concerning formality, punctuality, and organizational hierarchy. The report also discusses the legal systems in place and their effects on international trade, including legislation, directives, and international agreements. Finally, it touches upon Japan's support for foreign direct investment through various governmental organizations and regulatory frameworks.

INTERNATIONAL POLITICAL
ECONOMY
JAPAN

Introduction
 Japan ‘s economic and political importance in Asia cannot be
ignored. For most people, Japan is the land of the Rising sun.
 Noteworthy, Japan is considered the world’s fourth largest exporter
having shipped good worth 698.2bn(Usd) in the year
2017(Workman,2017)
 Japan export 4.4% of international export.
 Export valued at 15.952 trillion in Us Dollars.
 Japan is considered among the largest economies of the world thus
its importance to international trade.

Political Climate and Effects on
international business Japan’s [political economy is regulated by its government .
The regulation of Japan's economy is through the licensing, permit and taxation requirements.
Licensing, permit and taxation requirements affect Trade.
Ministries have issued administrative guidelines and directives in various industries.
Japan Bureaucracy extends to reputable international organizations on international
trade(Globaltrade.net,2011)
Currently, there is low government involvement as compared to a decade ago.
Japan’s political bureaucracy fully supports international trade because:
most foreign transactions such as profit transfer, royalties, dividends are
allowed
Japan’s government has created an enabling international business environment
through the existing infrastructure such as transport and telecommunication facilities.
Domestic support to its struggling industries .i.e. Agriculture.
Japanese political stability has strengthened its free economy(Heritage.Org,2017)

Business and Market Environment
 Free market economy(globaltrade.net,2011).
 Japan is the 30th most free economic economy in the world(Heritage,2018)
 Characteristics of Japans Market structure; Efficiency, Competitive, Lower productivity
levels(Agriculture, service industries), Industrial development, Few natural resource, Savings and
Investment.
 Japanese business structure is enabling international trade through:
Labor, Trade, Investment, Monetary, business freedom and health fiscal health.
 Structural Reforms for trade Simulation:Qunatiative ease, government expenditure, tax reforms
 Japan global leadership in manufacturing and technological advancement boost international trade
 Exchange rate-Japanese exchange rates have favored local businesses.
 Changing Business Practices; M $ A, trans-national trade cooperation's have boosted international
business transactions
 Japan enjoy competitive advantages:
Quality of products(“market Outlook, 2018)

Financial SYSTEM
 Composition of Japan’s banking system: City and regional banks, Credit Union, Associations and
Cooperatives(Imf.ORG,2017).
 Foreign banks are limited. Japan’s Insurance industry is the largest in the world after the USA.
 Equity Capitalization of 100 percent of Japan's Gross domestic Product .Japan’s financial institutions are stable(IMF,
2017).
 Attractive interest rates Credit banks makes it attractive for local business and to stimulate demand thus stimulating
economic growth in Japan.
 Currently, Japan has huge government debt globally(Heritage.Org,2018).Compared to the United States of America, Japan
‘s banking system is tighter. Japanese banking is premised on the banks having shares in their corporate partners.
 Japanese banking system is relationship oriented as contrasted with the relationship based relationship in the United States
of America banking system.
 Japanese financial systems were less affected by the global financial depression as compared to the
USA(Export.Gov,2018).
 Japanese banking is mostly electronic which makes it more accessible and favorable for international trade transactions.
 Remarkably, Japan Unlike the USA ,Japanese general trading companies carry out import and trade
transactions collectively thus making it easier and suitable for international business transactions.

ETHICAL STANDARDS
 According to Forbes, Magazine(Jun 9th 2016),Japan is among the top countries with least employee misconduct
rates.
 Misconduct comprises violations of legal, organizational or widely recognized principle s violations.
 Noteworthy, there is a difference about how western Countries and Japan do Business
 Japanese business ethics is commitment :Face –Value notion
 Highly Knowledgeable (Production)-Most Japanese labor force is highly skilled in production and manufacturing.
 Responsibility-Incase of delays and shoddy work, The Japanese are praised for taking personal mistakes for their
shortcomings
 Customer Satisfaction-’The customer is God”
 To the French, customer and customer service is on an equal level.
 Japanese conference rooms purpose if progress reporting as opposed to discussion (Miller,013).
 Japan has a different decision making process .
 Japanese company selection as potential business partners is based on individual company merits .As contrasted
with the French who are cost effective ideally.
 Traditionally, For Japan, alcohol drinking with working partners is not recommended unlike most western
countries(Miller,2013).

