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An Economic Analysis Of Japan

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Published: Mon, 01 May 2017

Japan is a very powerful country in the world in terms of the economy. It is the world’s second largest economy after USA as of 2009 data. They have the second highest GNP after USA. (Economy, 2009 ). Although it was badly hit by the recent global economic meltdown it has started to show some positive signs of recovering after introducing a stimulus package by the Japanese government (Japan’s Economy Leaves Recession, 2009).

When considering Japan’s gross domestic product currently they are only behind the USA and according to 2009 estimates which was based on official exchange rate Japan have recorded $5.108 Trillion GDP (Japan, 2010). Their GDP growth rate has gone down to -5.3% per annum during 2009 (Japan, 2010) due to the effects of global economic crisis. Prior to the economic meltdown they maintained an average of GDP growth rate around 2%. In 2007 their growth rate was 2.7% (Japan, 2010).

As a very rich nation in the world Japan records a high income per capita. Their personal income per capita is estimated in 2009 as $32,600 (Japan, 2010). According to (Family Budgets and Prices, 2008) an average Japanese worker’s household disposable income was calculated at 442,749 Yen and out of that disposable income about 73% was spend on consumptions including foods. Therefore that can be taken as a good sign for our business as we are planning to export food items. According to (Japan – Poverty and wealth, 2010) although extreme poverty does not exist in Japan, (Wiseman & Nishiwaki, 2006) says that the middle class in Japan may shrink as the gap between lower income earners and high income earners increase.

Japan has a highly developed transportation system which supports its economy greatly. Every part of the country is covered with high quality transportation modes like road, rail, air and sea. Japan has the world’s 5th largest roadway system totalling 1,203,777km (Japan, 2010) and railways covering 26,435km (Japan, 2010). Also they have 144 airports with paved runways (Japan, 2010). Japanese ports and terminals including Tokyo, Yokohama, and Nagoya are world famous (Japan, 2010).

The communication systems are well developed and they have all the latest communication types ranging from television, telephone to latest high speed internet and satellite services. According to (Japan, 2010) in terms of land line telephone usage Japan is ranked at the fourth place. They are ranked in the 2nd place in the world as they have 47,249 million internet hosts and according to 2008 data there are 90.91 million internet users (Japan, 2010).

Japan has only few natural resources and almost negligible mineral resources compared to other developed countries. Energy, forest products and minerals like iron ore, copper which are necessary for their industries are imported. Less than 20% of their lands are suitable for cultivation (Japan, n,a)

Principle industries of Japan including manufacturing, construction and mining are the largest contributors to the country’s GDP (Japan – Overview of economy, 2010). Most of them are privately owned firms as Japan is practicing open economic system. Their productions include mainly machineries, motor vehicles, textiles and electronics and electrical equipments ( Background Note: Japan, 2010).

Japan consists of highly educated workforce and their total workforce reaches 65.9 million workers with unemployment rate of 5.6% in 2009 (Japan, 2010). Majority of labour force occupied in services with about 68% and the least number of labours are occupied in the agricultural segment with only 4% (Japan, 2010).

When analysing Japan’s international trade statistics, it can be seen that Japan has enjoyed a favourable balance of trade which was calculated as positive $131.2 billion in 2009 since their exports have exceeded its imports in 2009. Their imports have reached $490.6 billion and main import partners included China, US, Saudi Arabia and Australia. Imports mainly consisted of, fuels, foods, chemicals, textiles, raw materials and machineries (Japan, 2010). Japan’s exports in 2009 have reached $516.3 billion and their main export partners included US, China, and South Korea. Main exporting products included motor vehicles, electronics and chemicals, etc. (Japan, 2010).

Japanese Yen has inflated recently against the US Dollar. According to (Japan, 2010) value of Yen has increased from Yen per USD 110.22 in 2005 to Yen per USD 94.5 in 2009. Currently exchange rate fluctuate around 90Yen per 1USD and 1.25Yen per 1 Sri Lanka Rupees (Japanese Yen, 2010 ) Also they keep their inflation rate at a healthy rate around 1% (Japan, 2010).

Japan as a member of the WTO has entered into many bilateral and multilateral trade agreements in order to facilitate international trade (Japan Country Profile, 2010). Since Japan’s GDP heavily depends upon exports and imports, Japan is actively engaged in international trade and they have only imposed comparatively low trade restrictions. Japan has prohibited some dangerous and unnecessary products to be imported into the country like firearms, articles which infringe upon rights in patents, etc and opium, etc. (Japan Country Profile, 2010).

There are few imports restrictions like tariffs and requirements imposed by Japanese government which are relevant to our business. As our product which we are planning to export to Japan belongs to foods category, we would have to take import approval from relevant Japanese authorities using a special form (Japan Country Profile, 2010). Further we would have to pay import duties between 3-15% which is applicable plus consumption tax of 5% based on the total cost of the product (Japan Country Profile, 2010). There are no other import restrictions like import quotas that are relavent to out product.


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