Japan has a highly service-dominated economy, which contributes approximately 70% of GDP, with most of the remainder coming from the industrial sector.[41] 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.[42] 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.[43]
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.[44] 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.[45] 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.[46] The Plaza Accord in 1985, an agreement among major economies to devalue the American dollar relative to several major currencies, led to a rapid appreciation of the yen.[47][48][49]
In 1995, Japan’s share of the world’s nominal GDP was 17.8%, reaching approximately 71% of that of the United States.[26]
Driven by speculative investments and excessive lending, the Japanese asset price bubble of the early 1990s burst, triggering a prolonged period of economic stagnation marked by deflation and persistently low or negative growth, now known as the Lost Decades. From 1995 to 2007, the country’s GDP fell from $5.33 trillion to $5.04 trillion in nominal terms.[50] 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.[51] 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.[52][53]
As of 2021, Japan has significantly higher levels of public debt than any other developed nations at approximately 260% of GDP.[54][55] 45% of this debt is held by the Bank of Japan, and most of the remainder is also held domestically.[54] The 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.[56] 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.[57] Projections show that the population will continue to fall, potentially to below 100 million by the middle of the 21st century.[58][59]
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.
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.
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.[60]
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.[61] 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.[62] 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.[63]
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.[64]
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.[65] 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.[66]
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.[67]
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.[68]
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.[69] 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.[70] 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)
Japan's nominal GDP per capita stagnated around $40,000 for the entire period.
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.[71] Unlike previous recovery trends, domestic consumption has been the dominant factor of growth.
Despite having interest rates down near zero for a long period of time, the quantitative easing strategy did not succeed in stopping price deflation.[72] This led some economists, such as Paul Krugman, and some Japanese politicians, to advocate the generation of higher inflation expectations.[73] 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[74] 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.[75]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.[76]
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.[77][78] Less than a quarter of Japanese people expected 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]
Post-recession (2021–present)
At the end of March 2022, the Ministry of Finance announced that the national debt reached precisely 1.017 million billion yen.[83] 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.[83] 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.”[83]
The Bank of Japan's main policy aim since the Lost Decades started had been to end deflation and eventually achieve 2% inflation.[51] The increased international economic tension brought about by events such as the Russian Invasion of Ukraine in 2022 finally helped the country achieve the much-anticipated inflation target of 2%, and the negative interest policy since 2016 was ended in March 2024.[52][53] However, while other major economies focus on suppressing inflation by raising interest rates, Japan aims to firmly establish inflation by maintaining low rates. As a side effect, the Japanese yen has become extremely weak, hitting a 37.5-year low of 161 yen/USD in July 2024.[84][85] Furthermore, the real effective exchange rate in May 2024, when the 2020 average is set at 100, is 68.65, the lowest level since the start of the Bank of Japan statistics in January 1970, due to a combination of low inflation in Japan and a relatively low trade share.[86][87][88][89] This devaluation of the currency caused Japan to lose its status as the world’s third largest economy to Germany in nominal terms, which was approximately half the size of the country's economy a decade earlier.[90][91][92]The Asahi Shimbun and other media outlets also reported that the impact of these sharp falls in the value of the currency had turned the Japanese yen into a junk currency.[93][94][95]
Factors such as an apparent end to the 30-year struggle against deflation, improvements in corporate governance, and high corporate profits boosted the stock market. Consequently, both the Nikkei 225 and TOPIX indices surpassed the record highs they reached more than 30 years ago in 2024. The market capitalisation of the Tokyo Stock Exchange’s prime section exceeded a quadrillion yen for the first time in July 2024.[96]
Macro-economic trend
GDP composition
Industries by GDP value-added 2012.[97] Values are converted using the exchange rate on 13 April 2013.[98]
The Japanese agricultural sector accounts for about 1.1% (2017) of the total country's GDP.[100] Only 12% of Japan's land is suitable for cultivation.[101][102] Due to this lack of arable land, a system of terraces is used to farm in small areas.[103] This results in one of the world's highest levels of crop yields per unit area, with an overall agricultural self-sufficiency rate of about 50% on fewer than 56,000 km2 (14 million acres) cultivated.
