The island nation of Japan has the most developed economy in Asia. Following two decades of economic stagnation, exacerbated by the devastating Tohoku Earthquake in 2011, Abenomics was introduced in 2013 with the aim to revitalise the Japanese economy through monetary easing, structural reforms and fiscal stimulus. This
has resulted in a significant wage increase and the lowest unemployment rates since the early 1990s, but consumption and investment have remained weak.

Japan’s ageing population and low national fertility rate continue to be its most pressing challenges. This has led to a shrinking labour force and domestic market as well as increased social spending. Meanwhile, income and gender inequality remain stark. Japan’s 26% gender pay gap is the third largest in the Organisation for Economic Co-operation and Development (OECD).

The Japanese social economy is one of the most innovative in Asia with a rich tradition of institutional philanthropy, a sizeable impact investing market, an active and creative corporate sector and a vibrant support ecosystem. Japan has emerged as a leader in environmental, social and governance (ESG) investing and an early pioneer in social impact bonds (SIBs) in Asia.

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Japan’s 2018 Fact File

World Giving Index Rank

2017
111 114 in 2016
  • 32%giving money
  • 18%volunteering time
  • 23%helping a stranger

Population

2017
126.8 million

GDP (PPP)

2017
USD 5.49 trillion World Rank 4

GDP Growth

2017
1.7%

Per capita GDP (PPP)

2017
USD 43,279 World Rank 27

Number of Millionaires

2018
2.8 million

Global Competitiveness Index

2017-2018
9/137 Global Competitiveness Rank (2016-2017) - 8/138

Ease of Doing Business Rank

2019
39/190 Ease of Doing Business Rank (2018) - 34/190

Source: : ADB, Charities Aid Foundation, Credit Suisse, World Economic Forum, World Bank. Figures are accurate as of March 2019

SDG Dashboard

Despite its advanced economy, Japan is far from attaining 9 out of 17 Sustainable Development Goals (SDGs) with another 7 only partially achieved. Gender equality, responsible consumption and production, climate action and partnerships are among the areas that need the most work.

In 2016, the SDGs Promotion Headquarters, led by Prime Minister Shinzo Abe, was established to coordinate the implementation of the SDGs. It unveiled the SDG Implementation Guiding Principles, which outline 8 priority areas and 140 measures, in the same year. The 8 priority areas are:

  • Empowerment of all people (SDGs 1, 4, 5, 8, 10, 12),
  • Achievement of good health and longevity (SDG 3),
  • Creating growth markets, revitalisation of rural areas and promoting science, technology and innovation (SDGs 2, 8, 9, 11),
  • Sustainable and resilient land use and high-quality infrastructure (SDGs 2, 6, 9, 11),
  • Energy conservation, renewable energy, climate change counter-measures and building a recycling-based society (SDGs 7, 12, 13),
  • Conservation of the environment, including biodiversity, forests and the oceans (SDGs 2, 3, 14, 15),
  • A peaceful, safe and secure society (SDG 16), and
  • Strengthening the means and frameworks for the implementation of the SDGs (SDG 17).
In June 2018, the Japanese Cabinet approved a new economic plan that removes the JPY 500 billion (USD 4.5 billion) limit on annual increases in social spending. In addition, the government has unveiled a new vision known as Society 5.0, where the Internet of Things, big data, artificial intelligence and robotics will be applied across various industries to further economic development and provide solutions to social and environmental challenges.
  • No Poverty
  • Zero Hunger
  • Good Health and Well-Being
  • Quality Education
  • Gender Equality
  • Clean Water and Sanitation
  • Affordable and Clean Energy
  • Decent Work and Economic Growth
  • Industry, Innovation and Infrastructure
  • Reduced Inequalities
  • Sustainable Cities and Communities
  • Responsible Consumption and Production
  • Climate Action
  • Life Below Water
  • Life On Land
  • Peace, Justice and Strong Institutions
  • Partnerships for the Goals

Source: sdgindex.org (2018)

Note: The "traffic light" colour scheme (green,yellow, orange, red) illustrates how far a market is from achieving a particular goal

