Japan Economic Overview

Topics: 2009, Economy of Japan, Japan Pages: 5 (1312 words) Published: April 10, 2011
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Japan: Economic Overview

Economic Boom and Bust:
After its miraculous recovery from World War II and unprecedented growth in the 1980s, the Japanese economy faltered as the “bubble economy” burst in the 1990s - heralding the onset of Japan’s notorious “lost decade”. Despite a subsequent period of some economic gains, the onset of the 2008 Global Financial Crisis made Japan plunge, yet again, into recession. According to analysts however, December 2009 has seen the first signs that the Japanese economy will begin to recover throughout 2010. As Japan’s National Strategy Minister Naoto Kan explained, “Economies in Asia and the world have rebounded and our fiscal spending ...is expected to boost demand... I think we can avoid a double-dip recession.”[1]

Economic Indicators:
▪ Japan currently boasts a GDP of $4.34 trillion, which ranks 3rd in the world.[2] ▪ As of 2008, Japan posted a 0.7% decline in GDP.
▪ In October 2009, Japan recorded $464.5 billion in exports and $444.8 billion in imports with exports falling by 30.7% and imports falling 31% since 2008[3].

Economic Structure: ▪ Japan’s economy consists of two tiers; the large multinational corporations such as Sony, Honda, and Toyota, and small, family owned enterprises. ▪ GDP by sector- agriculture: 1.5% industry: 26.3% services: 72.3%[4] ▪ Japan’s top export commodities are transport equipment, electrical equipment, and general machinery. Its top imports are machinery & equipment, mineral fuels, and foodstuffs.[5] ▪ Japan’s main trading partner is the United States, which is the recipient of 17.6% of Japanese exports and accounts for 10.2% of Japanese imports. China is the top exporter to Japan, accounting for 18.9% of Japanese imports.[6] ▪ In 2008, Japan received $24 billion in FDI. It invested far more than it received, netting $130 billion in outward FDI.[7] ▪ In 2009, the World Bank ranked Japan 15th in their “Ease of Doing Business” ranking. However, it was ranked 91st in ease of starting a business, 15th in obtaining credit, and 16th in protecting investors.[8]

Political Considerations:
▪ A parliamentary government is currently in place, composed of a bi-cameral legislature made up of the House of Councillors and the Senate House of Representatives. ▪ The Prime Minister serves as the head of government and is designated by the Diet, the legislative body. ▪ The Japanese government has a strong grip on the economy, and in 2006 the Bank of Japan ended an unprecedented era of zero interest rates by increasing borrowing costs for the first time in almost six years.[9] ▪ The Japanese government also has strong ties to businesses, and spent trillions of yen to stimulate the economy, leading to a government debt which is now 200% of its GDP.[10] ▪ As of August 2009, the standard national corporate tax rate is 30%. Including local taxes, the effective standard corporate tax rate is approximately 41%[11]. ▪ The top effective personal income tax rate, including local taxes, is 50%. The consumption tax rate is 5%.[12]

▪ Educated, Highly-skilled Population: As of the most recent population census (2005), 97.5% of Japanese adults had completed secondary education, with 35.2% of them having graduated from Universities or junior colleges.[13] ▪ In the 2009-2010 Global Competitiveness Report published by the World Economic Forum, Japan was ranked 8th overall in competitiveness, enjoying an edge in business sophistication and innovation. It is ranked second in the world for its availability of scientists and engineers.[14] ▪ Advanced Technology: Japan’s technology is supported by strong investment into Research and Development. Today it is ranked second in the world for its investments into R&D[15] ▪ A Hub...
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