Since 2009, Japanese corporate insolvencies decreased e, according to Atradius forecasts, will decrease further this year. However, smaller players in some sectors such as construction and retail are more vulnerable due to shrinking margins. Furthermore, firms that base their business on imports also face higher expenses due to the depreciation of the yen, which could damage their financial resilience.
During the past twenty years, Japan has suffered heavily from the consequences of low inflation, with periods of deflation and timid economic growth. Thanks to an easing of monetary policy, Strong fiscal stimulus package launched in February 2013 helped boost economic growth by 1,6%. However, the following year, GDP growth stabilized, mainly due to a 1,2% contraction in private consumption, which accounts for about 60% of the Japanese economy. In 2015 the economy should grow by 0,9%, followed by +1,4% next year with consumption expected to rise accompanied by robust growth in exports.
So far, it seems that the so-called Abenomics is working. Inflation is expected to rise further in 2016 and the economy to continue growing. Nonetheless, Japan still faces some major challenges. Despite the current downward trend, the fiscal deficit is high and the country faces major demographic challenges: the population is decreasing with repercussions on the working age segment. Without adequate measures, Japan will inevitably face a shrinking tax base with a corresponding increase in pension benefits. Many industries are already facing many difficulties due to lack of workforce, with an increase in labor costs and a worsening of competitiveness on international markets.
Here then, with the outcome of the December 2014 election result, Prime Minister Abe received a strong mandate to implement the necessary reforms and thus revive the Japanese economy. To achieve a long-term sustainable and long-lasting recovery a transition to a more flexible labor market is necessary, also against the protection of categories such as farmers, doctors and pharmaceutical companies, and the introduction of more deregulation of business. The government has announced plans to address these issues during the current mandate, but such measures inevitably run afoul of powerful local interest groups. Only by rowing all in the same direction is it possible to reach the most unthinkable goals: the real challenge is to be convinced of this.
