Economic trends
Japan, being the second world's economy, was one of the countries most affected by the international economic crisis of 2009, due to its strong dependence on exports. While in 2010, the country was just recovering from two years of recession, the global economic downturn together wih the earthquake and the following tsunami threw Japan back into recession in 2011. Driven by the resumption of domestic consumption, of exports, of business investment and reconstruction efforts, growth resumed in the second half of 2011 and should remain at around 2% in 2012.
The government intends to implement a tax incentive scheme to stimulate the economy, but its budget situation is rather unfavorable. The public debt reached 200% of GDP and is expected to increase due to the cost of reconstruction and insufficient expenditure control. The strong appreciation of the yen against the dollar threatens growth, and some parts of industrial production have already relocated abroad. In August 2011, the rating agency Moody's downgraded Japan's notation. To rebalance public finances, the Prime Minister has decided to double the consumption tax by 2015, and in order to finance the reconstruction of the country a law has been passed to allow temporary tax increases for 25 years, starting from 2013. At the end of 2011, the government approved a fourth supplementary budget. While the first three were clearly intended to finance the post-quake and tsunami reconstruction, the latter aims to help SMEs, to provide more subsidies for farmers and reduce the cost of health care. The government of the PDI (Democratic Party of Japan) seeks to reform the "iron triangle", a term covering the LDP (Liberal Democratic Party), the administration and powerful businessmen, who have formed the core of the post-war Japanese development model of growth, led by exports and dominated by conglomerates. Trying to learn from the nuclear disaster, the government also decided to redefine its energy policy. Priority is also given to environmental, social and natalist policies. In the long run, the problem of aging population will increase pressure on spending.
The unemployment rate increased under the effects of the crisis, but it remains moderate at about 5%.
Main branches 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 sector 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.
International trade
Foreign trade is an essential element of the Japanese economy, but the country is not sufficiently open and imposes extensive non-tariff barriers, especially in the agricultural sector. Japan ranks fourth as a global importer and exporter of goods (2010), trade represent around 30% of the Japanese GDP.
Japan's trade balance, structurally greatly in surplus, posted a deficit in 2011: exports dropped as a result of the global slowdown, of the interruption of the supply chain in Thailand following the floods and due to the proven risks of contamination of the food chain following the Japanese nuclear disaster. Meanwhile, imports have increased due to purchases related to energy production.
The main trade partners of Japan are the United States, China, Southeast Asia and Saudi Arabia.
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Last updates: May 2012
