Japan: Economy#
Over the past 70 years, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) have helped Japan develop an advanced economy. Two notable characteristics of the post-World War II 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.Scarce in many natural resources, Japan has long been dependent on imported raw materials. Since the complete shutdown of Japan’s nuclear reactors after the earthquake and tsunami disaster in 2011, Japan's industrial sector has become even more dependent than before on imported fossil fuels. A small agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. While self-sufficient in rice production, Japan imports about 60% of its food on a caloric basis.
For three decades, overall real economic growth had been impressive - a 10% average in the 1960s, 5% in the 1970s, and 4% in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the aftereffects of inefficient investment and an asset price bubble in the late 1980s, after which it took a considerable time for firms to reduce excess debt, capital, and labor. Modest economic growth continued after 2000, but the economy has fallen into recession four times since 2008. Government stimulus spending helped the economy recover in late 2009 and 2010, but the economy contracted again in 2011 as the massive 9.0 magnitude earthquake and the ensuing tsunami in March of that year disrupted economic activity. The economy has largely recovered in the five years since the disaster, although output in the affected areas continues to lag behind the national average.
Japan enjoyed a sharp uptick in growth in 2013 on the basis of Prime Minister Shinzo ABE’s "Three Arrows" economic revitalization agenda - dubbed "Abenomics" - of monetary easing, "flexible" fiscal policy, and structural reform. In 2015, ABE revised his "Three Arrows" to raise nominal GDP by 20% to 600 trillion yen by 2020, stem population decline by raising the fertility rate, and provide more support for workers with children and aging relatives. ABE’s government has replaced the preceding administration’s plan to phase out nuclear power with a new policy of seeking to restart nuclear power plants that meet strict new safety standards, and emphasizing nuclear energy’s importance as a base-load electricity source. Japan successfully restarted two nuclear reactors at the Sendai Nuclear Power Plant in Kagoshima prefecture. In October 2015, Japan and 11 trading partners reached agreement on the Trans-Pacific Partnership, a pact that promises to open Japan's economy to increased foreign competition and create new export opportunities for Japanese businesses.
Measured on a purchasing power parity (PPP) basis that adjusts for price differences, Japan in 2015 stood as the fourth-largest economy in the world after first-place China, which surpassed Japan in 2001, and third-place India, which edged out Japan in 2012. While seeking to stimulate and reform the economy, the government must also devise a strategy for reining in Japan's huge government debt, which amounts to more than 230% of GDP. To help raise government revenue, Japan adopted legislation in 2012 to gradually raise the consumption tax rate to 10% by 2015, beginning with a hike from 5% to 8%, implemented in April 2014. That increase had a contractionary effect on GDP, however, so PM ABE in late 2014 decided to postpone the final phase of the increase until April 2017 to give the economy more time to recover. Led by the Bank of Japan’s aggressive monetary easing, Japan is making progress in ending deflation, but demographic decline – a low birthrate and an aging, shrinking population – poses a major long-term challenge for the economy.
