After World War II, Japan has developed into one of the
world's leading industrialized countries, partly because of
continuous technological and corporate renewal, huge
investments in equipment and facilities and highly educated
With a gross domestic product (GDP) of more than US $
5443 billion (2017) and a national income (GNI) of 3969
billion, Japan is the world's fourth largest economy, after
China, the United States and India. In 2017, Japan had a GDP
per capita of $ 42,900.
COUNTRYAAH, a fundamental driver of Japan's economic growth has been
the Japanese labor force, which is known to show strong
enthusiasm and energy towards the work. Japanese companies
are investing a lot in building employee morale and
productivity. The leaders of Japanese big corporations
gladly encourage their workers to think of the company as a
welded entity, almost like a family. Larger companies often
offer their workers a lifetime job, corporate housing,
retirement plans and post-employment promotion. The state's
control over the business sector is relatively small, but
the authorities have used monetary policy to control the
degree of economic expansion and, in addition, prepared very
effective economic plans.
There has been a tremendous economic growth in Japan
after 1945, despite the fact that a large proportion of the
country's factories were in ruins after the war, and despite
the fact that the country is very poor in commodities.
The Korean War (1950–1953) played an important role in
Japan's economic development. Japan received hundreds of
millions of dollars in foreign currency as payment for
Japanese-built trucks and other heavy equipment, as well as
accommodation and services for UN troops that manned supply
bases in Japan. As a result, Japanese industry quickly
recovered after the defeat in 1945.
After the Korean War, the Japanese government implemented
an effective five-year economic growth plan, which included
tariff protection and subsidies for the key industries. With
the help of the government, new steel, shipbuilding and
industrial complexes were formed. New and efficient
Japan reinvested large parts of its gross domestic
product (GDP), 32 percent annually in the period 1956–1960,
in modernizing old industry and capital into new ones. The
country's car production increased rapidly, from 100,000
vehicles in 1960 to two million in 1970, and they passed ten
million in 2002. In the early 1970s, Japan became the
world's second largest car manufacturer, after West Germany.
At the same time, the Japanese light industry obtained the
Swiss for watch production, and the Germans for cameras,
lenses and other optical equipment.
Since the 1970s, the company has been focusing on
energy-saving, knowledge-oriented industry, but the country
still has large production of steel, machinery, electrical
equipment and chemicals. The Japanese have a large share of
the world consumer electronics market, but a growing part of
production has gradually moved to low-cost countries.
Despite the recession of about 1990, growth in the
economy since World War II is believed to have been greater
than in any other industrialized country.
Japanese business from the 1990s
Especially since around 1990, the service industry's
share of GDP has grown significantly. In 2003, they
accounted for 69.6 per cent, while the manufacturing sector
declined to 20 per cent. Some economists viewed this as a
sign that the country is entering a post-industrial era.
During the recession of about 1990, it appears that the
traditional corporate culture with very close ties between
employee and company has been weakened. Several of the
industrial giants have made mass layoffs. The working week
was gradually reduced from 48 hours in the 1980s to 40 hours
in 1994, when the 5-day week was introduced.
The Japanese in the 1990s had to contend with the
aftermath of the 1980s speculation-based "bubble economy".
In the period 1990–2003, property prices fell by
approximately 70 percent and stock prices by almost 80
percent. A sustained crisis in the banking industry led to a
credit drought for business. Japan is the only major
industrialized country that has had to fight a crippling
deflationary pressure since 1945, especially in the period
Business is dominated by the combined industrial and
trade conglomerates (keiretsu), which consist of
trade, service and industrial companies that are linked
together in alliances and cross-ownership. Among the most
famous keiretsu are Mitsubishi, Mitsui and Sumitomo.
In 1996, two of the largest banks, Mitsubishi Bank and
Bank of Tokyo, were merged into what was then the world's
largest commercial bank, Mitsubishi Tokyo Bank, as part of
rationalization and cost cuts in banking. In 2005, something
similar happened: Mitsubishi Tokyo merged again, this time
with Japan's third largest financial institution, UFJ
Holding. Once again, the result became the world's largest
bank (US Citigroup, however, has larger total assets).
The export-oriented Japanese industry was hit by new
problems in the 1990s. With declining turnover in the
domestic market, it has struggled with overcapacity after
over-investment in the 1980s. From around 1990, Japan
entered a period of prolonged economic stagnation. Changing
governments tried unsuccessfully to solve the problems of
tax cuts and large infrastructure development programs.
Annual growth was around a modest one percent.
