Business Environment in Japan
Japan, being the second world's economy, was one of the countries most affected by the international economic crisis, due to its strong dependence on exports. The country entered into recession in 2008 (-1.2% of growth) and in 2009 (-5.2%), mainly due to a decline of the economic activity in the United States (its number one trade partner), in Europe (which attracts 15% of the total exports from the country) and in Asia (mostly in China). Moreover, the price rise in energy and food products has contributed to the drop of the domestic demand. Supported by the dynamism of the Chinese economy, Japan's growth, estimated at 2.8%, has rebounded in 2010, stimulated by exports as well as the resurgence of private consumption.
The perspectives for 2011 were less optimistic due to the slowdown in exports and a less favorable business climate. The earthquake that hit Japan on March 11, 2011 and the tsunami that followed led to a more negative review of these estimates. The cost of the disaster is expected to exceed 300 billion USD, not to mention the significant concerns regarding the nuclear power plant in Fukushima, whose consequences are not yet well known. According to experts, the Japanese economy should not recover before 2012.
The government's general balance-sheet is experiencing a huge deficit and the level of the state's net-debt is very important. They account for 3.7% and almost 200% of GNP respectively. Due to these reasons, the government has announced restrictions on budgetary and monetary policies. A priority is also given to the environment, to the social system and a policy favoring the increase of birth rate. In a long term, the problem of the ageing of the population will also increase the pressure on expenditures.
The unemployment rate had declined until 2007, but it increased again under the effects of the crisis, it remains moderate at about 5%.
|GDP (billions USD)||5,032.98||5,458.87||5,821.95e||5,920.56||6,058.06|
|GDP (Constant Prices, Annual % Change)||-6.3||3.9e||1.4e||2.1||1.7e|
|GDP per Capita (USD)||39,459||42,820||45,659e||46,507e||47,679|
|General Government Balance (in % of GDP)||-7.0e||-7.5e||-8.3||-7.4e||-7.3e|
|Inflation Rate (%)||-1.4||-0.7||0.2||0.2||0.4|
|Unemployment Rate (% of the Labor Force)||5.1||5.1e||4.9||4.7||4.5|
|Current Account (billions USD)||141.66e||149.73e||131.05e||116.94||-|
|Current Account (in % of GDP)||2.8||2.8||2.4||2.1||-|
Source: IMF - World Economic Outlook Database
Note: (e) Estimated Data
Main Sectors of Industry
Japan has few natural resources (some deposits of gold, magnesium, coal and silver), therefore, it depends from exports to supply itself with raw materials and energy resources. Having a large maritime area, the country is one of the first producers of halieutic (fishing) products. Only 15% of Japan's surface is suitable for cultivation. Tea and rice are the two main crops. The agricultural economy is highly subsidized and protected. Agriculture contributes marginally to the GNP and employs less than 5% of the active population.
The industrial sector is very diversified and it covers basic products (steel, paper), as well as high technology products. Japan dominates the sectors of automobile, robotics, biotechnology, nanotechnology and renewable energy. Japan is the world’s second producer of cars and ships. The industrial sector contributes to nearly 30% of the GNP.
The service sector accounts for more than two thirds of the GDP and employs two thirds of the active population.
|Breakdown of Economic Activity By Sector||Agriculture||Industry||Services|
|Employment By Sector (in % of Total Employment)||4.2||27.9||66.7|
|Value Added (in % of GDP)||1.5||28.0||70.6|
|Value Added (Annual % Change)||4.9||1.8||2.6|
Source: World Bank - Last Available Data.
|Japanese Yen (JPY) - Average Annual Exchange Rate For 1 USD||110.22||116.30||117.75||103.36||93.57|
Source: World Bank
Indicator of Economic Freedom
- Mostly free
- World Rank:
- Regional Rank:
Foreign Trade in Figures
Foreign trade is an essential element of the Japanese economy, but the country is not sufficiently open. Trade represents about 30% of Japan's GDP. Even though it is the second economic power, Japan ranks fifth as a global importer and imposes extensive non-tariff barriers, mainly in the agricultural sector. Structurally, Japan has a high positive trade balance, however this surplus has been reduced heavily during the crisis, due to the fall on exports which have increased again in 2010 (as well as imports), these are supported by the dynamic Asian demand despite the increase of the value of the yen.
