JAPAN

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Japan is the world’s fourth largest economy. Its GDP reached USD 5,712 bn USD (purchasing power parity) in 2019. The economy has been significantly impacted by the COVID-19 pandemic, as real GDP contracted by 4.7%. The country has also struggled to ramp up its vaccination programme in 2021. Japan has one of the largest financial systems in the world. The country experienced remarkable growth after WW2, which ended with the bursting of the asset price bubble in the early 1990s. It was followed by a period known as the ‘lost decade’. Real economic growth dropped and inflation started to inch down, turning negative in the latter half of the 1990s. Fiscal stimulus and loose monetary policy were not successful in reviving the economy, but resulted in huge government debt. Given the COVID-19 shock and the fiscal policy response, the public debt-to-GDP ratio has reached 256% of GDP in 2020.

The election of Shinzo Abe in 2012 has led to a reinforcement of loose monetary and fiscal policy to reinvigorate the economy, that the current administration is pursuing. The so-called Abenomics strategy is built around three pillars (i) fiscal stimulus, (ii) a very loose monetary stance and (iii) structural reforms. The Bank of Japan has been buying financial assets, mainly Japanese government bonds in order to expand the monetary base, and its balance sheet equals roughly 130% of national GDP today. Mr. Yoshihide Suga became Prime Minister in September 2020 to replace Mr. Abe, but resigned in September 2021.

Progress on structural reforms needs to be further intensified to raise the economy’s potential growth and tackle significant demographic challenges. Progress has been made, for example, in increasing women’s participation in the workforce. However, one of Japan’s most serious structural problems is the rapidly ageing population. In 2018, almost 28% of the population was 65 and above, against the 17% OECD average. According to official projections, the Japanese population could shrink by over 25% in the next 40 years. This would have a significantly negative impact: in addition to negative effects on productivity and potential growth, for example a rise in the dependency ratio will reduce the tax base and limit the reduction of the primary deficit.

Summary

BNP Paribas has been present in Japan since 1867 with over 800 BNP Paribas specialists based in the Tokyo headquarters. The bank offers domestic and cross-border cash and liquidity management services and international trade finance solutions to both Japanese corporations and multinational corporations with a presence in Japan.

Currency

  • Japanese yen (JPY).

Bank accounts

  • A company is considered resident in Japan if its principal or head office is located in the country, with the exception of companies considered resident in countries with which Japan has a double-tax treaty.

BNP Paribas Cash Management Capabilities

Cash collections
Cheque collections
Direct debit collections
Domestic incoming transfers
Virtual IBAN
Virtual accounts
International incoming transfers
Card acquiring

Payments & collections

There is a strong preference for cash in Japan; government statistics indicate that it has a cashless ratio below 20% versus 96% in South Korea, for example. The government has set a target of doubling the percentage of cashless payments by 2025 to reduce the country’s dependency on cash. Most recently, it has proposed reforms that would enable companies to pay salaries digitally.

MoneyTap is a P2P cash transfer app and enables real-time settlement for domestic payments in JPY or foreign currency 24/7/365 via a bank account, phone number or QR code. In 2020, the volume and value of e-money transactions decreased 5.0% to 5,923 million on 2019. Value increased 4.9% to JPY 6.0 trillion.

Electronic banking services are available from all banks. There is no national electronic banking standard in Japan, so companies use banks’ proprietary services.

Companies use Answer Network System for Electronic Requests (ANSER) to see balance records across a variety of bank accounts. Zengin can then be used to initiate domestic and foreign-currency transfers between these accounts. Foreign companies sometimes operate separate electronic banking systems due to the difficulty in translating characters used in Japanese data to a readable format.

Short term investments

Interest payable on credit balances

  • Interest-bearing current accounts are permitted although rare. It is possible to sweep surplus balances into interest-bearing overnight accounts.

Demand deposits

  • Demand deposits denominated in JPY or major foreign currencies are available for terms ranging from overnight to one year.

Time deposits

  • Time deposits are available in JPY or major foreign currencies for terms ranging from one month to ten years.

Certificates of deposit

  • Domestic banks issue certificates of deposit with terms ranging from overnight to five years. Terms of three months are most common.
  • Certificates of deposit are issued paying fixed interest.

Treasury (government) bills

  • The Japanese government issues Treasury bills to corporations through bi-monthly auctions for terms of three, six and 12 months.
  • T-bills of JPY 10,000 are issued to retail investors with a three-year fixed-rate, five-year fixed-rate and ten-year floating-rate.

Commercial paper

  • Domestic commercial paper is issued by companies for terms of up to one year. Terms of three months are most common.
  • The minimum investment amount is JPY 100 million.

Money market funds

  • Domestic money market funds are popular short-term investment instruments.

Repurchase agreements

  • Repurchase agreements with maturities ranging from overnight to one week are commonly available to companies.
  • The use of ‘gensaki’ repos is increasing. Gensaki transactions are available for any maturity dates up to one year, but most agreements are within three months or less.

Banker's acceptances

  • Banker's acceptances are not used in Japan.

BNP Paribas Trade Finance Capabilities

Documentary credits
Documentary collections

International trade

  • As a member of the Asia-Pacific Economic Cooperation (APEC) forum, Japan has agreed to liberalise trade and investment rules between member states.