Japan for decades had an unemployment rate that was
significantly lower than in the West's industrialized
country, but in 2002 it reached a new Japanese record level
of 5.5 percent. Stronger yen currency has created problems
for Japanese exports, as Japanese goods have become more
expensive abroad. One way to tackle this problem has been to
acquire foreign companies and move out domestic production
by establishing production companies in the EU countries,
the US and Asia, since around 1995 with particular emphasis
on China. One example is the automotive industry, where the
number of Japanese cars produced abroad increased
significantly during the 1990s.
The production of television sets and other consumer
electronics was largely "flagged out" at the turn of the
millennium. At the same time, other countries, primarily
China, seemed to threaten Japan's position on the world
market as a manufacturer and exporter.
However, Japan has large assets, including the world's
largest foreign exchange reserves, which has enabled the
country to become the world's largest lender. On the other
hand, the Japanese state has the largest domestic debt
burden of all major powers - 237 percent of GDP (2017). The
deep structural problems in the economy have defied fiscal
policy in the form of zero interest rates and expansionary
Only in the mid-1960s did agriculture cease to be Japan's
most important trade route. As late as 1955, agriculture
employed about 40 percent of the working population and
contributed almost 20 percent to the gross domestic product.
In 2017, agriculture's share had fallen to 2.9 per cent of
employment and 1.1 per cent of GDP respectively. The lack of
arable land makes the use of agricultural land very
intensive. Where possible, the slopes are built up in
terraces to provide new areas, and south of the 38th
latitude two crops per year are common.
The average use size is only on 1.4 hectares of
cultivated land, and often the land is divided on smaller
scattered dunes. F°ydale real estate conditions survived
until 1946, when a land reform was implemented following
American initiative. Previously, most of the land was owned
by large landlords, while the many millions of small tenants
had to pay up to half the crop in fee. In the land reform,
80 per cent of the tenants became self-owners against a
small payment. The reforms have increased production, but
the many small farms have at the same time inhibited the
mechanization of Japanese agriculture.
The self-sufficiency of food products in general is
around 70 per cent, but varies greatly from product to
product as a result of varying levels of profitability.
While the country is self-sufficient with rice, rye,
potatoes, vegetables and eggs, wheat, maize, soybeans,
sugar, fish and meat must be imported.
Rice is the most important grain, covering 45 per cent of
the area cultivated and accounts for 35 per cent of
agricultural production by value. Rice is grown throughout
most of the country, including parts of Hokkaido. The
introduction of better frost-resistant rice varieties has
meant that cultivation can now take place up to 900 meters
in height, and far to the north where climatic conditions
previously seemed obstructive. Overproduction was a problem
in the late 1960s and 1970s, and farmers have been
encouraged to invest in other agricultural products.
Most of Japan's wheat, barley and citrus fruits are grown
in a belt extending from Kantosletta on Honshu to northern
Kyushu, including the coastal land of the Inland Sea. Wheat
and barley are often grown as winter crops in the rice
Since the Second World War, increased wealth has led to
significant changes in the Japanese diet. This is reflected
in, among other things, increased animal husbandry and meat
production. However, meat consumption is low compared to,
for example, Western Europe and the United States. The
cattle herd is especially developed at Hokkaido, where the
climatic conditions have favored the development of the
livestock industry, while pigs and poultry farming takes
place throughout the country.
Japan's forests cover nearly 70 percent of the country's
land. More than two-thirds belong to private forest owners,
the rest are state-owned. Unlike the Nordic countries, most
of Japan's forests lie in inaccessible mountain areas, and
less than a third of the forests are commercially exploited.
Hokkaido contributes about 25 percent of domestic
production, and another 15 percent comes from the four
northernmost prefectures of Honshu: Aomori, Iwate, Akita and
Fukushima. Despite the country's large forests, both timber
and timber have to be imported.
In the post-war period Japan has developed a modern
fishing industry. It has been among the world's largest, but
the catch volume (5.2 million tonnes in 2002) has been
declining. Fish consumption is very high, and marine
products cover almost half of the population's protein
needs. The main fish species are sardines, mackerel, tuna,
cod and shellfish. The rich fishing is mainly due to the
cold Oyashio - and the warm Kuroshio stream, which flows
together east of Cape Inubo on Honshu.
Traditionally, coastal fishing from small boats has
dominated the fishing industry, and a majority of the
fishing population are coastal fishermen. However, the
largest fish catches are made from modern ocean-going
vessels operating on all oceans, primarily the Pacific
Ocean. However, after the 200 mile limit was introduced by
most countries from the mid-1970s, the importance of coastal
and offshore fishing has again increased. Farming of fish
(trout, salmon), shellfish and seaweed became increasingly
extensive. Nevertheless, Japan imports more than 40 percent
of the fish consumed.
