International Investment and Japan

Political Indicators

Political Stability

Rating:

2005: 1 2 3 4 5 6 7

2010: 1 2 3 4 5 6 7

Analysis:

"Japan's current domestic goal is to strengthen the political party system. In recent years, a series of scandals have damaged the integrity of not only individual politicians, but also entire parties" (Fraser). Since the 1970's, there have been several changes in the government due to all the scandals. Since 1996, stability has been restored to the political system due to the election of Ryuturo Hashimoto (Fraser). Japan's government strongly distanced itself from communist countries during the Cold War but now currently has ties to several Asian countries.

Lately Japan has developed a more Ð''westernized' approach in regards to its political system, and things will continue to get better due to an increased public trust in the current majority, the liberal democrats. Even though Japan has a multi-party system, it has generally been dominated recently by this party. The government is divided into three branches, and the liberal democrats hold a majority of the seats in the legislative branch (Fraser).

Japan will continue to incorporate a more global approach to its policies and model their political structures and policies on the west. This has worked as no major scandals have occurred in the past ten years, and politics there will become more stable.

Public Policies Impacting Foreign Direct Investment

Rating:

2005: 1 2 3 4 5 6 7

2010: 1 2 3 4 5 6 7

Analysis:

All the major policies regarding business in Japan are decided by 12 ministries in Tokyo, and then local governments implement them ("1996 Country Commercial Guide"). They have power over the Japanese economy with the thousands of required licenses, permits, and approvals that regulate business there. "Although Japanese businesses have prospered for many years in a tightly regulated environment, in Japan's current recession, they are now calling for deregulation because they can deal with foreign competition and that the government's over-regulation is only protecting inefficient small companies while forcing manufacturing to move offshore" ("1996 Country Commercial Guide").

American companies initially start at a disadvantage in Japan, but become successful after a short period of time when a presence has been established. A little over 200 of the U.S. Fortune 500 companies have a direct investment in Japan, and 45 of the 50 leading exporters in the U.S. do so as well ("1996 Country Commercial Guide"). The government in Japan has removed most of the legal restrictions on exports to and from the foreign investment there and is currently seeking ways to increase this trade ("1996 Country Commercial Guide"). "The U.S. and Japanese governments continue to work on removing anti-competitive and exclusionary business practices through bilateral dialogue" ("1996 Country Commercial Guide").

The average tariff in Japan is now one of the worlds lowest. The country expanded their list of duty-free manufactured products by 2400 items out of 7000 items listed on the tariff schedule ("1996 Country Commercial Guide"). In addition to customs, there is a 3% tax on all goods sold in Japan and payment is required at the time of import.

The statistics prove that U.S. firms in Japan are very successful; this trend will most definitely continue as relations between the two countries will only get better.

Views of Political Leaders

Rating:

2005: 1 2 3 4 5 6 7

2010: 1 2 3 4 5 6 7

Analysis:

Japan has several major political parties with differing views including the: Liberal Democratic Party, Democratic Party, Social Democratic Party, Liberal Party, Communist Party, Heiwa Kaikuku, Komei, and Sakigake (Ito).

Liberal Democratic Party:

This has been the most dominant party in the last 40 years. Despite the name, the party is conservative and protects business interests. The LDP controls 101 seats in the upper house and 263 in the lower house (Ito).

Democratic Party:

The Democratic Party is the largest opposition of Japan's bicameral system. They are interested in seeking more open markets, greater deregulation and tax cuts. The Democratic Party has 47 seats in the upper house and 92 in the lower house (Ito).

Social Democratic Party:

This political group is strongly opposed to the Liberal Democratic Party with views on expanding Japan's military role and strengthening relations between the U.S. Support for the party was gained through unions, but they have recently waned; seats in the upper house are 13 while having 15 in the lower house (Ito).

Liberal Party:

The Liberal Party believes in deregulation and more of a participation in government affairs controlling 12 seats in the upper house and 40 in the lower house (Ito).

Communist Party, Heiwa, Kaikuku, Komei, Sakigake:

These parties have few seats in Japan's bicameral legislative system whose views are independent of other major parties.

The political system and views of Japan are similar to those of the United States, except for the fact that they have more active parties in power, with one holding a very large majority, the Liberal Democratic Party. Having such a dominant party is not good for change, but Japan has maintained government stability and should continue to do so for years to come.

Major Political Events

Rating:

2005: 1 2 3 4 5 6 7

2010: 1 2 3 4 5 6 7

Analysis:

The realignment of the Japanese political system, which began in the