Japan's small agricultural sector, however, is also highly subsidized and protected, with government regulations that favor small-scale cultivation instead of large-scale agriculture as practiced in North America.[101] There has been a growing concern about farming as the current farmers are aging with a difficult time finding successors.[104]
Rice accounts for almost all of Japan's cereal production.[105] Japan is the second-largest agricultural product importer in the world.[105] Rice, the most protected crop, is subject to tariffs of 777.7%.[102][106]
Although Japan is usually self-sufficient in rice (except for its use in making rice crackers and processed foods) and wheat, the country must import about 50% of its requirements of other grain and fodder crops and relies on imports for half of its supply of meat.[107][108] Japan imports large quantities of wheat and soybeans.[105] Japan is the 5th largest market for the European Union's agricultural exports.[109][needs update] Over 90% of mandarin oranges in Japan are grown in Japan.[108]Apples are also grown due to restrictions on apple imports.[110]
Japan ranked fourth in the world in 1996 in tonnage of fish caught.[111] Japan captured 4,074,580 metric tons of fish in 2005, down from 4,987,703 tons in 2000, 9,558,615 tons in 1990, 9,864,422 tons in 1980, 8,520,397 tons in 1970, 5,583,796 tons in 1960 and 2,881,855 tons in 1950.[112] In 2003, the total aquaculture production was predicted at 1,301,437 tonnes.[113] In 2010, Japan's total fisheries production was 4,762,469 fish.[114] Offshore fisheries accounted for an average of 50% of the nation's total fish catches in the late 1980s although they experienced repeated ups and downs during that period.
Coastal fishing by small boats, set nets, or breeding techniques accounts for about one third of the industry's total production, while offshore fishing by medium-sized boats makes up for more than half the total production. Deep-sea fishing from larger vessels makes up the rest. Among the many species of seafood caught are sardines, skipjack tuna, crab, shrimp, salmon, pollock, squid, clams, mackerel, sea bream, sauries, tuna and Japanese amberjack. Freshwater fishing, including salmon, trout and eel hatcheries and fish farms,[115] takes up about 30% of Japan's fishing industry. Among the nearly 300 fish species in the rivers of Japan are native varieties of catfish, chub, herring and goby, as well as such freshwater crustaceans as crabs and crayfish.[116] Marine and freshwater aquaculture is conducted in all 47 prefectures in Japan.[113]
Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch,[117] prompting some claims that Japan's fishing is leading to depletion in fish stocks such as tuna.[118] Japan has also sparked controversy by supporting quasi-commercial whaling.[119]
Japanese manufacturing and industry is very diversified, with a variety of advanced industries that are highly successful. Industry accounts for 30.1% (2017) of the nation's GDP.[100] The country's manufacturing output is the third highest in the world.[120]
Lexus LS. The rapid growth and success of Toyota's Lexus and other Japanese automakers reflects Japan's strength and global dominance in the automobile industry.
Japan's mining production has been minimal, and Japan has very little mining deposits.[131][132] However, massive deposits of rare earths have been found off the coast of Japan.[133] In the 2011 fiscal year, the domestic yield of crude oil was 820 thousand kiloliters, which was 0.4% of Japan's total crude processing volume.[134]
In 2019, Japan was the 2nd largest world producer of iodine,[135] 4th largest worldwide producer of bismuth,[136] the world's 9th largest producer of sulfur[137] and the 10th largest producer of gypsum.[138]
In 2012, Japan was the fifth most visited country in Asia and the Pacific, with over 8.3 million tourists.[145] In 2013, due to the weaker yen and easier visa requirements for southwest Asian countries, Japan received a record 11.25 million visitors, which was higher than the government's projected goal of 10 million visitors.[146][147][148] The government hopes to attract 40 million visitors a year by the 2020 Summer Olympics in Tokyo.[147] Some of the most popular visited places include the Shinjuku, Ginza, Shibuya and Asakusa areas in Tokyo, and the cities of Osaka, Kobe and Kyoto, as well as Himeji Castle.[149]Hokkaido is also a popular winter destination for visitors with several ski resorts and luxury hotels being built there.[147][150]
Japan's economy is less dependent on international tourism than those of other G7 countries and OECD countries in general; from 1995 to 2014, it was by far the least visited country in the G7 despite being the second largest country in the group,[151] and as of 2013 was one of the least visited countries in the OECD on a per capita basis.[152] In 2013, international tourist receipts was 0.3% of Japan's GDP, while the corresponding figure was 1.3% for the United States and 2.3% for France.[153][154]
In 2005, one half of Japan's energy was produced from petroleum, a fifth from coal, and 14% from natural gas.[157]Nuclear power in Japan made a quarter of electricity production but due to the Fukushima Daiichi nuclear disaster there has been a large desire to end Japan's nuclear power program.[158][159] In September 2013, Japan closed its last 50 nuclear power plants nationwide, causing the nation to be nuclear free.[160] The country has since then opted to restart a few of its nuclear reactors.[161]
