Economy of Japan
Some of the structural features for Japan’s economic growth developed in the Edo period, such as the network of transport routes, by road and water, and the futures contracts, banking and insurance of the Osaka rice brokers. During the Meiji period from 1868, Japan expanded economically with the embrace of the market economy. Many of today’s enterprises were founded at the time, and Japan emerged as the most developed nation in Asia. The period of overall real economic growth from the 1960s to the 1980s has been called the Japanese post-war economic miracle: it averaged 7.5 percent in the 1960s and 1970s, and 3.2 percent in the 1980s and early 1990s.
Growth slowed markedly in the 1990s during what the Japanese call the Lost Decade, largely because of the after-effects of the Japanese asset price bubble and domestic policies intended to wring speculative excesses from the stock and real estate markets. Government efforts to revive economic growth met with little success and were further hampered by the global slowdown in 2000. The economy showed strong signs of recovery after 2005; GDP growth for that year was 2.8 percent, surpassing the growth rates of the US and European Union during the same period.
As of 2012, Japan is the third largest national economy in the world, after the United States and China, in terms of nominal GDP, and the fourth largest national economy in the world, after the United States, China and India, in terms of purchasing power parity. As of January 2011, Japan’s public debt was more than 200 percent of its annual gross domestic product, the largest of any nation in the world. In August 2011, Moody’s rating has cut Japan’s long-term sovereign debt rating one notch from Aa3 to Aa2 inline with the size of the country’s deficit and borrowing level. The large budget deficits and government debt since the 2009 global recession and followed by earthquake and tsunami in March 2011 made the rating downgrade. The service sector accounts for three quarters of the gross domestic product.
Japan has a large industrial capacity, and is home to some of the largest and most technologically advanced producers of motor vehicles, electronics, machine tools, steel and nonferrous metals, ships, chemical substances, textiles, and processed foods. Agricultural businesses in Japan cultivate 13 percent of Japan’s land, and Japan accounts for nearly 15 percent of the global fish catch, second only to China. As of 2010, Japan’s labor force consisted of some 65.9 million workers. Japan has a low unemployment rate of around four percent. Almost one in six Japanese, or 20 million people, lived in poverty in 2007. Housing in Japan is characterized by limited land supply in urban areas.
Japan’s exports amounted to US$4,210 per capita in 2005. Japan’s main export markets are China (18.88 percent), the United States (16.42 percent), South Korea (8.13 percent), Taiwan (6.27 percent) and Hong Kong (5.49 percent) as of 2009. Its main exports are transportation equipment, motor vehicles, electronics, electrical machinery and chemicals. Japan’s main import markets as of 2009 are China (22.2 percent), the US (10.96 percent), Australia (6.29 percent), Saudi Arabia (5.29 percent), United Arab Emirates (4.12 percent), South Korea (3.98 percent) and Indonesia (3.95 percent).
Japan’s main imports are machinery and equipment, fossil fuels, foodstuffs (in particular beef), chemicals, textiles and raw materials for its industries. By market share measures, domestic markets are the least open of any OECD country. Junichiro Koizumi’s administration began some pro-competition reforms, and foreign investment in Japan has soared.
Japan ranks 12th of 178 countries in the 2008 Ease of doing business index and has one of the smallest tax revenues of the developed world. The Japanese variant of capitalism has many distinct features: keiretsu enterprises are influential, and lifetime employment and seniority-based career advancement are relatively common in the Japanese work environment. Japanese companies are known for management methods like “The Toyota Way”, and shareholder activism is rare.
Some of the largest enterprises in Japan include Toyota, Nintendo, NTT DoCoMo, Canon, Honda, Takeda Pharmaceutical, Sony, Panasonic, Toshiba, Sharp, Nippon Steel, Nippon Oil, and Seven & I Holdings Co.. It has some of the world’s largest banks, and the Tokyo Stock Exchange (known for its Nikkei 225 and TOPIX indices) stands as the second largest in the world by market capitalization. Japan is home to 326 companies from the Forbes Global 2000 or 16.3 percent (as of 2006).