Japan Economics and Business

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 manpower.

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.

Japan GDP (Nominal, $USD) 2003-2017

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.

Historical development

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 factories grew.

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 percent, while the manufacturing sector declined to 20 percent. 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 1998-2003.

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 budgets.


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 percent of employment and 1.1 percent 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. Føydale 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 percent 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 percent, 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 percent of the area cultivated and accounts for 35 percent 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 fields.

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 percent of the workforce.


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 percent 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 percent of employment (2015) and 30 percent 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 companies.

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 declined sharply.

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.

Foreign Trade

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 percent 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.

  • COUNTRYAAH: Find major trading partners of Japan, including major exports and major imports with latest trade value and market share as well as growth rate.

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 countries.

Foreign trade as a percentage by country in 2017

Export Import
United States 19.4 24.5
China 19 11
South Korea 7.6 4.2
Hong Kong 5.1
thailand 4.2
Australia 5.8

Exports as a percentage of major commodity groups in 2003

Machines and transport equipment 68.0
Chemical products 8.3
Scientific and optical equipment 3.7
Iron and steel products 3.8

Imports as a percentage of main product groups in 2003

Machines and transport equipment 31.5
Foods and live animals 11.5
Petroleum and petroleum products 15.8
textiles 6.3
Chemical products 7.8

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.

Road transport

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).

  • According to AllCityPopulation, the capital city of Japan is Tokyo with a population of 8,900,000 residents (excluding suburbs 2014). Other major cities include Yokohama with a population of 3.7 million, Osaka with a population of 2.7 million, Nagoya with a population of 2.3 million, Sapporo with a population of 1.9 million, Kobe with a population of 1.5 million, Kyoto with a population of 1.5 million, Fukuoka with a population of 1.5 million (2010 census).


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.

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