A | B | C | D | E | F | G | H | CH | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9
 Tokyo, the financial center of Japan | |
| Currency | Japanese yen (JPY, ¥) |
|---|---|
| 1 April – 31 March | |
Trade organizations | APEC, WTO, CPTPP, RCEP, OECD, G-20, G7 and others |
Country group | |
| Statistics | |
| Population |  122,631,432 (2024)
[5] |
| GDP | |
| GDP rank | |
GDP growth |
|
GDP per capita | |
GDP per capita rank | |
GDP by sector |
|
GDP by component |
|
| 3.1% | |
Population below poverty line | 16.1% (2013)[7] |
| 33.9 medium (2015)[8] | |
| |
| 73 out of 100 points (2023)[11] (rank 16th) | |
Labor force | |
Labor force by occupation |
|
| Unemployment | |
Average gross salary | ¥429,501 / $3,267.16 monthly[15] (2022) |
Main industries | |
| External | |
| Exports |  $717.94 billion (2023)[16] |
Export goods |
|
Main export partners |
|
| Imports | $784.06 billion (2023)[16] |
Import goods |
|
Main import partners |
|
FDI stock | |
| $58.108 billion (2022)[18] | |
Gross external debt |  $4.54 trillion (March 2023)[19](103.2% of GDP) |
| Public finances | |
| |
| 1.35% of GDP (2022 est.)[18] | |
| Revenues | ¥196,214 billion[18] 35.5% of GDP (2022)[18] |
| Expenses | ¥239,694 billion[18] 43.4% of GDP (2022)[18] |
| Economic aid | donor: ODA, $10.37 billion (2016)[20] |
| $1.2 trillion (2023)[24] | |
All values, unless otherwise stated, are in US dollars. | |
The economy of Japan is a highly developed/advanced social market economy, often referred to as an East Asian model.[25] It is the fourth-largest economy in the world by nominal GDP behind the United States, China, and Germany, and the fourth-largest by purchasing power parity (PPP) as well, after India instead of Germany.[26] It constituted 4.2% of the world's economy on a nominal basis in 2022.[27] According to the IMF, the country's per capita GDP (PPP) was at $54,184 (2024).[6][28] Due to a volatile currency exchange rate, Japan's nominal GDP as measured in 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 a developed country status. In 2018, Japan was the fourth-largest in the world both as an importer and as an exporter.[29] The country also has the world's fourth-largest consumer market.[30] Generally, Japan runs an annual trade surplus and has a considerable net international investment surplus. The country has the world's second-largest foreign-exchange reserves, worth $1.4 trillion.[31] 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.[32][33] Japan is the world's largest creditor nation.[34][35][36] Japan has a highly efficient and strong social security system, which comprises roughly 23.5% of GDP.[4][37][3] The Tokyo Stock Exchange is the world's fifth-largest stock exchange by market capitalisation.[38][39]
Japan has a highly service-dominated economy, which contributes approximately 70% of GDP, with most of the remainder coming from the industrial sector.[40] 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.[41] 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.[42]
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.[43] 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.[44] It became the second largest economy in the world in 1968 and remained so until 2010,[27] and on a nominal per capita basis, the most high-income among the G7 countries in the 1980s and 1990s.[45] In 1995, Japan’s share of the world’s nominal GDP was 17.8%, reaching approximately 71% of that of the United States.[27]
The Plaza Accord in 1985, an agreement among major economies to devalue the American dollar relative to the Japanese yen, led to a rapid appreciation of the yen.[46][47][48] The burst of the Japanese asset price bubble in the early 1990s has resulted in a long period of economic stagnation known as the “Lost Decades”, characterised by extremely low or negative growth and deflation. From 1995 to 2007, the country’s GDP fell from $5.33 trillion to $5.04 trillion in nominal terms.[49] 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.[50] 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.[51][52]
As of 2021, Japan has significantly higher levels of public debt than any other developed nations at approximately 260% of GDP.[53][54] 45% of this debt is held by the Bank of Japan, and most of the remainder is also held domestically.[53] 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.[55] 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.[56] Projections show that the population will continue to fall, potentially to below 100 million by the middle of the 21st century.[57][58]
History
The economic history of Japan is one of the most studied. Major milestones in modern Japan's economic progress include:
- the foundation of the Tokugawa shogunate based in Edo (in 1603), initiating a period of internal economic development
- the Meiji Restoration (in 1868) leading to Japan becoming the first non-European modern world power
- the Japan's defeat in World War II (in 1945), after which the island nation rose to become the world's second-largest economy
- the Lost Decades (the 1990s, 2000s and arguably 2010s), during which the country struggled to get out of deflation and extremely low or negative growth
Edo period (1603–1868)
The beginning of the Edo period coincides with the last decades of the Nanban trade period, marked by intense interaction with European powers. Japan built its first Western-style warships, such as the San Juan Bautista, and commissioned around 350 Red Seal Ships for intra-Asian commerce. Japanese adventurers, such as Yamada Nagamasa, were active throughout Asia.[59]
To eradicate Christian influence, Japan entered a period of isolation called sakoku in the 1630s, which led to economic stability and mild progress. In the 1650s, Japanese export porcelain production increased significantly due to a civil war in China, mainly in Kyushu.[60] This trade dwindled by the 1740s under renewed Chinese competition but resumed after Japan’s mid-19th century opening.
