In 1603, after decades of civil warfare, the Tokugawa shogunate (a military-led, dynastic government) ushered in a long period of relative political stability and isolation from foreign influence. For more than two centuries this policy enabled Japan to enjoy a flowering of its indigenous culture. Japan opened its ports after signing the Treaty of Kanagawa with the US in 1854 and began to intensively modernize and industrialize. During the late 19th and early 20th centuries, Japan became a regional power that was able to defeat the forces of both China and Russia. It occupied Korea, Formosa (Taiwan), and southern Sakhalin Island. In 1931-32 Japan occupied Manchuria, and in 1937 it launched a full-scale invasion of China. Japan attacked US forces in 1941 - triggering America's entry into World War II - and soon occupied much of East and Southeast Asia. After its defeat in World War II, Japan recovered to become an economic power and an ally of the US. While the emperor retains his throne as a symbol of national unity, elected politicians hold actual decision-making power. Following three decades of unprecedented growth, Japan's economy experienced a major slowdown starting in the 1990s, but the country remains an economic power. In March 2011, Japan's strongest-ever earthquake, and an accompanying tsunami, devastated the northeast part of Honshu island, killed thousands, and damaged several nuclear power plants. The catastrophe hobbled the country's economy and its energy infrastructure, and tested its ability to deal with humanitarian disasters. Prime Minister Shinzo ABE was reelected to office in December 2012, and has since embarked on ambitious economic and security reforms to improve Japan's economy and bolster the country's international standing.
Eastern Asia, island chain between the North Pacific Ocean and the Sea of Japan, east of the Korean Peninsula
negligible mineral resources, fish
Population - distribution
all primary and secondary regions of high population density lie on the coast; one-third of the population resides in and around Tokyo on the central plain (Kanto Plain)
TOKYO (capital) 38.001 million; Osaka-Kobe 20.238 million; Nagoya 9.406 million; Kitakyushu-Fukuoka 5.51 million; Shizuoka-Hamamatsu 3.369 million; Sapporo 2.571 million (2015)
- Conventional long form
- Conventional short form
- Local long form
- Local short form
parliamentary constitutional monarchy
- Geographic coordinates
- 35 41 N, 139 45 E
- Time difference
- UTC+9 (14 hours ahead of Washington, DC, during Standard Time)
accepts compulsory ICJ jurisdiction with reservations; accepts ICCt jurisdiction
Over the past 70 years, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (slightly less than 1% of GDP) have helped Japan develop an advanced economy. Two notable characteristics of the post-World War II economy were the close interlocking structures of manufacturers, suppliers, and distributors, known as keiretsu, and the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features have significantly eroded under the dual pressures of global competition and domestic demographic change.
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ 187,264,824,335
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 787,151,612,495
- Exports of goods and services
- US$ 772,993,953,822
- Total Merchandise Trade
- FDI, net inflows
- US$ 34,904,736,088
- Commercial Service Exports
- US$ 168,733,561,395
vegetables, rice, fish, poultry, fruit, dairy products, pork, beef, flowers, potatoes/taros/yams, sugarcane, tea, legumes, wheat and barley
among world's largest and most technologically advanced producers of motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles, processed foods
- motor vehicles 14.9%; iron and steel products 5.4%; semiconductors 5%; auto parts 4.8%; power generating machinery 3.5%; plastic materials 3.3% (2014 est.)
- US 20.2%, China 17.5%, South Korea 7.1%, Hong Kong 5.6%, Thailand 4.5% (2015)
- petroleum 16.1%; liquid natural gas 9.1%; clothing 3.8%; semiconductors 3.3%; coal 2.4%; audio and visual apparatus 1.4% (2014 est.)
- China 24.8%, US 10.5%, Australia 5.4%, South Korea 4.1% (2015)
- Country Risk Rating
- The political and economic situation is good. A basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low on average.
- Business Climate Rating
- The business environment is very good. Corporate financial information is available and reliable. Debt collection is efficient. Institutional quality is very good. Intercompany transactions run smoothly in environments rated A1.
- Advantageous geographic situation in a dynamic region
- Very high national savings level (around 23% of GDP)
- 90% of public debt held by local investors
- Advanced technology products and diversified industrial sector
- Difficulties to consolidate public finances and goes out of deflation
- Reduction of the active population and growing proportion of workers without job security
- Governmental instability
- Low productivity of small and medium-sized enterprises
In 2016, growth remained sluggish, driven by public consumption and to a lesser extent, by private consumption and external trade. The Abenomics policies have not given the expected results: the risk of deflation persists, the level of public debt is still very high. Growth prospects in 2017 remain limited. Indeed governmental support measures for the activity have been reduced. Private consumption will always support business, but its dynamics remain modest, wages still have not taken off despite a tight labour market (unemployment rate at the lowest around 3%). Wage growth is still hampered by the tendency of companies to insufficiently redistribute their profits, and by the rigid structure of the Japanese labour market (low mobility and marked duality). Also the same slight rise in inflation has a negative effect on real wages. Indeed inflation, after failing to return to positive territory in 2016, could be slightly greater than zero in 2017 due to the gradual rise in oil prices, but remain well below the Central Bank's 2% target.
Foreign trade is expected to be sluggish, and would increase slightly under the effect of a more favourable business partners environment while being hampered by the past appreciation of the yen. Private investment will remain sluggish due to significant investors’ wait and see attitude, although profits, corporate liquidity and financial conditions are still favourable. The still accommodative monetary policy would support the activity (deposit rate at -0.1% and asset purchase program of 80,000 billion yen per year). In September 2016, the monetary policy framework evolved by introducing rate curve control, including a long-term interest rate target: the government is committed to buying as many bonds as necessary to maintain the 10-year sovereign interest rate at around 0% and will increase the monetary base as much as necessary in order to reach the inflation target of 2% (which appears very ambitious).
The public deficit should stabilise at a high level in 2016. The increase in social spending significantly weighs on the state budget while revenues are insufficient. However, the government decided to postpone the VAT rise again from 8% to 10% until October 2019. While in 2016 the stimulus packages have multiplied (the last of which was 1.5% of GDP for the 2016/2017 fiscal year), their effects would be lower in 2017. The current trajectory of the debt does not appear sustainable, especially as health costs continue to increase with the ageing population. The prospect of the 2020 Olympics and the increase of expenditures brought as a result thereof is not expected to foster a recovery path. The government's goal of achieving a primary surplus by 2020 would appear unrealistic.
In September 2015, Shinzo Abe was reappointed to head the LDP (Liberal Democratic Party in power) and his party now holds half of the seats in the Senate following the senatorial elections held in July 2016. The party should dominate the political scene in 2017.