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Back to Japan

Japan's Economy

 

 

 

 

 

Economy - overview:
In the years following World War II, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan develop a technologically advanced economy. Two notable characteristics of the post-war economy were the close interlocking structures of manufacturers, suppliers, and distributors, known as keiretsu, and the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding under the dual pressures of global competition and domestic demographic change. Japan's industrial sector is heavily dependent on imported raw materials and fuels. A tiny agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self sufficient in rice, Japan imports about 60% of its food on a caloric basis. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades, overall real economic growth had been spectacular - a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after effects of inefficient investment and an asset price bubble in the late 1980s that required a protracted period of time for firms to reduce excess debt, capital, and labor. The Japanese financial sector was not heavily exposed to sub-prime mortgages or their derivative instruments and weathered the initial effect of the recent global credit crunch, but a sharp downturn in business investment and global demand for Japan's exports in late 2008 pushed Japan further into recession. Government stimulus spending helped the economy recover in late 2009 and 2010, but Tokyo is warning that GDP growth will slow in 2011. Prime Minister Kan's government has proposed opening the agricultural and services sectors to greater foreign competition and boosting exports through free-trade agreements, but debate continues on restructuring the economy and funding new stimulus programs in the face of a tight fiscal situation. Japan's huge government debt, which is approaching 200 percent of GDP, persistent deflation, and an aging and shrinking population are major complications for the economy.
GDP (purchasing power parity):
$4.338 trillion (2010 est.)
country comparison to the world: 4
$4.211 trillion (2009 est.)
$4.442 trillion (2008 est.)
note: data are in 2010 US dollars
GDP (official exchange rate):
$5.391 trillion (2009 est.)
GDP - real growth rate:
3% (2010 est.)
country comparison to the world: 125
-5.2% (2009 est.)
-1.2% (2008 est.)
GDP - per capita (PPP):
$34,200 (2010 est.)
country comparison to the world: 39
$33,100 (2009 est.)
$34,900 (2008 est.)
note: data are in 2010 US dollars
GDP - composition by sector:
agriculture: 1.5%
industry: 22.8%
services: 75.7% (2009 est.)
Labor force:
65.64 million (2009 est.)
country comparison to the world: 9
Labor force - by occupation:
agriculture: 4%
industry: 28%
services: 68% (2009 est.)
Unemployment rate:
5.2% (2010 est.)
country comparison to the world: 49
5.1% (2009 est.)
Population below poverty line:
NA%
Household income or consumption by percentage share:
lowest 10%: 4.8%
highest 10%: 21.7% (1993)
Distribution of family income - Gini index:
38.1 (2002)
country comparison to the world: 74
24.9 (1993)
Investment (gross fixed):
20.3% of GDP (2009 est.)
country comparison to the world: 83
Budget:
revenues: $1.839 trillion
expenditures: $2.252 trillion (2009 est.)
Public debt:
196.4% of GDP (2010 est.)
country comparison to the world: 2
192.9% of GDP (2009 est.)
Inflation rate (consumer prices):
-0.9% (2010 est.)
country comparison to the world: 7
-1.4% (2009 est.)
Central bank discount rate:
0.3% (31 December 2009)
country comparison to the world: 139
0.3% (31 December 2008)
Commercial bank prime lending rate:
1.72% (31 December 2009 est.)
country comparison to the world: 156
1.91% (31 December 2008 est.)
Stock of narrow money:
$5.541 trillion (31 December 2010 est)
$5.162 trillion (31 December 2009 est)
Stock of broad money:
$18.3 trillion (31 December 2009)
$14.56 trillion (31 December 2008)
Stock of domestic credit:
$16.39 trillion (31 December 2008 est.)
country comparison to the world: 3
$13.32 trillion (31 December 2007 est.)
Market value of publicly traded shares:
$3.378 trillion (31 December 2009)
country comparison to the world: 3
$3.22 trillion (31 December 2008)
$4.453 trillion (31 December 2007)
Agriculture - products:
rice, sugar beets, vegetables, fruit; pork, poultry, dairy products, eggs; fish
Industries:
among world's largest and technologically advanced producers of motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles, processed foods
Industrial production growth rate:
7.5% (2009 est.)
country comparison to the world: 33
Electricity - production:
957.9 billion kWh (2008 est.)
country comparison to the world: 4
Electricity - consumption:
925.5 billion kWh (2008 est.)
country comparison to the world: 4
Electricity - exports:
0 kWh (2008 est.)
Electricity - imports:
0 kWh (2008 est.)
Oil - production:
132,700 bbl/day (2009 est.)
country comparison to the world: 49
Oil - consumption:
4.363 million bbl/day (2009 est.)
country comparison to the world: 4
Oil - exports:
380,900 bbl/day (2008 est.)
country comparison to the world: 34
Oil - imports:
5.033 million bbl/day (2008 est.)
country comparison to the world: 3
Oil - proved reserves:
44.12 million bbl (1 January 2010 est.)
country comparison to the world: 79
Natural gas - production:
3.539 billion cu m (2009 est.)
country comparison to the world: 50
Natural gas - consumption:
94.67 billion cu m (2009 est.)
country comparison to the world: 6
Natural gas - exports:
0 cu m (2008 est.)
country comparison to the world: 84
Natural gas - imports:
90.29 billion cu m (2009 est.)
country comparison to the world: 3
Natural gas - proved reserves:
20.9 billion cu m (1 January 2010 est.)
country comparison to the world: 76
Current account balance:
$182.3 billion (2010 est.)
country comparison to the world: 2
$142.2 billion (2009 est.)
Exports:
$735.8 billion (2010 est.)
country comparison to the world: 5
$545.3 billion (2009 est.)
Exports - commodities:
transport equipment, motor vehicles, semiconductors, electrical machinery, chemicals
Exports - partners:
China 18.88%, US 16.42%, South Korea 8.13%, Taiwan 6.27%, Hong Kong 5.49% (2009)
Imports:
$636.8 billion (2010 est.)
country comparison to the world: 5
$501.6 billion (2009 est.)
Imports - commodities:
machinery and equipment, fuels, foodstuffs, chemicals, textiles, raw materials
Imports - partners:
China 22.2%, US 10.96%, Australia 6.29%, Saudi Arabia 5.29%, UAE 4.12%, South Korea 3.98%, Indonesia 3.95% (2009)
Reserves of foreign exchange and gold:
$NA (31 December 2010 est.)
$1.024 trillion (31 December 2009 est.)
Debt - external:
$2.246 trillion (30 June 2010)
country comparison to the world: 6
$2.231 trillion (31 December 2008)
Stock of direct foreign investment - at home:
$161.4 billion (31 December 2010 est.)
country comparison to the world: 24
$147.2 billion (31 December 2009 est.)
Stock of direct foreign investment - abroad:
$831.1 billion (31 December 2010 est.)
country comparison to the world: 7
$738.5 billion (31 December 2009 est.)
Exchange rates:
yen (JPY) per US dollar - 88.67 (2010), 93.57 (2009), 103.58 (2008), 117.99 (2007), 116.18 (2006)