Japan's spendings on roads has been considered large.[162] The 1.2 million kilometers of paved road are one of the major means of transportation.[163] Japan has left-hand traffic.[164] A single network of speed, divided, limited-access toll roads connects major cities and are operated by toll-collecting enterprises.[165] New and used cars are inexpensive, and the Japanese government has encouraged people to buy hybrid vehicles.[166] Car ownership fees and fuel levies are used to promote energy-efficiency.[166]
About 84% of Japan's energy is imported from other countries.[176][177] Japan is the world's largest liquefied natural gas importer, second largest coal importer, and third largest net oil importer.[178] Given its heavy dependence on imported energy, Japan has aimed to diversify its sources.[179] Since the oil shocks of the 1970s, Japan has reduced dependence on petroleum as a source of energy from 77.4% in 1973 to about 43.7% in 2010 and increased dependence on natural gas and nuclear power.[180] In September 2019, Japan will invest 10 billion on liquefied natural gas projects worldwide, in a strategy to boost the global LNG market and reinforce the security of energy supply.[181] Other important energy source includes coal, and hydroelectricity is Japan's biggest renewable energy source.[182][183] Japan's solar market is also currently booming.[184] Kerosene is also used extensively for home heating in portable heaters, especially farther north.[185] Many taxi companies run their fleets on liquefied natural gas.[186] A recent success towards greater fuel economy was the introduction of mass-produced hybrid vehicles.[166] Prime Minister Shinzō Abe, who was working on Japan's economic revival, signed a treaty with Saudi Arabia and UAE about the rising prices of oil, ensuring Japan's stable deliveries from that region.[187][188]
Finance
The main trading room of the Tokyo Stock Exchange, one of the largest stock exchanges in the world
Unemployment rate of Japan.[196] Red line is G7 average. 15-24 age (thin line) is youth unemployment.
The unemployment rate in December 2013 was 3.7%, down 1.5 percentage points from the claimed unemployment rate of 5.2% in June 2009 due to the strong economic recovery.[197][198][199]
In 2008 Japan's labor force consisted of some 66 million workers—40% of whom were women—and was rapidly shrinking.[200]
One major long-term concern for the Japanese labor force is its low birthrate.[201] In 2005, the number of deaths in Japan exceeded the number of births, indicating that the decline in population had already started.[202] While one countermeasure for a declining birthrate would be to increase immigration, Japan has struggled to attract potential migrants despite immigration laws being relatively lenient (especially for high-skilled workers) compared to other developed countries.[203] This is also apparent when looking at Japan's work visa programme for "specified skilled worker", which had less than 3,000 applicants, despite an annual goal of attracting 40,000 overseas workers, suggesting Japan faces major challenges in attracting migrants compared to other developed countries regardless of its immigration policies.[204] A Gallup poll found that few potential migrants wished to migrate to Japan compared to other G7 countries, consistent with the country's low migrant inflow.[205][206]
In 1989, the predominantly public sector union confederation, SOHYO (General Council of Trade Unions of Japan), merged with RENGO (Japanese Private Sector Trade Union Confederation) to form the Japanese Trade Union Confederation. Labor union membership is about 12 million.
As of 2019 Japan's unemployment rate was the lowest in the G7.[207] Its employment rate for the working-age population (15–64) was the highest in the G7.[208]
In 2016, the IMF encouraged Japan to adopt an income policy that pushes firms to raise employee wages in combination with reforms to tackle the labor market dual tiered employment system to drive higher wages, on top of monetary and fiscal stimulus. Shinzo Abe has encouraged firms to raise wages by at least three per cent annually (the inflation target plus average productivity growth).[216][217][218]
Shareholder activism is rare despite the fact that the corporate law gives shareholders strong powers over managers.[219] Under Prime Minister Shinzō Abe, corporate governance reform has been a key initiative to encourage economic growth. In 2012 around 40% of leading Japanese companies had any independent directors while in 2016 most all have begun to appoint independent directors.[216][220]
Our expansion could be much bigger and quicker, but we are held back. Nowhere in the world do the [regulatory approvals] take so long. (The process is) old fashioned. — Tony Fernandes, AirAsia chief.[226]
Overview
Nemawashi (根回し), or "consensus building", in Japanese culture is an informal process of quietly laying the foundation for some proposed change or project, by talking to the people concerned, gathering support and feedback, and so forth. It is considered an important element in any major change, before any formal steps are taken, and successful nemawashi enables changes to be carried out with the consent of all sides.
