The Economy of Japan
Japan's industrial sector is heavily dependent on imported raw materials and fuels. A tiny agricultural sector is highly subsidised and protected, with crop yields among the highest in the world. Usually self sufficient in rice, Japan imports about 60% 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 inefficient investment and an asset price bubble in the late 1980s that required a protracted period of time for firms to reduce excess debt, capital, and labor.
Japan enjoyed a sharp uptick in growth in 2013 on the basis of Prime Minister Shinzo ABE’s “Three Arrows” economic revitalization agenda - dubbed “Abenomics” - of monetary easing, “flexible” fiscal policy, and structural reform. In 2015, ABE revised his “Three Arrows” to raise nominal GDP by 20% to 600 trillion yen by 2020, stem population decline by raising the fertility rate, and provide more support for workers with children and aging relatives. ABE’s government has replaced the preceding administration’s plan to phase out nuclear power with a new policy of seeking to restart nuclear power plants that meet strict new safety standards, and emphasizing nuclear energy’s importance as a base-load electricity source. Japan successfully restarted two nuclear reactors at the Sendai Nuclear Power Plant in Kagoshima prefecture.
Japan in 2015 stood as the fourth-largest economy in the world after first-place China, which surpassed Japan in 2001, and third-place India, which edged out Japan in 2012. While seeking to stimulate and reform the economy, the government must also devise a strategy for reining in Japan's huge government debt, which amounts to more than 230% of GDP. To help raise government revenue, Japan adopted legislation in 2012 to gradually raise the consumption tax rate to 10% by 2015, beginning with a hike from 5% to 8%, implemented in April 2014. That increase had a contractionary effect on GDP, however, so PM ABE in late 2014 decided to postpone the final phase of the increase until April 2017 to give the economy more time to recover. Led by the Bank of Japan’s aggressive monetary easing, Japan is making progress in ending deflation, but demographic decline – a low birthrate and an aging, shrinking population – poses a major long-term challenge for the economy.
Partly from the CIA Factbook, 2016
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