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Economy of Japan
From Wikipedia, the free encyclopedia
The economy of Japan is a highly developed/advanced social market 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 fourth-largest by purchasing power parity (PPP) as well, after India instead of Germany.[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 $54,184 (2024).[6][27] Due to a volatile currency exchange rate, Japan's nominal GDP as measured in dollars fluctuates sharply.
![]() Tokyo, the financial center of Japan | |
Currency | Japanese yen (JPY, ¥) |
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1 April – 31 March | |
Trade organizations | APEC, WTO, CPTPP, RCEP, OECD, G-20, G7 and others |
Country group | |
Statistics | |
Population | ![]() |
GDP | |
GDP rank | |
GDP growth |
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GDP per capita | |
GDP per capita rank | |
GDP by sector |
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GDP by component |
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3.1% | |
Population below poverty line | 16.1% (2013)[7] |
33.9 medium (2015)[8] | |
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Labor force | |
Labor force by occupation |
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Unemployment | |
Average gross salary | ¥429,501 / $3,267.16 monthly[14] (2022) |
Main industries | |
External | |
Exports | ![]() |
Export goods |
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Main export partners |
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Imports | ![]() |
Import goods |
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Main import partners |
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FDI stock | |
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Gross external debt | ![]() (103.2% of GDP) |
Public finances | |
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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] |
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All values, unless otherwise stated, are in US dollars. |
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.[28] The country also has the world's fourth-largest consumer market.[29] 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.[30] 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.[31][32] Japan is the world's largest creditor nation.[33][34][35] Japan has a highly efficient and strong social security system, which comprises roughly 23.5% of GDP.[4][36][3] The Tokyo Stock Exchange is the world's fifth-largest stock exchange by market capitalisation.[37][38]
Japan has a highly service-dominated economy, which contributes approximately 70% of GDP, with most of the remainder coming from the industrial sector.[39] 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.[40] 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.[41]
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.[42] 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.[43] 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.[44] In 1995, Japan’s share of the world’s nominal GDP was 17.8%, reaching approximately 71% of that of the United States.[26]
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.[45][46][47] 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.[48] 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.[49] 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.[50][51]
As of 2021, Japan has significantly higher levels of public debt than any other developed nations at approximately 260% of GDP.[52][53] 45% of this debt is held by the Bank of Japan, and most of the remainder is also held domestically.[52] 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.[54] 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.[55] Projections show that the population will continue to fall, potentially to below 100 million by the middle of the 21st century.[56][57]