3.0 Political Environment and Risk
The political environment is vital to monitor for any company planning to do business, especially in a foreign country. Political risks are associated with government actions which deny or restrict the right of an investor or owner. These actions include war, insurrection and political violence. They are also able to devalue the firm by creating legislation that can increase taxes and tariffs, seize their property or restrict use of his/her assets which would then reduce the value of the firm (Howell, 2014).

3.1 Political Environment and Risk in Japan
Japans political environment is among the most stable in the world based upon the fact that the World Bank has ranked Japan in the top quartile in all areas of governance as can be seen in figure *INSERT FIGURE NUMBER*.
Graph retrieved from Finance for Australian Exporters
Graph retrieved from Finance for Australian Exporters

Figure 1- Governance Indicators in Japan

Sourced from Finance for Australian Exporters, 2015

Additionally, the World Bank has also rated Japan 29th out of 189 economies in ease of doing business. Australia has a major foreign trade incentive with Japan as the free trade agreement between Australia and Japan which came into effect in January 2015 allows 97% of Australian exports preferential treatment or duty free access into Japanese markets (Export Credit Agency, 2015).
Japans stable political environment and Australia’s positive relationship positions the country’s political risk as low.
3.2 Political Environment and Risk in South Korea
According to World Bank, South Korea scores in the top 50% in all areas of governance, however it is not quite up to par with other advanced economies (refer to figure 2). The instability in North Korea does, however, pose the most significant circumstantial risk. Paired with the deterioration with South