Japan – Economy Overview

• Capital: Tokyo
• Area: 377,873 km²
• Population: 127,433,494
• GDP (PPP): US$4.346 trillion
• GDP (Nominal): US$4.886 trillion
• Currency: Yen (JPY)
• Time Zone: GMT +9

The economy of Japan is remarkable for its low overall taxation and the overwhelming domination of the private sector relatively to most Western countries. Japan is known for high economic freedom, cultivating government-industry collaboration, high emphasis on science and technology, and a tradition of strong work ethic. The emphasis which Japanese culture places on familial and clan relationships translates in the realm of economy as a strong tendency for protectionism. Manufacturers, suppliers, distributors and various financial institutions form closely knit clusters named keiretsu that allow life long collaborations. The same distinguishing characteristic also accounts for close relationships with government officials, guaranteed lifetime employments, and powerful unions.

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Many economists blame this focus on relationships rather than productivity, as well as falling stock and real estate prices, for the slum Japan suffered throughout the 1990s. In the mid 2000s, Japanese companies began to move away from traditional modes of business. As a result, Japan enjoyed higher growth rates starting from 2005, lead by a rise in domestic consumption.

Today, Japan's economy is third largest in the world after the United States and the People's Republic of China. Japan is also the world's second largest economy by real GDP, nominal GDP and market exchange rates.

Signs of trouble began to appear again in early 2008 mainly in the shape of a decline in the country’s GDP per capita, and the reduction of Japan’s percentage of aggregate world income to under 10% for the first time in 24 years.

Industry

Japan's industrial sector experienced steady growth in the 1970s and 1980s as a result of the emergence of high-tech industries. At the same time the older heavy industries, such as shipbuilding and steel, generally declined. Most Japanese industry is geared towards the domestic market, with the exception of several key commodities such as transportation equipment, motor vehicles, electrical machinery and metal products. Japan enjoys relatively high technological development in the fields of optical fibers, semiconductor manufacturing, optoelectronics, optical media, and biochemistry.

Energy

Japan has very poor energy resources and is therefore highly dependent on energy import. Local metals were difficult to process because they were low grade, most mineral resources had to be imported and the country's large forest resources were not utilized extensively due to rough terrain and an underdeveloped road network. As partial compensation, the nation built up the manufacturing and processing industries to convert raw imported materials.

Service

Japan's service sector makes up approximately three-fourths of its overall economic output. Banking, real estate, insurance, transportation, retailing, and telecommunications are all major industries with industry giants such as Mitsubishi UFJ, Mizuho, JR East, TEPCO, Tokio Marine, Nomura, Seven & I and ANA. The six major keiretsus are the Mitsubishi, Fuyo, Sumitomo, Dai-Ichi Kangyo, Mitsui and Sanwa Groups. As of 2006, 326 companies or 16.3% from the Forbes Global 2000 call Japan home.

Agriculture & Fishery

Due to Japan's lack of arable land, Japanese farmers developed a system of terraces to farm in small areas. The result is one of the world's highest crop yields per unit area. This small agricultural sector is also highly subsidized and protected, with government regulations favoring small-scale cultivation. Japan is mostly self-sufficient in rice and wheat, but relies on imports for its supply of meat, sorghum, and soybeans. It's also the largest market for EU agricultural exports..

Japan maintains one of the world's largest fishing fleets, second only to the People's Republic of China, delivering nearly 15% of the global catch. Among the wide variety of fish species caught are sardines, crab, skipjack tuna, shrimp, pollock, salmon, clams, squid, sea bream, saury, tuna, mackerel and Japanese amberjack.

Employment

As of 2001, Japan's labor force counted approximately 67 million workers— of whom 40% were women—and was rapidly decreasing in numbers. Japan's major long-term concern for its labor force is a low birthrate. In 2005, the number of deaths in Japan exceeded the number of births, indicating that the population decline, predicted to begin in 2007, was already on its way. One measure to take against a declining birthrate would be to loosen immigration laws, however the Japanese government has been reluctant to do so.

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