The earthquake and tsunami that struck Japan on 11 March 2011, as well as environmental and health concerns related to the situation in the Fukushima Daiichi Nuclear Power Plant, including the proven risks of contamination of the food chain, have hurt Japanese exports. Many countries have decided to introduce systematic checks on certain imports from Japan. Other countries have simply decided to suspend imports, including agricultural products. Observers expect that Japan's exports decline of 0.5% - 1.6% and imports increase of 0.4% - 1.3% for the year 2011.
The main trade partners of Japan are the United States, China, Southeast Asia and Saudi Arabia.
|Foreign Trade Indicators||2006||2007||2008||2009||2010|
|Imports of Goods (million USD)||579,064||622,243||762,534||551,981||692,621|
|Exports of Goods (million USD)||646,725||714,327||781,412||580,719||769,839|
|Imports of Services (million USD)||133,900||148,685||167,443||146,965||155,235|
|Exports of Services (million USD)||115,140||127,060||146,440||125,918||137,555|
|Imports of Goods and Services (Annual % Change)||4.2||1.6||0.8||-16.7||-|
|Exports of Goods and Services (Annual % Change)||9.5||-||-||-||-|
|Imports of Goods and Services (in % of GDP)||14.9||15.9||17.4||12.2||-|
|Exports of Goods and Services (in % of GDP)||16.1||17.6||17.5||12.5||-|
|Trade Balance (million USD)||81,303||104,752||38,131||43,632||-|
|Trade Balance (Including Service) (million USD)||63,046||83,502||17,341||-||-|
|Foreign Trade (in % of GDP)||31.0||33.6||34.9||24.8||-|
Source: WTO - World Trade Organization ; World Bank
Main Partner Countries
(% of Exports)
|Other partnersClose extended list||46.9%|
(% of Imports)
|United Arab Emirates||4.2%|
|Other partnersClose extended list||52.0%|
Sources of General Economic Information
Ministry of the Economy, Trade and Industry
Ministry of Agriculture, Forestry and Fisheries
Japan’s SME policies
- Statistical Office
The Japanese Institute of Statistics
- Central Bank
The Bank of Japan
- Stock Exchange
Tokyo Stock Exchange
Nagoya Stock Exchange
Osaka Securities Exchange
Fukuoka Stock Exchange
Jasdaq Securities Exchange
- Search Engines
- Economic Portals
- Executive Power
- The head of state is the Emperor. His role is largely ceremonial. The leader of the majority party or leader of the majority coalition in the parliament (House of Representatives) is designated as the Prime Minister for a four-year term. The Prime Minister is the head of the government and enjoys the real executive powers which include implementation of the law in the country and running the day-to-day affairs. The Cabinet is appointed by the Prime Minister.
- Legislative Power
- The legislature in Japan is bicameral. The parliament called National Diet consists of: House of Councilors (the upper house) having 242 members elected through a popular vote for six year terms; and House of Representatives (the lower house) having 480 members elected through a popular vote for four-year terms. The Constitution of Japan states that the nation's "highest organ of state power" is the National Diet. The executive branch of government is directly or indirectly dependent on the support of the National Diet, often expressed through a vote of confidence.
- Main Political Parties
- Conservatives, right-wing:
LDP (Liberal Democratic Party) - made up of various conservative and reformist factions, the largest political party in Japan;
DPJ (Democratic Party of Japan) – a liberal, social-democratic party;
New Komeito – a conservative, theocratic Buddhist party.
Moderates, left-wing: - JCP (Japanese Communist Party) - a moderate communist party; SDP (Social Democratic Party) - a moderate social-democratic and populist party.
- Current Political Leaders
- Emperor: AKIHITO (since 7 January 1989) – hereditary
Prime Minister: Naoto Kan, PDJ (center left), since June 2010.
- Next Election Dates
- House of Councilors: 2013
Indicator of Freedom of the Press
- World Rank:
- 12 places up compared to 2008
Indicator of Political Freedom
- Political Freedom:
- Civil Liberties:
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