Japanese companies are known for management methods such as "The Toyota Way". Kaizen (改善, Japanese for "improvement") is a Japanese philosophy that focuses on continuous improvement throughout all aspects of life. When applied to the workplace, Kaizen activities continually improve all functions of a business, from manufacturing to management and from the CEO to the assembly line workers.[227] By improving standardized activities and processes, Kaizen aims to eliminate waste (see Lean manufacturing). Kaizen was first implemented in several Japanese businesses during the country's recovery after World War II, including Toyota, and has since spread to businesses throughout the world.[228] The corporate application of the kaizen system has been criticized for neglecting or harming the quality of life of workers, particularly via the implementation of long working hours. However, according to the OECD, Japan's average for annual hours worked per employee is lower than the OECD average and middling among G7 countries.[229]
Some companies have powerful enterprise unions and shuntō. The Nenko system or Nenko Joretsu, as it is called in Japan, is the Japanese system of prefering to promote employees close to retirement. This is done to prioritize experience in executive positions and to allow older employees to achieve a higher salary level before retirement. The Nenko system has been criticised for leaving younger employees at a disadvantage against older employees who may be less capable.
Relationships between government bureaucrats and companies are often close. Amakudari (天下り, amakudari, "descent from heaven") is the institutionalised practice where Japanese senior bureaucrats retire to high-profile positions in the private and public sectors. The practice is increasingly viewed as corrupt and a limitation on efforts to reduce ties between the private sector and the state that prevent economic and political reforms. Lifetime employment (shūshin koyō) and seniority-based career advancement have been common in the Japanese work environment.[210][230] These practices have become less common in recent years.[231]
Salaryman (サラリーマン, Sararīman, salaried man) refers to someone whose income is salary based; particularly those working for corporations. Coined in Japan, the word's frequent use by Japanese corporations and its prevalence in Japanese manga and anime has led to its adoption into and common usage within the English language to refer to Japanese white-collar workers, and it can be found in many English-language books and articles pertaining to Japanese culture. Immediately following World War II, becoming a salaryman was viewed as a gateway to a stable, middle-class lifestyle. In modern use, the term carries associations of long working hours, low prestige in the corporate hierarchy, absence of significant sources of income other than salary, wage slavery, and karōshi. The term salaryman refers almost exclusively to males.[citation needed]
Freeter (フリーター, furītā) is a Japanese expression for people between the age of 15 and 34 who lack full-time employment or are unemployed, excluding homemakers and students. They may also be described as underemployed or freelance workers. These people do not start a career after high school or university but instead usually live as parasite singles with their parents and earn some money with low skilled and low paid jobs. Low income makes it difficult for freeters to start a family, and lacking qualifications in the form of skilled labor experience makes it difficult for them to start a career at a later point in life.[citation needed]
Karōshi (過労死, karōshi), which can be translated quite literally from Japanese as "death from overwork", is occupational sudden death. The major medical causes of karōshi deaths are heart attack and stroke due to stress.[232]
Sōkaiya (総会屋, sōkaiya), (sometimes also translated as corporate bouncers, meeting-men, or corporate blackmailers) are a form of specialized racketeer unique to Japan, and often associated with the yakuza that extort money from or blackmail companies by threatening to publicly humiliate companies and their management, usually in their annual meeting (総会, sōkai). Sarakin (サラ金) is a Japanese term for moneylender, or loan shark. It is a contraction of the Japanese words for salaryman and cash. Around 14 million people, or 10% of the Japanese population, have borrowed from a sarakin. In total, there are about 10,000 firms (down from 30,000 a decade ago); however, the top seven firms make up 70% of the market. The value of outstanding loans totals 100 billion. The biggest sarakin are publicly traded and often allied with big banks.[233]
The first "Western-style" department store in Japan (called デパート, depāto) was Mitsukoshi, founded in 1904, which has its root as a kimono store called Echigoya from 1673. When the roots are considered, however, Matsuzakaya has an even longer history, dating back to 1611 and becoming a department store in 1910. In 1924, Matsuzakaya store in Ginza allowed street shoes to be worn indoors, something innovative at the time.[234] These former kimono shop department stores dominated the market in its earlier history. They sold luxurious products which contributed to them having sophisticated atmospheres. From the 1920s, private railway operators started to build department stores directly linked to their lines' terminuses. Seibu and Hankyu are examples of this practice. From the 1980s onwards, Japanese department stores have faced fierce competition from supermarkets and convenience stores, and they have gradually declined in prominence. Still, depāto are seen as bastions of cultural conservatism in the country. Gift certificates for department stores are frequently given as presents in Japan. Department stores in Japan generally offer a wide range of services which can include foreign exchange, travel reservations, and ticket sales for local concerts and other events.[citation needed]
