Japan: Economy

Japan's industrialized, free-market economy is the third-largest in the world. Its economy is highly efficient and competitive in areas linked to international trade, but productivity is far lower in protected areas such as agriculture, distribution, and services. Japan's reservoir of industrial leadership and technicians, well-educated and industrious work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade produced a mature industrial economy. Japan has few natural resources, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy.

After achieving one of the highest economic growth rates in the world from the 1960s through the 1980s, the Japanese economy slowed dramatically in the early 1990s, when the "bubble economy" collapsed, marked by plummeting stock and real estate prices. Japan eventually recovered from its worst period of economic stagnation since World War II. Real GDP in Japan grew at an average of roughly 1% yearly in the 1990s, compared to growth in the 1980s of about 4% per year. After sustaining several consecutive years of growth in the early 2000s, the Japanese economy began to slow in line with global economic conditions, and the country fell into its first recession in roughly 6 years in 2008. As worldwide demand for its goods tumbled, the Bank of Japan reported real GDP growth of -5.5% in FY 2009. Japan recovered slightly in 2010 and reported real GDP growth of 4.4%.

The 9.0-magnitude earthquake and ensuing tsunami on March 11, 2011, devastated the northeast coast of Honshu Island, washing away buildings and infrastructure as far as six miles inland, killing thousands, severely damaging several nuclear power plants, displacing and leaving homeless more than 320,000 people, and leaving a million households without running water. Radiation leaks at the Fukushima Daiichi nuclear power plant prompted mass evacuations and the declaration of an exclusion zone--initially for people and planes within 12.5 miles of the plant but later expanded to 19 miles. Radioactive iodine-131 has been found as far as 100 miles from the plant in samples of water, milk, fish, beef, and certain vegetables, at levels that make these foods unfit for consumption and create uncertainty regarding possible long-term contamination of the area. Energy-cutting efforts by electric companies and train lines have slowed the pace of business throughout Honshu Island, while Japan’s financial markets have fluctuated dramatically. In order to ensure stability, the Bank of Japan injected more than $325 billion in yen into the economy. Estimates of the direct costs of the damage--rebuilding homes and factories--range from $235 billion to $310 billion. In August 2011, the government revised downward its fiscal year inflation-adjusted GDP forecast to 0.5%. Government plans called for massive spending, as high as $295 billion, on reconstruction efforts in disaster-affected areas to stimulate economic growth. For U.S. Government advice on travel to the affected areas, please go to www.travel.state.gov.

Agriculture, Energy, and Minerals
Less than 15% of Japan's land is arable. The agricultural economy is highly subsidized and protected. With per hectare crop yields among the highest in the world, Japan maintains an overall agricultural self-sufficiency rate of about 40% on fewer than 4.6 million cultivated hectares (14 million acres). Japan normally produces a slight surplus of rice but imports large quantities of wheat, corn, sorghum, and soybeans, primarily from the United States. Japan is the fourth-largest market for U.S. agricultural exports.

Given its heavy dependence on imported energy, Japan has aimed to diversify its sources and maintain high levels of energy efficiency. Since the oil shocks of the 1970s, Japan has reduced dependence on petroleum as a source of energy, from more than 75% in 1973 to less than 50% in 2009. Other important energy sources are coal, liquefied natural gas, nuclear power, and hydropower. Today Japan enjoys one of the most energy-efficient developed economies in the world.

Deposits of gold, magnesium, and silver meet current industrial demands, but Japan is dependent on foreign sources for many of the minerals essential to modern industry. Iron ore, coke, copper, and bauxite must be imported, as must many forest products.

Labor
Japan's labor force consists of some 64.97 million workers (Dec. 2011 est.), 48.5% of whom are women. Labor union membership was estimated to be about 10 million in 2007.

Sources:

CIA World Factbook (March 2012)
U.S. Dept. of State Country Background Notes ( March 2012)

Glossary