Economy
Japan

Economy - overview:

Government-industry cooperation, a strong work ethic, mastery of
high technology, and a comparatively small defense allocation (1% of
GDP) helped Japan advance with extraordinary rapidity to the rank of
second most technologically powerful economy in the world after the
US and the third-largest economy in the world after the US and
China, measured on a purchasing power parity (PPP) basis. One
notable characteristic of the economy has been how manufacturers,
suppliers, and distributors have worked together 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 have now eroded. Japan's industrial
sector is heavily dependent on imported raw materials and fuels. The
tiny 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 55% of its food on a caloric basis.
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 the 1990s, averaging just 1.7%, largely
because of the after effects of overinvestment and an asset price
bubble during the late 1980s that required a protracted period of
time for firms to reduce excess debt, capital, and labor. From 2000
to 2001, government efforts to revive economic growth proved short
lived and were hampered by the slowing of the US, European, and
Asian economies. In 2002-07, growth improved and the lingering fears
of deflation in prices and economic activity lessened, leading the
central bank to raise interest rates to 0.25% in July 2006, up from
the near 0% rate of the six years prior, and to 0.50% in February
2007. In addition, the 10-year privatization of Japan Post, which
has functioned not only as the national postal delivery system but
also, through its banking and insurance facilities as Japan's
largest financial institution, was completed in October 2007,
marking a major milestone in the process of structural reform.
Nevertheless, Japan's huge government debt, which totals 182% of
GDP, and the aging of the population are two major long-run
problems. Some fear that a rise in taxes could