Economic development during the Edo period included urbanisation, increased commodity shipping, and expanded domestic and foreign commerce. The construction trades, banking facilities, and merchant associations flourished. Daimyō-led authorities (han) oversaw rising agricultural production and rural handicrafts. By the mid-18th century, Edo had a population of over 1 million, while Osaka and Kyoto each had more than 400,000 inhabitants, becoming centres for trade and handicraft production.[61] Rice, the economy’s base, was taxed at about 40% of the harvest and sold at the fudasashi market in Edo. Daimyō used forward contracts similar to modern futures trading to sell rice before harvest.[62]
During the sakoku period, Japan studied Western sciences and techniques (rangaku) through Dutch traders in Dejima, including geography, medicine, natural sciences, astronomy, and mechanical sciences. Japan reopened its economy to the West after being pressured by the United States twice in 1853 and 1854.[63]
Pre-war period (1868–1945)
Since the mid-19th century, after the Meiji Restoration, the country was opened up to Western commerce and influence and went through a period of economic development that extended through to the First World War.[64] Economic developments of the prewar period began with the "Rich State and Strong Army Policy" by the Meiji government. During the Meiji period (1868–1912), leaders inaugurated a new Western-based education system for all young people, sent thousands of students to Europe and the United States, and hired more than 3,000 Westerners to teach modern science, mathematics, technology, and foreign languages in Japan (Oyatoi gaikokujin). The government also built an extensive railway network, improved roads, and inaugurated a land reform program to prepare the country for further development.[65]
To promote industrialization, the government decided that, while it should help private business to allocate resources and to plan, the private sector was best equipped to stimulate economic growth. The greatest role of government was to help provide good economic conditions for business. In short, government was to be the guide and business the producer. In the early Meiji period, the government built factories and shipyards that were sold to entrepreneurs at a fraction of their value. Many of these businesses grew rapidly into the larger conglomerates such as Mitsubishi. Government emerged as chief promoter of private enterprise, enacting a series of pro-business policies.[66]
Post-war period (1945–1989)
Japan underwent significant economic transformation and rapid recovery and growth, emerging from the devastation of the Second World War to become a global economic powerhouse. The immediate post-war period saw Japan slowly recovering as a democratic nation under the Allied Occupation. The Korean War (1950-1953), which happened in its now divided former colony, boosted the economy, as Japan served as a major supply hub for U.S. forces. By the 1950s and 1960s, Japan’s economy had entered a period of high growth, often referred to as the 'Japanese Economic Miracle'. Key factors in this growth included government-industry cooperation, a strong work ethic, advanced technology, and a focus on export-oriented manufacturing. Japan’s economy diversified from textiles to steel, shipbuilding, and eventually electronics and automobiles, with companies such as Toyota, Sony, Hitachi and Honda becoming household names worldwide.[67]
In 1968, Japan became the world’s second-largest economy, a position it held until it was surpassed by China in 2010. The government played a crucial role through policies that promoted industrial expansion and technological advancement. Japan’s emphasis on quality control and continuous improvement (kaizen) further boosted its international competitiveness.[68] By the 1980s, Japan was leading in a wide range of industries, including automotive and consumer electronics, and was known for its formidable trade surplus and wealth.[69] However, the late 1980s also saw the infamous Plaza Accord and the formation of an asset price bubble, with inflated real estate and stock market prices, setting the stage for the economic stagnation of the 'Lost Decades' that followed.
