- Japan has a population of 127 million and an aging society, with 22.9% over 65. Its economy is concentrated in major cities due to 70% of land being forested or unsuitable for development. - Japan has highly advanced manufacturing industries, especially automobiles and electronics, though services now contribute most to GDP. It imports most of its energy and raw materials. - Japan's economy is the 3rd largest by GDP but is expected to be overtaken by India in 2011. It has struggled with deflation for over a decade and low growth, though inflation is predicted to increase slightly in coming years.

1. Japan's Economy in Brief
Japan’s Economic Structure
Japan had a population of 127.08 million in 2010, with a labour force of 65.7 million. In 2010, Japan’s
unemployment 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 and
negative population growth rate. 22.9 percent of the Japanese population is above the age of 65
while 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 unsuitable
for agricultural, industrial or residential uses. As such, much of Japan’s economic activity is
concentrated 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 and
fodder crops from other countries, and relies on imports for most of its meat products. Japan is also
the 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 the
world's third largest oil importer, with 5.033 million barrels per day to meet 45 percent of its energy
needs in 2009. Japan boasts the largest fishing fleets in the world, accounting for almost 15 percent
of the global catch.
Find out more about Japan’s Economic Structure at EconomyWatch.com
Japan’s Industry Sectors
Despite an overall stagnation on the economy for nearly two decades, Japan’s industries are still
among the most highly advanced and innovative in the world. Japanese manufacturing products,
particularly in electronics and automobiles, are the world leaders in both production and
technological advancements in their respective fields.

2. In 2010, Industry was responsible for 23 percent of Japan's GDP. Major industries in Japan include
motor 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 behind
China. However, Japanese automobile companies remain among the most valuable and
technologically advanced in the world. Japan is home to six of the top twenty largest vehicle
manufacturers 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 percent
growth 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 electronic
products are renowned for their innovation and quality. Backed by its high-tech industries and
companies, Japan had the 8th highest industrial production growth rate in the world for 2010 at 15.5
percent. Simultaneously, Japan’s industrial production growth rate was the highest among the G20
nations.
Despite the historical significance of Japanese manufacturing, Services are the dominant component
of the economy – contributing to 75.9 percent of the GDP in 2010. Major services in Japan include
banking, 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 326
companies from the Forbes Global 2000. The once government-owned Japan Post is also the world’s
largest 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 of
household assets in its life insurance services.
Agriculture’s contribution to Japan’s economy is fairly small when compared to Industry and
Services. In 2010, Agriculture made up only 1.1 percent of the nation’s GDP. Although its
contribution appears minute, agriculture is still a highly important component of Japan’s economy
and society.

3. Japan’s agricultural economy is highly subsidised and protected. Only 15 percent of Japanese land is
suitable for agriculture, though any available land is highly cultivated. As such, Japan has one of the
highest 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 Japan's agricultural
imports.
Find out more about Japan’s Industry Sectors at EconomyWatch.com
Japan’s Exports, Imports & Trade
Japan is the 5th largest importer and exporter in the world. Japan imports raw materials and pays for
them by processing the raw materials, thus adding value to them before exporting the output. In
recent 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-level
issues in EPAs, such as "devising framework through which investment can take place in a secure
manner, or developing a mechanism to ensure protection of intellectual property rights". The list of
Japanese 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 import
partner. In 2010, 18.88 percent of Japan’s exports went to Japan while 22.22 percent of Japanese
imports came from China.
Find out more about Japan’s Exports, Imports & Trade at EconomyWatch.com
Japan’s Economic Forecast
Japan 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 growth
between 2.25 percent and 4.22 percent from 2012 to 2016. By the end of 2016, Japan's 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 consistent
margins. In 2010, Japan had the 25th highest GDP (PPP) per capita in the world at US$33,804. The
following year, Japan’s GDP (PPP) will increase by 2.49 percent to reach US$34,645.99. From 2012 to
2016, Japan’s GDP (PPP) per capita will see an annual increase ranging from 3 percent to 3.64
percent. By the end of 2016, Japan will have the 24th highest GDP (PPP) per capita in the world at
US$40,806.32.
Japan has been struggling to combat deflation for more than a decade. From 1999 to 2009, there
were 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 0.3
percent in 2006. In 2010, Japan experienced deflation once again with an inflation rate (average
consumer 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 energy
shortages 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. From
2012 to 2016, inflation (average consumer price change) is expected to increase in Japan though it is
unlikely to go over the 1 percent mark. Inflation (average consumer price change) is expected to
peak at 0.985 percent in 2016.
Japan has the world's second largest current account balance at US$194.754 billion – behind China
and slightly ahead of Germany. The Japanese current account balance was at its peak in 2007 at
US$210.967 billion but dropped significantly during 2008 and 2009 to US$141.751 billion. Having
recovered from the financial crisis, Japan’s current account balance in 2010 was 37.39 percent
higher than it was in 2009.
However, in the aftermath of the earthquake and tsunami, Japan’s current account balance is
expected to decline sharply by 31.15% in 2011 to hit US$134.083 billion. The decline in Japanese's
exports coupled with the strengthening of the Yen means that Japan’s current account balance is
likely to decline even further. By 2016, Japan’s current account balance is expected to fall to
US$131.471 billion.