Japan is the second most advanced economy in the world, the third largest by nominal GDP, and the 4th by PPP. In 2014, Japan’s economy was ranked 28th in the world regarding per capita GDP. The country is one of the world’s most innovative economies having the largest electronic goods industry and patent filings. Japan is also the world’s biggest creditor with the leading public debt ratio. The country is home to 13.7% of private financial assets in the world estimated at $13.5 trillion and has 54 Fortune 500 companies. However, the Japanese economy is facing fierce competition from China and South Korea.
Overview of the Economy of Japan
The Japanese fiscal year starts on April 1st through to March 31st of the following year. Japan has a nominal GDP of $4.41 trillion and PPP GDP of $4.83 trillion. The GDP per capita is $38,100. The consumption of the GDP estimated by 2015 was as follows: consumption by households 58.6%, fixed capital investments 21.7%, consumption by government 20.4%, inventories 0.3%, the export of goods and services 17.9%, and the import of goods and services 18.9%. The largest industries are agriculture and fishing, manufacturing, and tourism among others. Japan's GDP per sector is as follows: services 71.4%, industry 27.5%, and agriculture 1.2%. About 16% of the population lives below the poverty line while the unemployment rate is 3.4%. The labor force in Japan consists of about 65.93 million people whose percentage by occupation is: 69.8% services, 26.2% industries, and 3.9% agriculture. Japan has revenue of $1.739 trillion against expenses of $2.149 trillion. The country's foreign reserves are estimated at $1.264 trillion.
Main Exports of Japan
Japan exports goods worth an estimated $697 billion and the country’s main exports are motor vehicles, auto parts, power generating machinery, iron and steel products, semiconductors, and plastic materials. Japan is the third largest automobile manufacturing country, and they form the leading export goods for the country.
Major Export Partners of Japan
The major export destinations for Japan are the United States, accounting for 20% of all exports; China, accounting for 17.55% of all exports; South Korea, accounting for 7.1% of all exports; Hong Kong, accounting for 5.6% of all exports; and Thailand, accounting for 4.5% of all exports.
Main Imports of Japan
Japan spends an estimated $766.6 billion on imports of goods such as petroleum, liquefied natural gas, coal, audio and visual apparatus, semiconductors, and clothing. Japan is the third largest importer of agricultural products and liquefied natural gas, and the largest importer of coal.
Main Import Partners of Japan
Japan imports its products from China, which accounts for 24.8% of all imports; the United States, accounting for 10% of all imports; Australia, accounting for 5.4% of all imports; and South Korea, accounting for 4.1% of all imports.
Challenges to the Economy of Japan
Japan’s economy has experienced numerous problems such as bad debts which have led to a slow and unsteady growth rate and inadequate natural resources due to the unfavorable mountainous terrain thus the need to rely on imported agricultural produce for local consumption. The Japanese population is mainly made up of old people due to a low birth rate, therefore, raising concerns about the future of Japan’s workforce.
Since Japan’s economy depends heavily on human labor, the government intends to lift barriers on foreign immigrants so as to counter the effects of the declining population. The lifetime employment traditions are being eliminated to help the economy cope with the increasing completion from other world economies as well as to increase the chances of employment for younger and skilled individuals.