Heisei period (1989–2019)
.png)
Zero interest-rate policy started in 1995
Growth slowed markedly in the late 1990s also termed the Lost Decade after the collapse of Japanese asset price bubble. As a consequence Japan ran massive budget deficits (added trillions in Yen to Japanese financial system) to finance large public works programs.
By 1998, Japan's public works projects still could not stimulate demand enough to end the economy's stagnation. In desperation, the Japanese government undertook "structural reform" policies intended to wring speculative excesses from the stock and real estate markets. Unfortunately, these policies led Japan into deflation on numerous occasions between 1999 and 2004. The Bank of Japan used quantitative easing to expand the country's money supply in order to raise expectations of inflation and spur economic growth. Initially, the policy failed to induce any growth, but it eventually began to affect inflationary expectations. By late 2005, the economy finally began what seems to be a sustained recovery. GDP growth for that year was 2.8%, with an annualized fourth quarter expansion of 5.5%, surpassing the growth rates of the US and European Union during the same period.[70] Unlike previous recovery trends, domestic consumption has been the dominant factor of growth.
Negative interest rates started in 2014.
Despite having interest rates down near zero for a long period of time, the quantitative easing strategy did not succeed in stopping price deflation.[71] This led some economists, such as Paul Krugman, and some Japanese politicians, to advocate the generation of higher inflation expectations.[72] In July 2006, the zero-rate policy was ended. In 2008, the Japanese Central Bank still had the lowest interest rates in the developed world, but deflation had still not been eliminated[73] and the Nikkei 225 has fallen over approximately 50% (between June 2007 and December 2008). However, on 5 April 2013, the Bank of Japan announced that it would be purchasing 60–70 trillion yen in bonds and securities in an attempt to eliminate deflation by doubling the money supply in Japan over the course of two years. Markets around the world have responded positively to the government's current proactive policies, with the Nikkei 225 adding more than 42% since November 2012.[74] The Economist has suggested that improvements to bankruptcy law, land transfer law, and tax laws will aid Japan's economy. In recent years, Japan has been the top export market for almost 15 trading nations worldwide.
In December 2018, a free trade agreement between Japan and the European Union was cleared to commence in February 2019. It creates the world's largest free trade zone valued at 1/3rd of global gross domestic product. This reduces tariffs on Japanese cars by 10%, duties by 30% on cheese and 10% on wines and opens service markets.[75]
Reiwa period (2020–present)
2020–21 recession
In early January 2020, Japanese economy began to suffer from the COVID-19 pandemic. In early April, Japanese Prime Minister Shinzo Abe announced a state of emergency,[76] giving the nation its worst economic crisis since the end of World War II.[77] Jun Saito of the Japan Center for Economic Research stated that the pandemic delivered the "final blow" to Japan's long fledging economy, which had resumed slow growth in 2018.[78] Less than a quarter of Japanese people expect living conditions to improve in the coming decades.[79]
In October 2020 during the pandemic, Japan and the United Kingdom formally signed the first free-trade agreement post-Brexit, which will boost trade by approximately £15.2 billion. It enables tariff-free trade on 99% of exports to Japan.[80][81]
On 15 February 2021, the Nikkei average breached the 30k benchmark, the highest since November 1991.[82] It was due to strong corporate earnings, GDP data and optimism over the COVID-19 vaccination program in the country.[82]
In the year ending of March 2021 despite COVID-19 spreading, SoftBank Group made a record net profit of 45.88 billion, which was largely due to the debut of e-commerce company Coupang.[83] However, this was the largest annual profit by a Japanese company in the nation's history.
As a result, Japanese economic impact of COVID-19 was officially ended by early October 2021, ahead of the endemic phase.