A keiretsu (系列, "system" or "series") is a set of companies with interlocking business relationships and shareholdings. A keiretsu unequivocally exists as an identical form of business structure to the affiliate, or an associate.[citation needed] It is a type of business group. The prototypical keiretsu appeared in Japan during the "economic miracle" following World War II. Before Japan's surrender, Japanese industry was controlled by large family-controlled vertical monopolies called zaibatsu. The Allies dismantled the zaibatsu in the late 1940s, but the companies formed from the dismantling of the zaibatsu were reintegrated. The dispersed corporations were re-interlinked through share purchases to form horizontally integrated alliances across many industries. Where possible, keiretsu companies would also supply one another, making the alliances vertically integrated as well. In this period, official government policy promoted the creation of robust trade corporations that could withstand pressures from intensified world trade competition.[235]
The major keiretsu were each centered on one bank, which lent money to the keiretsu's member companies and held equity positions in the companies. Each central bank had great control over the companies in the keiretsu and acted as a monitoring entity and as an emergency bail-out entity. One effect of this structure was to minimize the presence of hostile takeovers in Japan, because no entities could challenge the power of the banks.[citation needed]
There are two types of keiretsu: vertical and horizontal. Vertical keiretsu illustrates the organization and relationships within a company (for example all factors of production of a certain product are connected), while a horizontal keiretsu shows relationships between entities and industries, normally centered on a bank and trading company. Both are complexly woven together and sustain each other.[236]
The Japanese recession in the 1990s had profound effects on the keiretsu. Many of the largest banks were hit hard by bad loan portfolios and forced to merge or go out of business. This had the effect of blurring the lines between the keiretsu: Sumitomo Bank and Mitsui Bank, for instance, became Sumitomo Mitsui Banking Corporation in 2001, while Sanwa Bank (the banker for the Hankyu-Toho Group) became part of Bank of Tokyo-Mitsubishi UFJ, now known as MUFG Bank. Additionally, many companies from outside the keiretsu system, such as Sony, began outperforming their counterparts within the system.[citation needed]
Generally, these causes gave rise to a strong notion in the business community that the old keiretsu system was not an effective business model, and led to an overall loosening of keiretsu alliances. While the keiretsu still exist, they are not as centralized or integrated as they were before the 1990s. This, in turn, has led to a growing corporate acquisition industry in Japan, as companies are no longer able to be easily "bailed out" by their banks, as well as rising derivative litigation by more independent shareholders.[citation needed]
Mergers and acquisitions
Japanese companies have been involved in 50,759 deals between 1985 and 2018. This cumulates to a total value of US$2.636 billion which translates to ¥281.469 trillion.[237] In 1999, there was an all-time high in terms of value of deals with almost US$220 billion. The most active year so far was 2017 with over 3,150 deals, but only a total value of US$114 billion (see graph "M&A in Japan by number and value").[citation needed]
Here is a list of the most important deals (ranked by value in US$ [billion]) in Japanese history:[citation needed]
Date announced
Acquiror name
Acquiror mid industry
Acquiror state
Target name
Target mid industry
Target state
Value of transaction ($mil)
13 October 1999
Sumitomo Bank Ltd
Banks
Japan
Sakura Bank Ltd
Banks
Japan
45,494.36
18 February 2005
Mitsubishi Tokyo Financial Grp
Banks
Japan
UFJ Holdings Inc
Banks
Japan
41,431.03
20 August 1999
Fuji Bank Ltd
Banks
Japan
Dai-Ichi Kangyo Bank Ltd
Banks
Japan
40,096.63
27 March 1995
Mitsubishi Bank Ltd
Banks
Japan
Bank of Tokyo Ltd
Banks
Japan
33,787.73
18 July 2016
SoftBank Group Corp
Wireless
Japan
ARM Holdings PLC
Semiconductors
United Kingdom
31,879.49
20 August 1999
Fuji Bank Ltd
Banks
Japan
Industrial Bank of Japan Ltd
Banks
Japan
30,759.61
24 August 2004
Sumitomo Mitsui Finl Grp Inc
Banks
Japan
UFJ Holdings Inc
Banks
Japan
29,261.48
28 August 1989
Mitsui Taiyo Kobe Bank Ltd
Banks
Japan
Taiyo Kobe Bank Ltd
Banks
Japan
23,016.80
15 October 2012
SoftBank Corp
Wireless
Japan
Sprint Nextel Corp
Telecommunications Services
United States
21,640.00
20 September 2017
KK Pangea
Other Financials
Japan
Toshiba Memory Corp
Semiconductors
Japan
17,930.00
Among the top 50 deals by value, 92% of the time the acquiring nation is Japan. Foreign direct investment is playing a much smaller role than national M&A in Japan.
