Economical overview
Japan is an economic powerhouse and for many
years had the world's second largest economy after the
United States. In 2010, however, China took second
place. But since 1990, Japan has had problems with low
economic growth and a large government debt. The fact
that the population is declining is feared to lead to a
shortage of labor in the future.
In 1945, Japan was crushed as one of the great losers
of World War II - military, political and economic. Then
it took less than ten years for the shattered industry
to reach pre-war production levels again and the
country's rapid recovery hit the world with
astonishment.
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Japan's advance in the 1950s and 1960s is often
called "miracle" but had several causes. The foundation
was laid during the Meiji era (1868-1912)
industrialization and already in the 1930s the country
was a major exporter of industrial goods. It was also
decisive that during the occupation of 1945–1952, the
United States intervened with extensive assistance,
implemented land reform and dissolved the large
financial and industrial groups that had long dominated
the economy. Several of the corporate groups were
re-educated after the war and pushed for development,
but then in the form of powerful multinational companies
such as Mitsui, Mitsubishi and Matsushita.
Today's business sector consists partly of gangs that
have become known around the world, and partly of small,
often family-owned companies. The economy has been
characterized by a strong value community between
business and the state. Trade and finance laws and other
state regulations have been decided in close agreement
with industry and the financial sector.
An important factor behind Japan's strong growth has
also been the high level of savings. Despite low
interest rates, households have saved huge sums, which
have helped to finance the large investments that have
built up Japanese industry. The companies have also
saved a large part of their profits and used them for
investment. Domestic lending has also funded Japan's
sweltering government debt.
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including JPN which represents the country of Japan.
The Korean War of 1950-1953 gave Japan's first boost.
After that, the wear and tear of the workers, an
aggressive trade policy in conjunction with the large
investments of companies and adaptation to the needs of
the outside world contributed to giving Japan economic
growth of over 10 percent in nearly two decades. Japan
suffered more relief than many others in the global oil
crisis of 1973. The country maintained annual growth of
4 to 6 percent until the late 1980s and appeared to be
approaching the United States in economic strength. At
the turn of the year 1989–1990, a steep race for the
upgraded stock prices and property prices began. Then
followed many years of low growth. Recovery periods
alternated with new setbacks, and the aftermath of the
financial crash was affecting Japan for over two
decades.
Japan's economic worries during the 1990s were
exacerbated by an ever-increasing exchange rate of the
country's currency, the yen, and by economic problems in
the western world. The outside world wanted or could not
continue to buy Japanese products on a large scale.
Unemployment rose and several large finance companies
went bankrupt. The central government had to help with
the remediation of the banks' burdens of “bad loans” and
the central bank introduced “zero interest” in 1998–1999
by lowering its policy rate to a zero-per- centage rate.
The next few years after the turn of the millennium
saw signs that the economy was moving towards firmer
land. Increased exports to China and the US key market
contributed to the positive figures. The recovery was
facilitated by pressured world market prices for raw
materials such as oil. The privatization of Japan's
gigantic post office was also seen as part of the new
venture.
The US mortgage crisis and the global financial
crisis in its tracks had a negative impact on the
economy. Exports decreased and in 2009 the economy
shrank by more than 5 percent. The government tried to
deal with tax cuts for households, loan guarantees for
small businesses and tax relief for home loans. Towards
the end of 2010, some improvement was noted, but the
camp changed in one stroke in connection with the March
2011 earthquake and tsunami disaster. imports of natural
gas after the triple disaster. Important car and
electronics exports were hit hard when factories were
forced to cancel distribution and transport due to the
damage.
When the LDP took over the government in December
2012, the main objective was to get the economy in
order. Prime Minister Abe and his government launched a
new economic policy, "Abenomics", with extensive
stimulus measures in the form of infrastructure
investments in combination with a more active central
bank, including through huge support purchases of
Japanese government bonds. In addition, structural
reforms were planned, all in an attempt to get a
positive spiral of consumption, investment and new jobs.
Abe's program also included various deregulations,
lower corporate taxes, attempts to reform agriculture,
higher wages and measures to increase household
purchasing power, restart nuclear power reactors and a
new trade cooperation: the Trans-Pacific Partnership (TPP)
- the proposed free trade and investment agreement
between countries around the Pacific (see Foreign
Trade).
The policy led to somewhat increasing growth, falling
unemployment and, not least, that the country's currency
yen fell in value, which contributed to export
companies' revenues increasing. It was more difficult to
stop the stubborn deflation (falling prices) which has
lowered prices ever since the late 1990s and pushed down
wages, which had a negative impact on the economy. The
government has not succeeded in reaching the target of
raising inflation to 2 percent. An increase in VAT from
5 to 8 percent in April 2014 meant that the Japanese
reduced their consumption for a period.