Economic Facts#
| GDP (purchasing power parity) | $4.932 trillion (2016 est.) $4.907 trillion (2015 est.) $4.881 trillion (2014 est.) note: data are in 2016 dollars |
|---|---|
| GDP (official exchange rate) | $4.73 trillion (2015 est.) |
| GDP - real growth rate | 0.5% (2016 est.) 0.5% (2015 est.) 0% (2014 est.) |
| GDP - per capita (PPP) | $38,900 (2016 est.) $38,600 (2015 est.) $38,400 (2014 est.) note: data are in 2016 dollars |
| Gross national saving | 25.3% of GDP (2016 est.) 25.3% of GDP (2015 est.) 22.6% of GDP (2014 est.) |
| GDP - composition, by end use | household consumption: 58.3% government consumption: 20.4% investment in fixed capital: 21.7% investment in inventories: -0.1% exports of goods and services: 16.6% imports of goods and services: -16.9% (2016 est.) |
| GDP - composition, by sector of origin | agriculture: 1.2% industry: 27.7% services: 71.1% (2016 est.) |
| Agriculture - products | vegetables, rice, fish, poultry, fruit, dairy products, pork, beef, flowers, potatoes/taros/yams, sugar cane, tea, legumes, wheat and barley |
| Industries | among world's largest and most technologically advanced producers of motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles, processed foods |
| Industrial production growth rate | 0.5% (2016 est.) |
| Labor force | 65.93 million (2016 est.) |
| Labor force - by occupation | agriculture: 2.9% industry: 26.2% services: 70.9% (February 2015 est) |
| Unemployment rate | 3.2% (2016 est.) 3.4% (2015 est.) |
| Population below poverty line | 16.1% (2013 est.) |
| Household income or consumption by percentage share | lowest 10%: 2.7% highest 10%: 24.8% (2008) |
| Distribution of family income - Gini index | 37.9 (2011) 24.9 (1993) |
| Budget | revenues: $1.696 trillion expenditures: $1.931 trillion (2016 est.) |
| Taxes and other revenues | 35.8% of GDP (2016 est.) |
| Budget surplus (+) or deficit (-) | -5% of GDP (2016 est.) |
| Public debt | 234.7% of GDP (2016 est.) 230% of GDP (2015 est.) |
| Fiscal year | 1 April - 31 March |
| Inflation rate (consumer prices) | -0.1% (2016 est.) 0.8% (2015 est.) |
| Central bank discount rate | 0.3% (31 December 2015) 0.3% (31 December 2014) |
| Commercial bank prime lending rate | 1.5% (31 December 2016 est.) 1.48% (31 December 2015 est.) |
| Stock of narrow money | $6.314 trillion (31 December 2016 est.) $5.131 trillion (31 December 2015 est.) |
| Stock of broad money | $9.156 trillion (31 December 2016 est.) $7.542 trillion (31 December 2015 est.) |
| Stock of domestic credit | $13.27 trillion (31 December 2016 est.) $11.09 trillion (31 December 2015 est.) |
| Market value of publicly traded shares | $4.895 trillion (31 December 2015 est.) $4.378 trillion (31 December 2014 est.) $4.543 trillion (31 December 2013 est.) |
| Current account balance | $176.1 billion (2016 est.) $135.6 billion (2015 est.) |
| Exports | $641.4 billion (2016 est.) $622 billion (2015 est.) |
| Exports - commodities | motor vehicles 14.9%; iron and steel products 5.4%; semiconductors 5%; auto parts 4.8%; power generating machinery 3.5%; plastic materials 3.3% (2014 est.) |
| Exports - partners | US 20.2%, China 17.5%, South Korea 7.1%, Hong Kong 5.6%, Thailand 4.5% (2015) |
| Imports | $629.8 billion (2016 est.) $627.3 billion (2015 est.) |
| Imports - commodities | petroleum 16.1%; liquid natural gas 9.1%; clothing 3.8%; semiconductors 3.3%; coal 2.4%; audio and visual apparatus 1.4% (2014 est.) |
| Imports - partners | China 24.8%, US 10.5%, Australia 5.4%, South Korea 4.1% (2015) |
| Reserves of foreign exchange and gold | $1.233 trillion (31 December 2015 est.) $1.261 trillion (31 December 2014 est.) |
| Debt - external | $3.24 trillion (31 March 2016 est.) $2.83 trillion (31 March 2015 est.) |
| Stock of direct foreign investment - at home | $204.3 billion (31 December 2016 est.) $202.4 billion (31 December 2015 est.) |
| Stock of direct foreign investment - abroad | $1.418 trillion (31 December 2016 est.) $1.258 trillion (31 December 2015 est.) |
| Exchange rates | yen (JPY) per US dollar - 107.1 (2016 est.) 121.02 (2015 est.) 121.02 (2014 est.) 97.44 (2013 est.) 79.79 (2012 est.) |