Despite international protests, the Japanese are whaling,
both in Antarctica and near coastal waters. The annual catch
has been around 1000 whales.
Japan has few mineral resources other than limestone and
sulfur, and its industry relies heavily on imported raw
materials and fuels. Coal is recovered at Hokkaido and
northern Kyushu, but the quality is poor and the recovery
goes back. The extraction of limestone and sulfur meets the
domestic need, while almost all of the country's needs for
bauxite, crude oil, iron ore, copper ore and coal are
covered by imports. In 2003, mines accounted for 0.1 per
cent of GDP and employed less than 0.1 per cent of the
Japan imports around 90 percent of its total energy
needs. Imports of petroleum and petroleum products accounted
for a total of 12 percent of Japan's total imports in 2003.
Both to reduce oil dependency and to meet the Kyoto
requirements for reduced greenhouse gas emissions, Japan
focused on nuclear power from 1970. Japan's nuclear power
industry was ranked third in the world. In 2003, the 52
nuclear reactors in operation then accounted for 30 per cent
of the country's total electricity generation. After the
Fukushima disaster in 2011, all nuclear power plants were
temporarily shut down. The disaster raised doubts about the
future of nuclear power in Japan, but after a review of the
safety of all of the country's nuclear power plants, a slow
phase-in of closed power plants was planned. In 2018, 7
reactors have resumed operation, while a further 17 reactors
are preparing to start up.
Virtually all of Japan's petroleum production takes place
on the island of Honshu, but covers only a few of the
country's needs. In 2004, Japan paid $ 2 billion for rights
to the Iranian oil field Azadegan. In 2004, an agreement was
also reached with Russia on the construction of an oil
pipeline from Siberia to Nakhodka, the Russian port city
closest to Japan. The pipeline could reduce the dependence
on oil from the Middle East.
Japan's emergence as an industrialized country began in
the 1880s, and the industry had reached a high level even
before the Second World War. After the war, the country has
evolved into one of the world's industrial giants, thanks in
part to continuous technological and corporate renewal, with
huge investments in plant and equipment, supported by highly
educated manpower and effective collaboration between state
government and industry organizations.
Japan's economy has its center of gravity in the
industrial sector. However, the country is poor in natural
resources, and most raw materials, including energy
minerals, must be imported. Despite this, Japan has been
among the countries in the world with the largest gross
domestic product (GDP) since the late 1960s. The lack of raw
materials makes the industry very vulnerable to
international political and economic cycles.
The industry accounts for 26 per cent of employment
(2015) and 30 per cent of GDP (2017). A characteristic
feature of the Japanese industry is the industrial
"dualism". This means that the industry is divided into a
handful of large industrial groups, while there are numerous
small companies that are often subcontractors to the large
The heavy industry dominates the Japanese industrial
structure, but the country's industrial policy has since the
1970s aimed at developing energy-saving, knowledge-oriented
industrial branches with high machining value. Since 1965,
the fastest growth has taken place in the mechanical,
electrical, electronic and transport equipment industries
and in shipbuilding. Japan has become a major manufacturer
of turbines, machines, machine parts and machine tools.
Japan is the world's largest car manufacturer and also a
leading shipbuilding nation. Great emphasis is also placed
on exports of complete industrial plants. Other significant
industrial sectors are the chemical and petrochemical
industries, which have expanded their production capacity
considerably over the past 20-25 years. On the other hand,
the textile industry, the leading industrial sector before
the Second World War, has been greatly reduced.
Digital consumer electronics are pulling the burden for
an electronics industry that is still leading
internationally. In 2003, Japan had 80 percent of the world
market for digital cameras, distributed among 19
manufacturers. In 2001, Japan became one of the first
countries in the world to introduce third generation mobile
telephony (G3). The computer industry and other electronic
industries also reflect the ever-growing volume of data in
commerce and industry in general, and Japan has become a
major supplier of computer systems. In contrast, the
production of smaller high-tech appliances, such as TVs, has
Most of Japan's industry is concentrated on a belt
extending from Kantosletta on Honshu in the east to northern
Kyushu in the west, with the country's three largest
industrial regions. The most important is Keihin which
includes the cities of Tokyo, Yokohama and Kawasaki.
Hanshin, which includes the cities of Osaka, Kobe and Kyoto,
is also an important industrial area in addition to Chukyo
around Nagoya. Other significant industrial areas are
northern Kyushu with the center of the city of Kita Kyushu,
and Hiroshima and Okayama on the Inland Sea.
