HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

The third-largest global economy, Japan, is home to the largest electronics industry and third-largest car industry in the world. The country relies heavily on its export market to drive its economy, as it does private consumption, which accounts for 60.9 per cent of GDP. Exports rose 14.1 per cent year-on-year in September 2017, imports by 12 per cent, as the country benefits from an upturn in the global economy and increased demand for goods. This upturn in trade helped drive GDP growth in Q3 to 1.4 per cent in annualised terms; the seventh consecutive quarter of growth. Despite the moderate expansion of the economy after years of sluggish growth, the central bank has delayed its timetable for hitting its target of 2 per cent inflation until the year to March 2020; the IMF has warned that greater structural reform is required in order for the country to secure a ‘durable exit from deflation’. Domestically, addressing the economic costs of the country’s aging population remains a priority for the government; the country’s shrinking population is also causing severe labour shortages (the unemployment rate was 2.8 per cent in September 2017). The government has relaxed some restrictions on foreigners wishing to live and work in the country, and is committed to providing greater care facilities for children. In September 2017, it proposed a USD17.8 billion economic stimulus which will, in part, be spent on child-care costs.

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Legal and regulatory

  • Foreign exchange and domestic currency (JPY) accounts can be held by residents both domestically and abroad. Resident domestic currency accounts are freely convertible into foreign currency
  • Non-resident bank accounts are permitted in both foreign and domestic currency. Non-resident domestic currency accounts are freely convertible into foreign currency
  • Interest is offered on demand deposit accounts (except for JPY-denominated current accounts). Multi-currency accounts are popular in Japan as they allow companies to take advantage of higher interest returns than are obtainable on JPY deposits
  • All non-trade transactions between residents and non-residents in excess of JPY30 million, or its equivalent in foreign currency, must be reported to the Bank of Japan (BOJ) for balance of payments purposes

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Taxation

  • Resident companies are taxed on their worldwide income
  • Non-resident companies are taxed on Japanese-sourced income only
  • The standard corporation tax rate of 23.4 per cent applies to companies with share capital exceeding JPY100 million
  • Japan is a signatory to the Multilateral Competent Authority Agreement, under which information will be exchanged between tax administrations, giving a single, global picture on some key indicators of economic activity within multinational enterprises

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Payment instruments and systems

  • The cheque remains an important cashless payment instrument in Japan, particularly for large companies, but its use is in steady decline due to a preference for electronic credit transfers for high-value corporate and low-value retail payment transactions. There is no standardised direct debit scheme. E-money schemes are very popular in Japan; in 2016, there were five billion e-money transactions totaling USD44.5 billion
  • Japan operates four national payment systems: Bank of Japan Financial Network System (BOJ-NET), an Real Time Gross Settlement (RTGS) system; the Zengin System, for low-value electronic credits and debits; the Foreign Exchange Yen Clearing System (FXYCS), an RTGS system for cross-border JPY transactions; and the Bill and Cheque Clearing Systems (BCCS), for paper-based payments

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Cash management

  • Notional pooling is permitted although Japan’s tax regulations can make notional pooling structures difficult to operate
  • Domestic and cross-border cash concentration is permitted. However, according to the Temporary Interest Rates Adjustment Act, the current maximum interest rate applicable to all JPY-denominated current accounts in Japan is set at zero per cent per annum. Accordingly, a sweep within a single entity, an automatic two-way sweep, or a reverse sweep between a JPY-denominated current account in Japan and an interest bearing account (in or outside Japan) should be avoided
  • Lockbox services are available

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Electronic banking

  • Electronic banking is available in Japan. There is no bank-independent electronic banking standard
  • International companies often operate separate electronic banking and ERP systems for their Japanese operations due to the difficulty of translating Japanese characters to a format readable by internationally developed ERP systems

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To read the full report on Japan and to discover more on these and other topics, including banking and trade, please click on the Download PDF option.

Sources:

  • World Bank
  • Bank of Japan
  • International Monetary Fund (IMF)
  • Statistics Bureau: Ministry of Internal Affairs and Communications
  • Japan Automobile Manufacturers Association

The materials contained on this page were assembled in May 2017 (unless otherwise dated).

 

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