Economy of Japan

Economy of Japan

Tokyo, the financial center of Japan
Currency	Japanese yen (JPY, ¥)
Fiscal year	1 April – 31 March
Trade organizations	APEC, WTO, CPTPP, RCEP, OECD, G-20, G7 and others
Country group	Advanced economy[1] High-income economy[2] Welfare state[3][4]
Statistics
Population	122,631,432 (2024)[5]
GDP	$4.07 trillion (nominal; 2024)[6] $6.57 trillion (PPP; 2024)[6]
GDP rank	4th (nominal; 2024) 5th (PPP; 2024)
GDP growth	1.9% (2023) 0.9% (2024) (forecast)[6]
GDP per capita	$32,859 (nominal; 2024)[6] $53,059 (PPP; 2024)[6]
GDP per capita rank	36th (nominal; 2024) 36th (PPP; 2024)
GDP by sector	Agriculture: 1.0% Industry: 26.9% Services: 71.4% (2022 est.)[7]
GDP by component	Household consumption: 55.6% Government consumption: 21.6% Investment in fixed capital: 26.0% Investment in inventories: 0.6% Exports of goods and services: 21.5% Imports of goods and services: −25.3% (2022 est.)[7]
Inflation (CPI)	3.1%
Population below poverty line	16.1% (2013)[7]
Gini coefficient	33.8 medium (2021)[8]
Human Development Index	0.920 very high (2022)[9] (24th) 0.844 very high IHDI (19th) (2022)[9]
Corruption Perceptions Index	73 out of 100 points (2023)[10] (rank 16th)
Labor force	69.349 million (2023 est.)[11] 61.2% employment rate (May 2023)[12]
Labor force by occupation	Agriculture: 3% Industry: 25% Services: 72% (FY 2018)[13]
Unemployment	2.6% (2023)[11] 3.7% youth unemployment (15 to 24 year-olds; May 2023)[11] 1.8 million unemployed (May 2023)[11]
Average gross salary	¥429,501 / US$3,267.16 monthly[14] (2022)
Main industries	High technology Motor vehicles Electronics Machine tools
External
Exports	$717.94 billion (2023)[15]
Export goods	Transport Equipment 21.0% Machinery 19.9% Electrical Machinery 18.7% Chemicals 12.4% Manufactured Goods 10.4% Raw Materials 1.7% Foodstuff 1.3% Mineral Fuels 0.8% Others: 13.8%[15]
Main export partners	China 22.1%  Hong Kong 4.5%  United States 20.0%  ASEAN 14.6%  European Union 10.3%  South Korea 6.5%  Taiwan 5.9%  Australia 2.3%  India 2.2% (2023)[15]
Imports	$784.06 billion (2023)[15]
Import goods	Electrical Machinery 17.6% Mineral Fuels 16.6% Machinery 10.5% Foodstuff 9.9% Chemicals 9.9% Manufactured Goods 9.3% Raw Materials 6.9% Transport Equipment 5.0% Others: 14.4%[15]
Main import partners	China 22.3%  Hong Kong 0.2%  ASEAN 15.4%  United States 10.5%  European Union 10.2%  Australia 8.3%  United Arab Emirates 4.7%  Taiwan 4.5%  Saudi Arabia 4.4%  South Korea 4.0% (2023)[15]
FDI stock	Inward: $25 billion (2021)[16] Outward: $147 billion (2021)[16]
Current account	$58.108 billion (2022)[17]
Gross external debt	$4.54 trillion (March 2023)[18] (103.2% of GDP)
Public finances
Government debt	¥1.457 quadrillion 263.9% of GDP (2022)[17]
Budget balance	1.35% of GDP (2022 est.)[17]
Revenues	¥196,214 billion[17] 35.5% of GDP (2022)[17]
Expenses	¥239,694 billion[17] 43.4% of GDP (2022)[17]
Economic aid	donor: ODA, $10.37 billion (2016)[19]
Credit rating	Standard & Poor's:[20][21] A+ (Domestic) A+ (Foreign) AA+ (T&C Assessment) Outlook: Stable Moody's:[21] A1 Outlook: Stable Fitch:[21] A Outlook: Stable Scope Ratings:[22] A Outlook: Stable
Foreign reserves	US$1.255 trillion (September 2024)[23]
All values, unless otherwise stated, are in US dollars.

