Social Investment Landscape
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.
Japan’s Fact File
Japan’s 2018 Fact File
USD 5.49 trillion
Per capita GDP (PPP)
111 114 in 2016
World Giving Index Rank
Number of Millionaires
Global Competitiveness Index
Ease of Doing Business Rank
- 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).
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
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
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
Presence, size, and maturity of SEs
- 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.
- 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.