Japan accounts for a significant portion of world trade;
only the US and Germany have a larger foreign economy. Japan
relies on imports to meet most of its energy and commodity
needs. The main export goods are electronic components,
machinery and transport equipment. Imports of petroleum and
petroleum products accounted for 12 per cent of the
country's total imports. Japan's main trading partner is the
United States, otherwise China, Hong Kong, South Korea and
Taiwan. Japan is the largest or second largest trading
partner of all nations in Southeast Asia.
A long-standing problem has been the imbalance in trade
with the United States, with particularly large Japanese
surpluses. Japan has had to bow to some US demands for
"voluntary" export restrictions since the early 1990s.
However, thanks to the surplus, Japan has made a significant
contribution to financing the US state, albeit directly, as
the largest buyer of US government bonds. Moreover, since
the 1970s, Japan has been the foremost source of reasonable
capital for governments, businesses and individuals in many
Foreign trade as a percentage by country in 2017
Exports as a percentage of major commodity groups in
|Machines and transport equipment
|Scientific and optical equipment
|Iron and steel products
Imports as a percentage of main product groups in 2003
|Machines and transport equipment
|Foods and live animals
|Petroleum and petroleum products
Transport and Communications
Japan has a well-developed and modern transport network
that ties all the major islands and cities together. The
development of the high-speed train Shinkansen and express
motorways has been a high priority. Outside metropolitan
areas, the road network is relatively poorly developed.
Industrial growth has caused acute traffic problems in many
urban areas, and public transport in the big cities is
crowded by western scale. Car traffic is intense with about
70 million motor vehicles on the roads, most in the world
after the United States. Ring roads are built in the big
cities to reduce congestion in inner-city areas.
Japan's first railway was built in 1872 between Tokyo and
Yokohama (29 kilometers). The former state-controlled
Japanese National Railways (JNR) was privatized in 1987 and
split into several smaller companies, which have extensive
cooperation under their common name, Japan Railways. In
addition, a further 130 private companies operate local
railway operations. Well-developed metro networks exist in
nine metropolitan areas: Tokyo, Osaka, Nagoya, Yokohama,
Kobe, Sapporo, Kyoto, Sendai and Fukuoka.
The rail network includes the high-speed network
Shinkansen (maximum speed of 270 kilometers per hour)
consisting of the Tokaido/Sanyo line, which runs from
Tokyo via Nagoya, Kyoto, Osaka and Hiroshima, to Shimonoseki
furthest west of Honshu, and on to Fukuoka on the north
coast of Kyushu. The Tohoku line goes from Tokyo, via
Sendai, to Morioka north on Honshu, and the Joetsu line goes
from Tokyo to Niigata. In 2015, the total railway network in
Japan was 27,311 kilometers.
At the same time, development work is underway with the
next generation high-speed train, Maglev (magnetic track),
which is kept suspended over the track through magnetic
power. In 2003–2004, a magnetic crane based on
electrodynamics was trial run for future operation on the
Tokyo - Osaka section. Maglev will be able to run at a speed
of about 500 kilometers per hour and shorten the travel time
between Japan's two largest cities to just over an hour,
compared to 2.5 hours with today's Shinkansen.
Japan's total road network in 2015 was approximately 1.2
million kilometers, of which approximately 8400 kilometers
are highway. There is a bridge and tunnel connection between
the islands of Honshu and Kyushu, and between Honshu and
Shikoku (the world's longest suspension bridge at
completion, 9.4 kilometers).
The semi-state Japan Air Lines (JAL) was
privatized in 1987 and won competition on international
routes by All Nippon Airways (ANA) and Japan
Air System (JAS). In 1978, Narita, six miles northeast
of Tokyo, was taken into use as the capital's new
international airport. The development was greatly slowed by
demonstrating landowners and radical students, and only in
1992 could Narita's second terminal be opened. In 1994, the
world's first international "offshore" airport, Kansai, was
opened on an artificial island in the Gulf of Osaka with a
total cost of $ 20 billion. In 1993, a new terminal was
opened at Haneda Airport in Tokyo, which is the hub for
domestic traffic and also takes international traffic. The
airport network is constantly being developed. Japan
TransOcean Airand Air Nippon operates
exclusively domestic air traffic.
Japan has one of the largest merchant fleets in the
world. In 2018, the fleet consisted of 5300 ships. Coastal
transport is important, especially between the ports of the
Pacific Coast and the ports of the Inland Sea. The largest
port cities are Tokyo, Yokohama, Nagoya and Osaka. The port
facility in Kobe was partially destroyed during the
earthquake in 1995, but rebuilt in 1998.