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Japan Economy

Economy - overview:

Japan is a major economic global power. Government-industry cooperation, aid from the United States following World War II, a strong work ethic, mastery of high technology, emphasis on education, and a comparatively small defense allocation have helped Japan advance with extraordinary speed to become the second largest economy in the world, after the U.S. 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 largely due to the after-effects of over-investment during the late 1980s and domestic policies intended to wring speculative excesses from the stock and real estate markets. Government efforts to revive economic growth have met with little success and were further hampered in 2000 to 2001 by the slowing of the US and Asia economies.

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.

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