Post-recession (2021–present)
 | This article needs to be updated. (February 2024) |
At the end of March 2022, the Ministry of Finance announced that the national debt reached precisely 1.017 million billion yen.[84] The total public debt of the country, which includes debts contracted by local governments, represents 1.210 million billion yen (9,200 billion dollars) which is nearly 250% of Japan's GDP.[84] Economist Kohei Iwahara said such an exceptional debt to GDP level is only possible because Japanese hold most of the debt: "“Japanese households hold most of their savings in bank accounts (48%) and these sums are used by commercial banks to buy Japanese government bonds. Thus, 85.7% of these bonds are held by Japanese investors.”[84] However, an aging population could decrease savings.[84]
By July 2024, the yen had weakened for the first time in 37.5 years in nominal effective exchange rates and for the first time in real effective exchange rates since statistics began. The Asahi Shimbun and other media have reported that the decline in the currency's value has made it a junk currency.[85][86][87] These effects have led some companies, such as Modec, to stop presenting their financial statements in Japanese yen.[88]
Japan's annual exports grew much-less than expected in June 2023, highlighting weak Chinese and Western demand that continues to undercut the post-COVID recovery in the world's fourth-largest economy (surpassed by Germany).[89]
Macro-economic trend
This is a chart of trend of gross domestic product of Japan at market prices estimated by the International Monetary Fund with figures in millions of Japanese Yen.[90] See also:[91][92]
| Year | Gross domestic product | US dollar exchange | Price index (2000=100) |
Nominal per-capita GDP (as % of US) |
PPP capita GDP (as % of US) |
|---|---|---|---|---|---|
| 1955 | 8,369,500 | ¥360.00 | 10.31 | – | |
| 1960 | 16,009,700 | ¥360.00 | 16.22 | – | |
| 1965 | 32,866,000 | ¥360.00 | 24.95 | – | |
| 1970 | 73,344,900 | ¥360.00 | 38.56 | – | |
| 1975 | 148,327,100 | ¥297.26 | 59.00 | – | |
| 1980 | 240,707,315 | ¥225.82 | 100 | 105.85 | 71.87 |
| 2005 | 502,905,400 | ¥110.01 | 97 | 85.04 | 71.03 |
| 2010 | 477,327,134 | ¥88.54 | 98 | 89.8 | 71.49 |
For purchasing power parity comparisons, the US dollar was exchanged at ¥109 in 2010.[93]
GDP composition
Industries by GDP value-added 2012.[94] Values are converted using the exchange rate on 13 April 2013.[95]
| Industry | GDP value-added billions 2018 | % of total GDP |
|---|---|---|
| Other service activities | 1,238 | 23.5% |
| Manufacturing | 947 | 18.0% |
| Real estate | 697 | 13.2% |
| Wholesale and retail trade | 660 | 12.5% |
| Transport and communication | 358 | 6.8% |
| Public administration | 329 | 6.2% |
| Construction | 327 | 6.2% |
| Finance and insurance | 306 | 5.8% |
| Electricity, gas and water supply | 179 | 3.4% |
| Government service activities | 41 | 0.7% |
| Mining | 3 | 0.1% |
| Total | 5,268 | 100% |
Development of main indicators
The following table shows the main economic indicators in 1980–2021 (with IMF staff estimates in 2024–2029). Inflation under 5% is in green.[96]
| Year | GDP
(in Bil. US$PPP) |
GDP per capita
(in US$ PPP) |
GDP
(in Bil. US$nominal) |
GDP per capita
(in US$ nominal) |
GDP growth
(real) |
Inflation rate
(in Per cent) |
Unemployment
(in Per cent) |
Government debt
(in % of GDP) |
|---|---|---|---|---|---|---|---|---|
| 1980 | 1,068.1 | 9,147.0 | 1,127.9 | 9,659.0 | 3.2%
|
7.8%
|
2.0% | 47.8% |
| 1981 | 1,218.4
|
10,358.1
|
1,243.8
|
10,574.4
|
4.2%
|
4.9%
|
2.2%
|
52.9%
|
| 1982 | 1,336.5
|
11,283.0
|
1,157.6
|
9,772.8
|
3.3%
|
2.8%
|
2.4%
|
57.8%
|
| 1983 | 1,437.8
|
12,054.5
|
1,268.6
|
10,636.5
|
3.5%
|
1.9%
|
2.7%
|
63.6%
|
| 1984 | 1,556.7
|
12,967.1
|
1,345.2
|
11,205.4
|
4.5%
|
2.3%
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