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Economy - overview: Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) have helped Japan advance with extraordinary rapidity to the rank of second most technologically powerful economy in the world after the US and third largest economy in the world after the US and China. One notable characteristic of the economy is the working together of manufacturers, suppliers, and distributors in closely knit groups called keiretsu?. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding. Industry, the most important sector of the economy, is heavily dependent on imported raw materials and fuels. The much smaller agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self-sufficient in rice, Japan must import about 50% of its requirements of other grain and fodder crops. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades overall real economic growth had been spectacular: a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in 1992-95 largely because of the aftereffects of overinvestment during the late 1980s and contractionary domestic policies intended to wring speculative excesses from the stock and real estate markets. Growth picked up to 3.9% in 1996, largely a reflection of stimulative fiscal and monetary policies as well as low rates of inflation. But in 1997-98 Japan experienced a wrenching recession, centered about financial difficulties in the banking system and real estate markets and exacerbated by rigidities in corporate structures and labor markets. In 1999 output started to stabilize as emergency government spending began to take hold and business confidence gradually improved. The crowding of habitable land area and the aging of the population are two major long-run problems. Robotics constitutes a key long-term economic strength, with Japan possessing 410,000 of the world's 720,000 "working robots". |
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Japan's industrialized, free-market economy is the second-largest in the world after the United States. Its economy is highly efficient and competitive in areas linked to international trade, but productivity is far lower in areas such as agriculture, distribution, and services. After achieving one of the highest economic growth rates in the world from the 1960s through the 1980s, the Japanese economy slowed dramatically in the early 1990s, when the "bubble economy" collapsed. Its reservoir of industrial leadership and technicians, well-educated and industrious work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade have produced a mature industrial economy. Japan has few natural resources, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy. While Japan's long-term economic prospects are considered good, Japan is currently in its worst recession since World War II. Plummeting stock and real estate prices marked the end of the "bubble economy" of the late 1980s. The impact of the Asian financial crisis also has been substantial. Real GDP in Japan grew at an average of roughly 1% yearly between 1991-98, compared to growth in the 1980s of about 4% per year. Growth in Japan in this decade has been slower than growth in other major industrial nations. The Government of Japan has forecast growth in Japan fiscal year 2001 at 1.7%. A number of economic indicators remain in negative territory, and growth for first quarter 2001 was -0.2%. Agriculture, Energy, and Minerals Only 15% of Japan's land is suitable for cultivation. The agricultural economy is highly subsidized and protected. With per hectare crop yields among the highest in the world, Japan maintains an overall agricultural self-sufficiency rate of about 50% on fewer than 5.6 million cultivated hectares (14 million acres). Japan normally produces a slight surplus of rice but imports large quantities of wheat, sorghum, and soybeans, primarily from the United States. Japan is the largest market for U.S. agricultural exports. Given its heavy dependence on imported energy, Japan has aimed to diversify its sources. Since the oil shocks of the 1970s, Japan has reduced dependence on petroleum as a source of energy from more than 75% in 1973 to about 57% at present. Other important energy sources are coal, liquefied natural gas, nuclear power, and hydropower. Deposits of gold, magnesium, and silver meet current industrial demands, but Japan is dependent on foreign sources for many of the minerals essential to modern industry. Iron ore, coke, copper, and bauxite must be imported, as must many forest products. Labor Japan's labor force consists of some 64 million workers, 40% of whom are women. Labor union membership is about 12 million. The unemployment rate is currently 4.9%--a post-war high. In 1989, the predominantly public sector union confederation, SOHYO (General Council of Trade Unions of Japan), merged with RENGO (Japanese Private Sector Trade Union Confederation) to form the Japanese Trade Union Confederation. |
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