 


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sinjuku_skyscrapers_nightview.jpg (16353 bytes)The scope of Japan's economy is second only to that of the United States.  Records indicate that Japan's gross national product was $2.577 trillion in 1999 versus the United States' was $4.864 trillion  Japan's continued rapid economic growth since the nation's modernization began in the later half of the nineteenth century has gained the world's attention.  Economic growth has not always been steady, however; on a number of occasions, such as after its defeat in WWII, during the oil crises of the 1970's, and after the collapse of the bubble economy in the early 1990's, Japan has had to overcome major economic hardships.  Now that the nation's economy generally is prospering in quantitative terms, the  focus has turned to the improvement of the quality of people's lives. 

In 1994, Japan's per capita GDP was $37,618, ranking first among the 24 OECD nations.  While these statistics alone might indicate that the average Japanese enjoys a comparatively high standard of living, the amounts are based on the respective dollar exchange rates, which can fluctuate greatly.

  The figures are thus not necessarily an accurate measure of living standards; a closer examination of various factors is necessary.  For example, an EPA survey conducted in November 1994 revealed that Tokyo's commodity prices were 52% higher than in New York and 50% higher than in London, indicating the relatively low purchasing power of the Japanese consumer.

  Moreover, residential land prices in Japan, especially in big cities, are so high as to be beyond comparison with those of other nations, making mortgage or rent payments a great burden on the average citizen.

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Information provided by the Japanese Embassy


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BUBBLE ECONOMY

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Following the 1985 Plaza Accord, the yen rose sharply in value over the next few years to three times its value in 1971, in the fixed exchange rate system.  With the increase in the price of Japanese exports, competitiveness was decreased overseas, while government financial measures increased demand domestically.

Corporate investment rose sharply in 1988 and 1989.  New equity issues rose in value as a result of higher stock prices, thus making them an important source of financing for corporations.  In the meantime, banks sought for funds in the outlet of real estate development.  In turn, corporations used their real estate holding as collateral for stock market speculation.  A direct result of this was the doubling of land value prices and a 180% rise in the Tokyo Nikkei stock market index.

In May 1989, the government tightened it's monetary policies to suppress the rise in value of assets, such as land.  However, higher interest rates sent stock prices on a steady spiral down.  The Tokyo stock market had fallen 38% by the end of 1990, thus effectively wiping out 2.07 trillion dollars in value.  Steeply dropping land prices burdened financial institutions with bad debts and some of them even went bankrupt.  Others attempted to improve internal finances and managed to stay afloat by limiting the supply of capital to private businesses by being cautious in granting loans.  In October 1993, the recession bottomed out, but has been recovering slowly since then

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