Government Initiatives to Address Development Gaps

Impact Area SDG Goals Gap Government Initiatives
Climate action
SDG Goals
  • Climate Action
  • Life Below Water
  • Life On Land
Gap
  • Coal power plants accounted for 32% of Japan’s electricity production in 2016.
  • The 2011 nuclear meltdown led the government to abandon its goal of reducing coal’s share in electricity production to 11% and aim for 26% instead by 2030.
Government Initiatives
  • The government is aiming for “clean coal” technologies which emit less carbon dioxide to account for 50% of all coal-powered electricity by 2030.
  • In 2018, the Cabinet approved the fifth Basic Energy Plan which lays out initiatives for the country to transition to a lower-carbon energy system by 2050.
  • Japan aims to cut greenhouse gas emissions by 26% from 2013 levels by 2030.
Gender equality
SDG Goals
  • Gender Equality
Gap
  • Japan fell 3 places between 2016 and 2017 to 114 out of 144 countries in the Global Gender Gap Report.
  • Japan has the third largest gender income gap in the OECD after Estonia and South Korea.
Government Initiatives
  • As part of the updated Abenomics introduced in 2015, Japan aims to increase women’s involvement in the workforce by encouraging flexible employment, reducing overtime work and improving access to high-quality childcare.
Poverty alleviation
SDG Goals
  • No Poverty
  • Reduced Inequalities
Gap
  • Income of the top 20% households is 6 times higher than that of the bottom 20%, placing Japan in the bottom third of OECD countries in terms of income inequality.
  • The percentage of people with incomes lower than 50% of the median household disposable income for those aged 65 and above is 19%, compared to the OECD average of 13%.
  • In 2017, 16% of Japanese children lived below the national poverty line.
Government Initiatives
  • The national social welfare system is governed by 4 key laws, namely Public Assistance Law, Child Welfare Law, the Law on the Welfare of Single Mothers and Widows and the Law on the Welfare of the Elderly.
  • The Public Assistance Law stipulates support for low-income households that covers basic living expenses, housing costs, education and skill training.
  • Elderly people aged 65 and above are entitled to public health care services under the Long-term Care Insurance System.
SME development
SDG Goals
  • Decent Work and Economic Growth
  • Sustainable Cities and Communities
Gap
  • Japanese SMEs’ productivity is only 45% that of large companies, which is lower than OECD average of 55%.
  • While SMEs account for 70% of national employment (compared to the OECD average of 60%), they generate only slightly more than 50% of national value added.
Government Initiatives
  • The Japanese government supports SMEs primarily through public financing and tax benefits, including credit guarantees, unsecured low-interest loans and tax credits for capital investment and research expenses.
Social protection
SDG Goals
  • Good Health and Well-Being
  • Reduced Inequalities
Gap
  • 27% of the population is 65 years old and above, and those aged 75 years and above have outnumbered those aged between 65 and 74. The rapidly ageing population has led to escalating medical and social security expenses for the government.
Government Initiatives
  • The government’s efforts to improve fiscal sustainability of the health care system include: expanding the role of local governments in providing community-based health care services, increasing co-payment by users and improving operational efficiency of health care providers.

Social Economy

The social economy in Japan is one of the most mature in Asia driven by professionally managed foundations, increased interest from mainstream investors and innovative investment models

Category Factor Rating Description
SPOs
Factor
Presence, size, and maturity of SEs
three-quarter
  • There are more than 51,000 NPOs and about 205,000 SEs in Japan.
  • As of 2014, the SE sector was valued at USD 160 billion and employed nearly 6 million workers, indicating the maturity of the sector.
SPOs
Factor
SEs' sectoral presence
three-quarter
  • Japanese SEs are active in various areas such as regional development and community building, environment, capacity building and empowerment, education, health care, child care and general social welfare.
Investors
Factor
Philanthropic contributions
three-quarter
  • Japan has one of the most mature institutional philanthropy cultures in Asia with 77% of its foundations being professionally managed.
Investors
Factor
Managed funds
three-quarter
  • The impact investing market doubled in size in 2017 compared to 2016. This can be attributed in part to increased interest from mainstream financial institutions and foundations.
Investors
Factor
Corporate sector
full
  • Many corporations are early adopters of social investment such as Panasonic and NEC.
  • There has been a growing interest among corporates to foster technologies for social good. Examples include Fujitsu, Rakuten and Mitsubishi.
Enablers and Intermediaries
Factor
Policy environment
three-quarter
  • The establishment of the Japan National Advisory Board under the GSG, SIBs and the Dormant Account Utilisation Act are some of the key policies to unlock social investment.
  • However, SEs are not legally recognised and formally supported.
Enablers and Intermediaries
Factor
Incubators, accelerators, and capacity-builders
three-quarter
  • ETIC., KIBOW, Impact Hub Tokyo, Social Innovation Japan, Cross Fields and the Japan Institute for Social Innovation and Entrepreneurship (JSIE) are some of the notable social incubators, accelerators and capacity builders in Japan.
  • Many corporations provide incubation and acceleration support to SEs such as Panasonic, NEC, Fujitsu, Rakuten and Mitsubishi.
Enablers and Intermediaries
Factor
Networks and platforms
three-quarter
  • AVPN, Green Finance Network Japan, JSIF and SIMI are some of the prominent multi-sectoral networks and platforms in Japan.
Enablers and Intermediaries
Factor
Knowledge and research
three-quarter
  • The Japan Foundation Centre, the Japan NPO Centre, Cabinet Office, the GSG Japan National Advisory Board, JSIF, JFRA, Nippon Foundation, Sasakawa Peace Foundation, UBS and INSEAD and Keio University have published research on the Japanese social economy. However, English publications are sparse compared to the level of activity.
  • Keio University, Meiji University and Kobe University offer social innovation courses. Tama University set up a social investment think-tank in 2018.
Enablers and Intermediaries
Factor
Partnerships
full
  • Multi-sectoral partnerships have proliferated with examples such as NEC and ETIC.; Seibu Shinkin Bank, Nippon Foundation and ETIC.; Rakuten and SVP Tokyo; the Green Finance Network Japan; and JSIF and the 2 SIBs in Hachioji and Kobe city.

partnership Partnership Opportunity

Demand & Supply of Capital in Japan

Note: Data is based on AVPN's analysis. If there are any inconsistencies or errors in the information listed, please let us know at knowledge@avpn.asia

Case Studies in Japan

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Social Investment Landscape in Asia

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