Performance overview: Japan
Japan (8th) loses two places, overtaken by Sweden and the United Kingdom. The macroeconomic situation (104th) continues to undermine Japan’s competitiveness performance, although the situation has improved over the past year (up 17 places) thanks to a lower, yet still very large, budget deficit. Inflation is now again very close to zero and the 2 percent target set by the Bank of Japan has been met only once since Shinzo Abe became Prime Minister. Japan is also beset by the rigidities and lack of dynamism of its labor market (19th). Despite progressing eight places, Japan still ranks a low 115th on the ease of hiring and firing. The ratio of women to men in the labor force (77th) is one of the lowest among high-income economies and Japan remains a rather unattractive destination for foreign talent (77th). The domestic market is relatively uncompetitive and closed, with high barriers to entry and to business creation. On the brighter side, Japan features in the top 10 of five pillars. It notably boasts an excellent infrastructure (5th) and firms are highly sophisticated (2nd), typically employing unique products and production processes (2nd) with significant control over international distribution (5th). High-quality research institutions (13th) and company spending on R&D (4th), coupled with an excellent availability of scientists and engineers (3rd), contribute to the country’s overall highly innovative environment (5th). Yet Japan’s innovation prowess seems to be eroding: consistently ranked in the top 5 between 2007 and 2015, Japan loses three positions and now ranks 8th.