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  • 1. Japans Economy in BriefJapan’s Economic StructureJapan had a population of 127.08 million in 2010, with a labour force of 65.7 million. In 2010, Japan’sunemployment rate was the lowest among the G7 nations at 5.058 percent.One of the biggest challenges that the Japanese government face today is its aging population andnegative population growth rate. 22.9 percent of the Japanese population is above the age of 65while Japan’s total fertility is the 5th lowest in the world.Japan has a land area of 364,485 square km. 70 percent of Japanese land is forested and unsuitablefor agricultural, industrial or residential uses. As such, much of Japan’s economic activity isconcentrated in major cities such as Tokyo, Yokohama and Osaka.With only about 15 percent of its land being arable, Japan imports about 60 percent of grain andfodder crops from other countries, and relies on imports for most of its meat products. Japan is alsothe largest market for EU and third largest market for US agricultural exports.With its lack of natural resources, Japan rely on the imports of commodities such as fuels, foodstuffs,chemical, textiles and raw materials from various countries for its industrial sectors. Japan is theworlds third largest oil importer, with 5.033 million barrels per day to meet 45 percent of its energyneeds in 2009. Japan boasts the largest fishing fleets in the world, accounting for almost 15 percentof the global catch.Find out more about Japan’s Economic Structure at EconomyWatch.comJapan’s Industry SectorsDespite an overall stagnation on the economy for nearly two decades, Japan’s industries are stillamong the most highly advanced and innovative in the world. Japanese manufacturing products,particularly in electronics and automobiles, are the world leaders in both production andtechnological advancements in their respective fields.
  • 2. In 2010, Industry was responsible for 23 percent of Japans GDP. Major industries in Japan includemotor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals,textiles, and processed foods.Japan’s automobile industry produces the second largest amount of vehicles in the world behindChina. However, Japanese automobile companies remain among the most valuable andtechnologically advanced in the world. Japan is home to six of the top twenty largest vehiclemanufacturers in the world – Toyota (1st), Renault-Nissan (4th), Honda (8th), Suzuki (10th), Mazda(14th), Mitsubishi (16th). The automobile industry also managed to register a massive 10.5 percentgrowth in 2009, in spite of the global financial crisis.Japan is also the world’s largest electronics manufacturer with prominent companies such as Sony,Casio, Mitsubishi Electric, Panasonic, Canon, Fujitsu, Nikon, Yamaha etc. Japanese electronicproducts are renowned for their innovation and quality. Backed by its high-tech industries andcompanies, Japan had the 8th highest industrial production growth rate in the world for 2010 at 15.5percent. Simultaneously, Japan’s industrial production growth rate was the highest among the G20nations.Despite the historical significance of Japanese manufacturing, Services are the dominant componentof the economy – contributing to 75.9 percent of the GDP in 2010. Major services in Japan includebanking, insurance, retailing, transportation and telecommunications.The Tokyo Stock Exchange is the third largest stock exchange in the world by market capitalisation –with a total market capitalization of US$3.8 trillion as of Dec 2010. Japan is also home to 326companies from the Forbes Global 2000. The once government-owned Japan Post is also the world’slargest postal savings system, and quite possibly the world’s largest holder of personal savings –present it holds about US$2.1 trillion of household assets in its savings account and US$1.2 trillion ofhousehold assets in its life insurance services.Agriculture’s contribution to Japan’s economy is fairly small when compared to Industry andServices. In 2010, Agriculture made up only 1.1 percent of the nation’s GDP. Although itscontribution appears minute, agriculture is still a highly important component of Japan’s economyand society.
  • 3. Japan’s agricultural economy is highly subsidised and protected. Only 15 percent of Japanese land issuitable for agriculture, though any available land is highly cultivated. As such, Japan has one of thehighest per hectare crops yields in the world. Though it has a small agriculture sector, Japan is self-sufficient in the production of rice and fish, but relies heavily on food imports such as wheat, corn,sorghum and soybeans from the US. This makes US the third largest market for Japans agriculturalimports.Find out more about Japan’s Industry Sectors at EconomyWatch.comJapan’s Exports, Imports & TradeJapan is the 5th largest importer and exporter in the world. Japan imports raw materials and pays forthem by processing the raw materials, thus adding value to them before exporting the output. Inrecent years, Japan has been the top export market for 15 trading nations worldwide.In order to greater facilitate bilateral trade, Japan adopts Economic Partnership Agreements (EPAs)According to former Japanese Prime Minister Taro Aso, countries move on to discuss higher-levelissues in EPAs, such as "devising framework through which investment can take place in a securemanner, or developing a mechanism to ensure protection of intellectual property rights". The list ofJapanese EPAs include those with ASEAN, Brunei, Indonesia, Malaysia, Philippines, Singapore,Thailand, Vietnam, Australia, Chile, India, Mexico, Peru, Korea and Switzerland.Despite Japan’s extensive list of EPA partners, China remains as Japan’s largest export and importpartner. In 2010, 18.88 percent of Japan’s exports went to Japan while 22.22 percent of Japaneseimports came from China.Find out more about Japan’s Exports, Imports & Trade at EconomyWatch.comJapan’s Economic ForecastJapan will be overtaken by India as the third largest economy in the world by the end of 2011 –according to GDP (PPP). Japan’s GDP (PPP) is expected to see slow but steady annual growthbetween 2.25 percent and 4.22 percent from 2012 to 2016. By the end of 2016, Japans GDP (PPP)will grow to US$5.145 trillion.
  • 4. Similarly, Japan’s GDP (PPP) per capita is also expected to increase annually by fairly consistentmargins. In 2010, Japan had the 25th highest GDP (PPP) per capita in the world at US$33,804. Thefollowing year, Japan’s GDP (PPP) will increase by 2.49 percent to reach US$34,645.99. From 2012 to2016, Japan’s GDP (PPP) per capita will see an annual increase ranging from 3 percent to 3.64percent. By the end of 2016, Japan will have the 24th highest GDP (PPP) per capita in the world atUS$40,806.32.Japan has been struggling to combat deflation for more than a decade. From 1999 to 2009, therewere only three years in which Japan did not experience deflation. Even then, inflation rates(average consumer price change) were at 0 percent for two years (2004 and 2007) and a mere 0.3percent in 2006. In 2010, Japan experienced deflation once again with an inflation rate (averageconsumer price change) of negative 0.698 percent.Japan is likely to overcome deflation in 2011; though it is more of a result of food and energyshortages caused by the tsunami, rather than that of monetary policies having any effect. In 2011,Japan’s inflation rate (average consumer price change) is expected to reach 0.156 percent. From2012 to 2016, inflation (average consumer price change) is expected to increase in Japan though it isunlikely to go over the 1 percent mark. Inflation (average consumer price change) is expected topeak at 0.985 percent in 2016.Japan has the worlds second largest current account balance at US$194.754 billion – behind Chinaand slightly ahead of Germany. The Japanese current account balance was at its peak in 2007 atUS$210.967 billion but dropped significantly during 2008 and 2009 to US$141.751 billion. Havingrecovered from the financial crisis, Japan’s current account balance in 2010 was 37.39 percenthigher than it was in 2009.However, in the aftermath of the earthquake and tsunami, Japan’s current account balance isexpected to decline sharply by 31.15% in 2011 to hit US$134.083 billion. The decline in Japanesesexports coupled with the strengthening of the Yen means that Japan’s current account balance islikely to decline even further. By 2016, Japan’s current account balance is expected to fall toUS$131.471 billion.