Other economic indicators
This article needs to be updated. The reason given is: the indicators are 10 years old and unsupported by citation as well. Please help update this to reflect recent events or newly available information.(February 2019)
^Japan: 2017 Article IV Consultation : Press Release ; Staff Report ; and Statement by the Executive Director for Japan. Washington, D.C.: International Monetary Fund. Asia and Pacific Department. 2017. ISBN978-1-4843-1349-7. OCLC1009601181.
^円の実力、なぜ過去最低水準 金利差だけではない日本経済の「弱さ」：朝日新聞デジタル [Why is the yen's strength at its lowest level ever? The weakness of the Japanese economy is not just due to the interest rate differential]. Asahi Shimbun Digital (in Japanese). The Asahi Shimbun. 25 December 2023. Archived from the original on 30 January 2024. Retrieved 13 April 2024.
^"（時時刻刻）口先介入、薄れた効果 １カ月４円下落「市場に見透かされ」：朝日新聞デジタル" [(Time and Time) Lip service, faded effect, 4 yen drop in one month 'The market saw through']. Asahi Shimbun Digital (in Japanese). 26 April 2024. Retrieved 28 April 2024.
^"このままでは日本の伝統的企業が海外に買われていく…円安が止まらない日本を待ち受ける"最悪のシナリオ" 政府は円安政策を意図的に進めているように見える" [If things continue like this, traditional Japanese companies will be bought out by foreign companies...The 'worst case scenario' awaits Japan as the yen continues to depreciate.The government appears to be intentionally pursuing a policy of depreciating the yen.]. PRESIDENT Online（プレジデントオンライン） (in Japanese). 9 May 2024. Retrieved 13 May 2024.
^"日本円が「ジャンク通貨」に？ ロシアや新興国通貨よりも価値下落：朝日新聞デジタル" [Will the Japanese yen become a "junk currency"? Decrease in value compared to Russian and emerging market currencies]. 朝日新聞デジタル (in Japanese). The Asahi Shimbun. 2 September 2022. Retrieved 15 November 2023.
^"円安で日本円は"ジャンク通貨"になった 海外両替所に日本円の表示がないことも" [The depreciation of the yen has turned the Japanese yen into a "junk currency". Overseas currency exchange offices may not display Japanese yen.]. マネーポストWEB (in Japanese). Shogakukan. 25 August 2022. Retrieved 15 November 2023.
^"ドル円相場、「円弱」1ドル150円 理由は金利差だけじゃない" [The dollar/yen exchange rate is “weak” at 150 yen to the dollar, and the reason is not just the interest rate difference.]. 日本経済新聞 (in Japanese). Nikkei. 13 November 2023. Retrieved 15 November 2023.
^The Association of Japanese Private Railways. 大手民鉄の現況（単体）(PDF) (in Japanese). Archived from the original(PDF) on 4 March 2012. Retrieved 27 November 2010.
^Oishi, Nana (2012). "The Limits of Immigration Policies: The Challenges of Highly Skilled Migration in Japan". American Behavioral Scientist. 56 (8): 1080–1100. doi:10.1177/0002764212441787. S2CID154641232.
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