Country Report Japan November 2009

Summary

The resounding victory of the Democratic Party of Japan (DPJ) in the election to the House of Representatives (the lower house of parliament) on August 30th puts the party in a strong position to serve a full four-year term.
A poll released on October 19th shows that the DPJ's approval rating currently stands at 73%, a very high figure by Japanese standards. Such ratings should further bolster its ability to implement policy.
Japan's relations with China will improve under the new government. The two countries are pursuing a number of goals jointly, but military tensions and resource competition will continue to strain relations.
On October 14th the Bank of Japan (BOJ, the central bank) kept its main policy interest rate, the target for the overnight call rate (OCR), at 0.1%. It is expected to keep the OCR at 0.1% for the remainder of 2009 and in 2010.
The recent strengthening of the yen against the US dollar has led the Economist Intelligence Unit to revise its forecast to averages of ¥90:US$1 (previously ¥92.5:US$1) in 2010 and ¥89:US$1 (previously ¥92:US$1) in 2011.

As the DPJ already commands a majority in the House of Councillors (the upper house) by dint of its coalition with two small parties, it is now in a strong position to draft and enact legislation.
The civil service has traditionally wielded great power over the elected authorities. The DPJ is taking a cautious approach to meeting its stated goal of weakening the bureaucracy.
The DPJ government has decided to investigate and publish Japan's past nuclear agreements with the US. This could cause embarrassment to both countries and undermine public confidence in the bilateral relationship.
The biggest challenge confronting the new government will be compiling the budget for fiscal year 2010/11 (April-March). The government wants ministries to resubmit their funding requests, in order to make cost savings.
The new head of the Financial Services Agency, Shizuka Kamei, has called for the government to extend a range of subsidies to construction firms and small businesses.
Economic activity is showing signs of reviving, from a much-reduced level. Leading indicators suggest that any recovery in real GDP growth will be weak, with no component of GDP likely to record a rebound in the near future.
Recent surveys by the BOJ have found that demand for new bank loans, particularly from households, is weak.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52