Economy of Japan, What is Japan’s economy known for?
The economy of Japan has faced several ups and downs in its history. But the country is known for its extraordinary growth of its economic structure, especially after several decades of World War II.
Such a boost in Japan’s economy resulted from the enormous expansion of its industrial production and domestic market growth. The trade policy of the country also played an essential role in boosting the economy.
The country has a mixed economy, depending on capitalism. The government of Japan is closely attached to its industries. Then central banks work closely with the government making it better against China.
Japan is the world’s second-largest economic power after the United States in terms of gross national product (GNP). The country is now the leading producer of automobile services and high-end technologies. The service sector is currently dominating the country in terms of its GDP, which overall helps boost the economy of Japan.
Economic History of Japan
After 1945, the economy of Japan rose to become the second-largest economy in the world. The country faced a 10% average economic growth in the 1960s, around 5% during the 70s, and 4% in the 1980s. Till then, the locals were enjoying the ergonomic period of Japan’s economy.
But in January 1990, Japan’s stock market crashed severely. The shares’ values dropped by 87%, forcing the banks to lower the interest rate from 6% to 0.5% by 1995. But it does not help in reviving the economy as people have purchased too many shares for investing in real estate.
Then the government introduced a fiscal policy through which they spend on various infrastructures of the country, resulting in a high debt-to-GDP ratio.
From 2005, the companies started to maintain balance sheets, and by 2007 the economy of Japan was again getting back on the right track. After the worst phase of 20 years, the country also showed economic growth of 2.1% in 2007 and 3.2 in 2008’s first quarter.
But the financial crisis of 2008, again led to GDP growth crashing through 12.9% in the last quarter. It was the biggest drop in Japan’s economy since 1974.
How Japan Affects the US Economy?
Japan signed a trade agreement with the EU on July 17, 2018. It is the world’s largest bilateral trade agreement covering almost $152 billion. This deal came as a shock to US auto and agricultural exporters.
Japan’s automobile industry came on top because of the lower value of yen. It made Toyota as the leading automobile industry in the world in 2007. If in some cases, the lower value of yen cannot help in boosting economic growth, the central bank can strengthen it to reduce the inflation rate.
Is Japan’s economy growing? The reason behind the success of Japan’s Economy
Most western countries are still finding reasons behind Japan’s impressive and puzzling achievements after World War II. The reason is simple and measurable.
The Japanese are concerned very much of their dependence on imports for energy, raw materials, and food to push it to the rest of the world. Although these considerations do not have a larger impact, every interested firm in Japan takes it seriously.
In 2018, Japan’s position was 5th in the Logistic Performance Index and 2nd in the infrastructure category. Japan was known to produce half of its energy from petroleum in 2005, one-fifth energy from coal, while the other 14% from natural gas. Japan exports around 84% of the energy to other countries, making it the world’s largest liquefied natural gas supplier and the second-largest coal producer.
In 2012, Japan was among the top 5 most visited countries in Asia, with around 8.3 million tourists. In 2013, the country attracted almost 11.25 million tourists, who even surpassed the government’s projected 10 million targets. However, they then decided to attract 40 million visitors per year by the 2020 Tokyo Olympics to maintain Japan’s economy(GDP).
Japan’s Economic Recovery after COVID-19
Although the economy has fallen, there is still hope for the post-COVID future. The opportunity of organizing the 2020 Olympics is gone now because the economy is facing a recession due to coronavirus pandemic. It leads around 1000 deaths in the country, and the number is still increasing.
However, by the end of the year, if nothing goes worse, the third-largest economy’s nation can emerge from COVID-19.
The lost International Olympic Committee faces due to postponement of the Olympics are of around $800 million. At the same time, the cost for Japan is already in billions.