The economy of Japan is a highly developed mixed economy, often referred to as an East Asian model.^[24] It is the fourth-largest economy in the world by nominal GDP behind the United States, China, and Germany, and the fifth-largest by purchasing power parity (PPP), below India and Russia.^[25] It constituted 4.2% of the world's economy on a nominal basis in 2022.^[26] According to the IMF, the country's per capita GDP (PPP) was at $53,059 (2024).^[6][27] Due to a volatile currency exchange rate, Japan's nominal GDP as measured in American dollars fluctuates sharply.

Being a founding member of the G7 and an early member of the OECD, Japan was the first country in Asia to achieve developed country status. In 2018, Japan was the fourth-largest in the world both as an importer and as an exporter.^[28] The country also has the world's fourth-largest consumer market.^[29] Japan used to run a considerable trade surplus, but the decline of the manufacturing sector since the 1980s and increased fossil fuel imports after the Fukushima nuclear disaster in 2011 have changed this trend in recent years.^[30][31] Being the world's largest creditor nation,^[32][33][34] Japan has a considerable net international investment surplus. The country has the world's second-largest foreign-exchange reserves, worth $1.4 trillion.^[35] Japan has the third-largest financial assets in the world, valued at $12 trillion, or 8.6% of the global GDP total as of 2020.^[36][37] Japan has a highly efficient and strong social security system, which comprises roughly 23.5% of GDP.^[4][38][3] The Tokyo Stock Exchange is the world's fifth-largest stock exchange by market capitalisation.^[39][40]

Japan has a highly service-dominated economy, which contributes approximately 70% of GDP, with most of the remainder coming from the industrial sector.^[41] The automobile manufacturing industry, which is the second largest in the world, dominates the industrial sector, with Toyota being the world’s largest manufacturer of cars.^[42] Japan is often ranked among the world’s most innovative countries, leading several measures of global patent filings. However, its manufacturing industry has lost its world dominance since the 1990s. In 2022, Japan spent around 3.7% of GDP on research and development. As of 2022, 47 of the Fortune Global 500 companies are based in Japan.^[43]

Long having been an agricultural country, one study estimates that Japan’s economy was among the top ten in the world by size during the second millennium before the industrial revolution started.^[44] Industrialisation in Japan began in the second half of the 19th century with the Meiji Restoration, initially focusing on the textile industry and later on heavy industries. The country rapidly built its colonial empire and the third most powerful navy in the world. After the defeat in the Second World War, Japan’s economy recovered and developed further rapidly, primarily propelled by its lucrative manufacturing exporting industries.^[45] It became the second largest economy in the world in 1968 and remained so until 2010,^[26] and on a nominal per capita basis, the most high-income among the G7 countries in the 1980s and 1990s.^[46] The Plaza Accord in 1985, an agreement among major economies to devalue the American dollar relative to several major currencies, led to a rapid appreciation of the yen.^[47][48][49] In 1995, Japan’s share of the world’s nominal GDP was 17.8%, reaching approximately 71% of that of the United States.^[26]

Driven by speculative investments and excessive lending, the Japanese asset price bubble of the early 1990s burst, triggering a prolonged period of economic stagnation marked by deflation and persistently low or negative growth, now known as the Lost Decades. From 1995 to 2007, the country’s GDP fell from $5.33 trillion to $5.04 trillion in nominal terms.^[50] At the beginning of the 21st century, the Bank of Japan set out to encourage economic growth through a novel policy of quantitative easing, aiming to end deflation and eventually achieve 2% inflation.^[51] The increased international economic tension brought about by events such as the Russian invasion of Ukraine in 2022 finally helped the country achieve the inflation target, and the negative interest policy since 2016 was ended in March 2024.^[52][53]

As of 2021, Japan has significantly higher levels of public debt than any other developed nations at approximately 260% of GDP.^[54][55] 45% of this debt is held by the Bank of Japan, and most of the remainder is also held domestically.^[54] The Japanese economy faces considerable challenges posed by an ageing and declining population, which peaked at 128.5 million people in 2010 and has fallen to 122.6 million people in 2024.^[56] In 2022, the country's working age population consisted of approximately 59.4% of the total population, which was the lowest rate among all the OECD countries.^[57] Projections show that the population will continue to fall, potentially to below 100 million by the middle of the 21st century.^[58][59]