IMPACT OF JAPANESE CULTURE IN
INTERNATIONAL TRADE
 Cultural differences directly or indirectly impact international trade.
 Culture implies the set of common and accepted societal norms .
 Culture through language, organization hierarchy and etiquette affects international
business relations(Hult News,2017).
 Formality of Address differences;
Western Countries Approach-First name
Asian Countries Approach-Mr.Mrs.Surname.
 Punctuality Concept differs among western and Asian countries.
 Organizational Hierarchy-For Japan, it's important values are inclusive of Societal
equality and values which are incorporated into the corporate world.
 Japanese organization hierarchy greatly influences roles and duties in the organization
than any other country.
 Norway, has implemented a flat hierarchy in its structure of organization despite being
society oriented thus proving that different countries have different cultures in business.

LEGAL SYSTEMS AND ITS EFFECT ON
INTERNATIONAL TRADE
 Japan government has implemented various legal instruments to this effect;
 Legislation-Foreign Exchange and Foreign Trade Act
 Directives and Guidelines
 International Instrument, Treaties, Conventions and protocols. Agreements-(ASEAN).Partnerships-EU-
Economic Partnership Agreement and Strategic Partnership Agreement
 In the conduct of international trade in Japanese soil, all the legal and regulatory framework ratified In Japan,
directly impacts on all business operations in Japan.
 Japanese laws prohibit the legal practice of Non-Japanese qualified lawyers thus restricting potential foreign
legal firms .There is an exception of qualifying after Ministers approval.
 Restricted foreign capital requirements curtail international trade opportunities(Moran et.al,2017).
 The Japanese Customs Tariff Schedule provides a discriminatory tariff rates for direct countries .
 Preferential Tariffs might not be favorable to countries outside the preferential tariffs list thus curtailing
international trade activities.
 Antidumping rules have the potential to curtail international trade among countries.

FOREIGN DIRECT
INVESTMENT
 Japan supports foreign direct investment (FDI)
 Formally(FDI),programs have been incorporated.
 Foreign Direct Investment Promotion Council(Export.Gov,2017)
 Ministry of Economy, Trade and Industry(METI) .
 Japan External Trade Organization(JETHRO).
 The Japan Bank of International Cooperation(JBIC).
 Additionally, the Japanese government has established the Investment Advisor Assignment
System(2016) to offer assistance to FDI Investors.
 There is active Japanese government Involvement in FDI.
 Regulations laws exists to govern foreign business operations .
The Foreign Exchange and Foreign Trade Act
 Restricted foreign direct investment in various industries in Japan:
Radio platform

References
Export. Gov.(2017).Japan-1-Openess to ,& Restriction Upon,Foreign Direct Invetsment.
Export.Gov.[Online].Retrieved https://www.export.gov/article?id=Japan-openness-to
foreign-investment
Export.Gov.(2017).Japan-Banking Systems. Export.Gov. Retrieved
https://www.export.gov/article?id=Japan-Banking-Systems
Hult News.(2017).How Cultural Differences Impact International Business In 2017.Hult
International Business School. .Retrieved from http://www.hult.edu/blog/cultural-
differences-impact-international-business/
International Monetory Fund.(2017).Japan. Financial System stability Assessment. IMF. Org.
Retrieved from http://www.imf.org/~/media/Files/Publications/CR/2017/cr17244.ashx
“Market Outlook”.(2018).Market Outlook-JAPAN 2018.Business-Sweden.Se..Retrieved
https://www.business-
sweden.se/contentassets/75b685a3ee104308867b1e771384ba06/japan-
Miller, A.(2013).Differences In business Culture between Japan and the West .Japan Today
.Retrieved from https://japantoday.com/category/features/lifestyle/differences-in-
business-culture-between-japan-and-westmarket-outlook-2018.pdf
Moran,W.,Shirato,Y.,Cho,F.,Nishimua,K .,White and Case.(2017).International Trade In goods
and Services in Japan: Overview. ThomsonReuters. Retrieved from
https://uk.practicallaw.thomsonreuters.com/w-011-
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Workman, D.(2018)Japan’s Top Trading Partners. WTEx.Com .Retrieved
http://www.worldstopexports.com/japans-top-import-partners/