But government finances were still hampered and
hampered by a difficult problem: rising social costs as
a result of the country getting more and more old people
to take care of (see Social conditions). This has led to
a continued large budget deficit, while the huge
government debt, the highest among the world's
industrialized countries towards the end of the 2010s,
continues to build on. However, since borrowing mainly
takes place within the country, this is not considered
to be an acute problem. As long as interest rates are
low, the financing of central government debt continues,
but the situation becomes more complicated if interest
rates rise to more normal levels.
Other concerns are the low birth rates and the
shrinking workforce that will support the growing
proportion of older people in the population. In the
autumn of 2015, the government of Abe supplemented its
economic policy with attempts to encourage the Japanese
to have more children with the goal of raising the birth
rate to at least 1.8 percent. This would be done, among
other things, by expanding childcare and reducing the
high number of overtime hours (see also Labor Market).
In order to tackle the problem of the shrinking labor
force in the country, the government in 2018 passed
amendments to immigration legislation in order to open
to receive labor migrants. Foreign workers should be
given the opportunity to obtain a five-year work visa
for themselves and their families.
Economic growth remained at a moderate level towards
the end of the 2010s. At the same time, however, the
economy was adversely affected by the ongoing trade
dispute between China and the United States, which
affected Japan's technology exports to China. However,
the economy received some traction from investments
ahead of the Tokyo 2020 Summer Olympics. An increase in
VAT in the fall of 2019 was also expected to provide
long-awaited revenue to the Treasury.
FACTS - FINANCE
GDP per person
US $ 39,287 (2018)
Total GDP
US $ 4,970,916 million (2018)
GDP growth
0.8 percent (2018)
Agriculture's share of GDP
1.2 percent (2017)
Manufacturing industry's share of GDP
20.7 percent (2017)
The service sector's share of GDP
69.1 percent (2017)
Inflation
1.0 percent (2019)
Government debt's share of GDP
237.1 percent (2018)
Currency
yen
Triple Disasters 2011
The natural disaster that hit Japan in March 2011
had severe consequences and required around 20,000
lives. The quake, whose epicenter was in the Pacific
Ocean about 40 miles northeast of Tokyo, was measured at
9.0 on the Richter scale. It was followed by a 10-20
meter high tsunami wave that extended over the northern
parts of the country's east coast, into the Tohoku
region of the main island of Honshu.
The devastation was enormous: entire port cities were
swept away, and many thousands of people were feared
dead. At the same time, alarming reports came about the
situation at the Fukushima Dai-ichi nuclear power plant,
where explosions and fires occurred after the tsunami
hit the plant. Within a couple of days, three of the six
reactors in Fukushima Dai-ichi were hit by meltdowns,
mainly due to the lack of cooling water. As a nuclear
accident, Fukushima is only surpassed by Chernobyl.
Tens of thousands of people in the nuclear power
plant's vicinity were evacuated due to radioactive waste
and hazardous levels of radiation. In total, the tsunami
and earthquake damaged over one million buildings, of
which about 125,000 were classified as completely
destroyed and over a quarter of a million as
"half-destroyed".
Even in Tokyo, 25 miles further south, elevated
levels of radioactive radiation were measured, but the
capital was lucky with the wind direction during the
most critical days.
The fight against all the effects of the triple
disaster (quake, tsunami and nuclear accident) became
chaotic. Despite all efforts, radioactive emissions were
not prevented; radioactivity was detected in vegetables,
milk and meat from the affected areas, in the drinking
water and in the sea along the coast off the nuclear
power plant, where the levels were very high.
The work to put a stop to the radiation and the
leakage of radioactive water from the nuclear power
plant has since become both difficult and lengthy, with
a series of setbacks. Four of the Fukushima Dai-ichi
reactors are too badly damaged to be used again and the
other two should also be decommissioned. The dismantling
of the entire plant is expected to take decades.
Prime Minister Kan described the disaster as the
country's most serious crisis since the Second World
War. Hundreds of thousands of Japanese soldiers assisted
in the relief efforts and the outside world sent rescue
workers to the affected area. In the autumn of 2012, the
official figure for the number of dead and missing
persons was just over 18,500, while the number of
injured persons was stated at just over 6,000. Almost
all lives were extinguished by the tsunami, while the
number of victims of the quake itself was relatively
limited. The number of evacuees for another three years
after the disaster (in March 2014) amounted to about
270,000.
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