However, the economy saw signs of strong recovery in 2005. GDP growth for the year was 2.8%, with a fourth quarter expansion of 5.5%, surpassing the growth rate of the US and European Union during the same period. Unlike previous recovery trends, domestic consumption has been the dominant factor in leading the growth. Hence, the Japanese government predicts that recovery will continue in 2006. In March 2006 the core Consumer Price Index (CPI) showed a positive growth for the first time in 8 years.
Distinguishing characteristics of the Japanese economy include the cooperation of manufacturers, suppliers, distributors, and banks in closely-knit groups called keiretsu; the powerful enterprise unions and shunto; cozy relations with government bureaucrats, and the guarantee of lifetime employment (shushin koyo) in big corporations and highly unionized blue-collar factories. Recently, Japanese companies have begun to abandon some of these norms in an attempt to increase profitability.
The current government of Junichiro Koizumi has enacted or attempted to pass (sometimes with failure) major privatization and foreign-investment laws intended to help stimulate Japan's dormant economy. Although the effectiveness of these laws is still ambiguous, the economy has begun to respond, but Japan's aging population is expected to place further strain on growth in the near future.
Agricultural sector
Japan uses a system of terrace farming to build in a small area due to lack of available land. Japanese agriculture has one of the world's highest levels of productivity per unit area. Japan's small agricultural sector, however, is also highly subsidized and protected, with government regulations that favor small-scale cultivation instead of large-scale agriculture as practiced in North America. Imported rice, the most protected crop, is subject to tariffs of 490% and restricted to a quota of only 3% of the total rice market. Although Japan is usually self-sufficient in rice (except for its use in making rice crackers and processed foods), the country must import about 50% of its requirements of other grain and fodder crops, and relies on imports for most of its supply of meat. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch, prompting some claims that Japan's fishing is leading to depletion in fish stocks such as tuna. Japan has also sparked controversy by supporting quasi-commercial whaling.
Industrial sector
Industry, one-fourth of Japan's GDP, depends heavily on imported raw materials and fuels. Internationally, Japan is best known for its automotive, optics, and electronics industries, as the home of big manufacturers such as Toyota, Yamaha, Honda, Nissan, Mitsubishi, Mazda, Sony, Matsushita, Toshiba, Suzuki and Hitachi, as well as household names like Nintendo and Nikon Corporation. Japan also holds a large market share in high-technology industries such as semiconductors, industrial chemicals, machine tools, and (in recent years) aerospace. Construction has long been one of Japan's largest industries, with the help of multi-billion-dollar government contracts in the civil sector. Robotics constitutes a key long-term economic strength.
Service sector
Japan's service sector accounts for about three-fourths of its total economic output. Banking, insurance, real estate, retailing, transportation, and telecommunications are all major industries. The Koizumi government is attempting to privatize Japan Post, one of the country's largest providers of savings and insurance services, by 2007.
Economy - overview:
Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan advance with extraordinary rapidity to the rank of third largest economy in the world after the US and China, measured on a purchasing power parity (PPP) basis. Japan is the second largest economy, measured on an exchange rate basis. One notable characteristic of the economy is the working together of manufacturers, suppliers, and distributors in closely-knit groups called keiretsu. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding. Japan's industrial sector is heavily dependent on imported raw materials and fuels. The tiny agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self sufficient in rice, Japan must import about 50% of its requirements of other grain and fodder crops. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades, overall real economic growth had been spectacular: a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after effects of overinvestment during the late 1980s and contractionary domestic policies intended to wring speculative excesses from the stock and real estate markets and to force a restructuring of the economy. From 2000 to 2003, government efforts to revive economic growth met with little success and were further hampered by the slowing of the US, European, and Asian economies. In 2004 and 2005, growth improved and the lingering fears of deflation in prices and economic activity lessened. Japan's huge government debt, which totals 170% of GDP, and the aging of the population are two major long-run problems. A rise in taxes could be viewed as endangering the revival of growth. Internal conflict over the proper way to reform the financial system will continue as Japan Post's banking, insurance, and delivery services undergo privatization between 2007 and 2017.
GDP (purchasing power parity):
$3.867 trillion (2005 est.)
GDP (official exchange rate):
$4.955 trillion (2005 est.)
GDP - real growth rate:
2.1% (2005 est.)
GDP - per capita:
purchasing power parity - $30,400 (2005 est.)
GDP - composition by sector:
agriculture: 1.3%
industry: 25.3%
services: 73.5% (2005 est.)
Labor force:
66.4 million (2005 est.)
Labor force - by occupation:
agriculture 4.6%, industry 27.8%, services 67.7% (2004)
Unemployment rate:
4.3% (2005 est.)
Population below poverty line:
NA
Household income or consumption by percentage share:
lowest 10%: 4.8%
highest 10%: 21.7% (1993)
Distribution of family income - Gini index:
37.9 (2000)
Inflation rate (consumer prices):
-0.2% (2005 est.)
Investment (gross fixed):
24.4% of GDP (2005 est.)
Budget:
revenues: $1.429 trillion
expenditures: $1.775 trillion, including capital expenditures (public works only) of about $71 billion (2005 est.)
Public debt:
170% of GDP (2005 est.)
Agriculture - products:
rice, sugar beets, vegetables, fruit, pork, poultry, dairy products, eggs, fish
Industries:
among world's largest and technologically advanced producers of motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles, processed foods
Industrial production growth rate:
1.3% (2005 est.)
Electricity - production:
1.017 trillion kWh (2003)
Electricity - consumption:
946.3 billion kWh (2003)
Electricity - exports:
0 kWh (2003)
Electricity - imports:
0 kWh (2003)
Oil - production:
120,700 bbl/day (2003 est.)
Oil - consumption:
5.578 million bbl/day (2003 est.)
Oil - exports:
93,360 bbl/day (2001)
Oil - imports:
5.449 million bbl/day (2001)
Oil - proved reserves:
29.29 million bbl (1 January 2002)
Natural gas - production:
2.519 billion cu m (2001 est.)
Natural gas - consumption:
80.42 billion cu m (2001 est.)
Natural gas - exports:
0 cu m (2001 est.)
Natural gas - imports:
77.73 billion cu m (2001 est.)
Natural gas - proved reserves:
20.02 billion cu m (1 January 2002)
Current account balance:
$158.3 billion (2005 est.)
Exports:
$550.5 billion f.o.b. (2005 est.)
Exports - partners:
US 22.7%, China 13.1%, South Korea 7.8%, Taiwan 7.4%, Hong Kong 6.3% (2004)
Imports:
$451.1 billion f.o.b. (2005 est.)
Imports - partners:
China 20.7%, US 14%, South Korea 4.9%, Australia 4.3%, Indonesia 4.1%, Saudi Arabia 4.1%, UAE 4% (2004)
Reserves of foreign exchange and gold:
$845 billion (2004)
Debt - external:
$1.545 trillion (31 December 2004)
Economic aid - donor:
ODA, $8.9 billion (2004)
Currency (code):
yen (JPY)
Exchange rates:
yen per US dollar - 109 (2005), 108.19 (2004), 115.93 (2003), 125.39 (2002), 121.53 (2001)
Fiscal year:
1 April - 31 March
