Japan

2016 business cost index

92.7

Country ranking

9th / 10

Japan, GDP per capita: US$36,194 (2014), GDP growth rate: 0.5% (2015), Unemployment rate: 3.2% (Q4/2015), Inflation rate: 0.2% (2015)
Locations12016 indexRank12014 indexRank1
Japan92.7999.27
Osaka91.83296.359
Tokyo93.644102.1103
1  Overall results for the country and cities. Rank for Japan is relative to 10 countries in both 2016 and 2014. Ranks for cities are relative to 111 cities in 2016 and 107 cities in 2014.
 
Sectors2016 indexRank22014 indexRank2
Digital services88.8898.27
R&D services87.2898.98
Corporate services84.3998.68
Manufacturing95.0999.56
2  Rank is relative to 10 countries in both 2016 and 2014.
 
Cost factors3
  • 17.3% currency depreciation against the US$
  • Below-average increase in wage and salary costs
  • Above-average increase in employee benefit costs
  • Increase in utility costs, for both electricity and natural gas
  • Rate increases and decreases for various prefectural taxes
3  Significant cost trends between 2014 and 2016.
 
Exchange rate sensitivity4IndexChangeRank5
20% appreciationUS$1 = ¥97.15100.0-7.39 (tie)
20% depreciationUS$1 = ¥145.7387.9+4.89
4  "What if" sensitivity scenarios based on appreciation or depreciation relative to the US dollar.
5  Rank among 10 countries assuming equal appreciation/depreciation of all currencies relative to the US dollar.

Locations

National results for Japan reflect the combined results for two major cities: Osaka and Tokyo. Total business costs in Osaka are 1.8 percentage points lower than in Tokyo. Since 2014, reported labor cost differentials have shrunk between the two Japanese cities, with labor costs increasing in Osaka while Tokyo experienced a marginal decline. Construction costs for industrial facilities have also risen in Osaka and declined in Tokyo. Combined, these factors result in a narrowing of 5.8 point cost advantage that Osaka held over Tokyo in 2014.
 

Sectors

Consistent with its overall ranking, Japan ranks ninth among the 10 countries in the corporate services and manufacturing sectors, but moves into eighth place for digital services and R&D services. Relative differences in facility costs drive these sector results—Japan ranks last among the 10 countries for industrial facility costs (lease or own), ninth for downtown office costs, but eighth for the types of suburban office space utilized by the digital and R&D firms examined.
 

Cost factors

The rise in value of the US dollar relative to the yen in 2015 is the primary driver of Japan’s improved cost index in 2016 and the significant improvement in rankings for the two Japanese cities. However, other cost trends as noted in the table also contribute to Japan’s overall results in the current study.
 

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