The economic context of Japan

 

Economic Indicators

Japan, the world's third-largest economy, is heavily affected by external influences due to its heavy reliance on exports. The threat has manifested itself in recent years, as its economy has experienced a slowdown in the global economy as well as a periodic recession. Similarly, the global economic crisis caused by the Kuwait 19 epidemic had a significant impact, falling to 5.3% of the country's GDP in 2020.One of the main reasons for the collapse was the sharp decline in domestic consumption, which accounted for more than half of Japan's economy. Exports have also fallen sharply as epidemics have affected global trade. Japanese policymakers immediately implemented a tr 1 trillion stimulus package, equivalent to more than 20 percent of Japan's GDP, more than double the stimulus package launched during the 2008 financial crisis. According to the IMF's October 2020 forecast, GDP growth is expected to reach 2.3 percent in 2021 and stabilize 1.7 percent in 2022, subject to a global economic recovery following the epidemic.In its latest World Economic Outlook January 2021 statement, the IMF revised its GDP growth estimates for Japan in 2021 to 3.1 percent in 2021 and 2.4 percent in 2022. The WEO estimates for October 2020 are + 0.8% and + 0.7%, respectively).

Under the leadership of Prime Minister Shinzo Abe, the limits of economic reform - 'Abinomics' - have become clearer. Despite budget stimulus plans, fiscal easing and structural reforms, growth remained weak and public debt remained high (238% of Japan's GDP in 2019). In addition to Japan's already serious economic woes, the Kovid 19 epidemic has led to a significant drop in the country's economic activity, weakening public finances. According to the latest IMF estimates for October 2020, public debt reached 266.3% in 2020.It is projected to be 264% in 2021 and 263% in 2022. In addition, the disproportionate increase in government deficits due to impact mitigation measures is on the rise. Japan's budget deficit was -12.7% in 2020, expected to be -5.6% in 2021 and -2.8% in 2022. Inflation rose to -0.1% in 2020 due to the outbreak of Covid 19. It is expected to increase to 0.3% in 2021 and 0.7% in 2022. In addition to the previously announced emergency measures, Japanese Prime Minister Yoshihide Suga announced in December 2020 a new era of stimulus for the Japanese economy.The 73.6 trillion yen (70 8,708 billion) package is expected to fund 19 19.2 billion to promote carbon neutrality by 2050, 9. 9.6 billion to accelerate digital transformation, and lower trade hours during epidemic losses. 14.4 billion subsidy will be added to support the delivery restaurant.

Going forward, budget stability will be a major issue for the country as it seeks to control its debt levels. The demographic problems facing Japan are becoming more serious. An aging society is a major challenge for the country, as government spending on pensions and health care continues to rise. Furthermore, declining declines lead to a significant reduction in population, and consequently a decrease in the number of taxpayers.Japan's working age population has been declining for decades, but it has declined due to rising participation, increased employment and maintaining a low unemployment rate. However, the negative economic effects of the Cove 19 epidemic could lead to a decline in business services due to weak investment and exports. Unemployment rose to 3.3 percent in 2020 from 2.4 percent in 2019. But it is expected to fall 2.8 percent in 2021, and reach pre-crisis levels in 2022.

Main Indicators	2018	2019	2020 (e)	2021 (e)	2022 (e)
GDP (billions USD)	4.00	5.00e	4.00	5.00	5.00
GDP (Constant Prices, Annual % Change)	0.3	0.7	-5.3	3.1	2.4
GDP per Capita (USD)	39	40	39	40	42
General Government Balance (in % of GDP)	-2.5	-3.0e	-12.7	-5.6	-2.8
General Government Gross Debt (in % of GDP)	236.6	238.0e	266.2	264.0	263.0
Inflation Rate (%)	1.0	0.5	-0.1	0.3	0.7
Unemployment Rate (% of the Labour Force)	2.4	2.4	3.3	2.8	2.4
Current Account (billions USD)	176.63	184.29	143.53	165.61	160.49
Current Account (in % of GDP)	3.6	3.6	2.9	3.2	3.0

 

Source: IMF – World Economic Outlook Database, October 2020

Note 1: (e) Estimated Data

Note 2: The GDP growth projections for 2021 and 2022 (Constant Prices, Annual % Change) were updated by the IMF in January 2021

Main Sectors of Industry

Although Japan has reserves of gold, magnesium, coal and silver, the country as a whole has very limited natural resources and, as a result, is heavily dependent on imports to meet its raw material and energy needs. does. On the other hand, thanks to its large area of ​​maritime boundaries, the country is one of the world's leading producers of fishing products.However, given that only 11% of Japan's surface area is suitable for cultivation, the agricultural sector in Japan is very small. Tea and rice are the country's two largest crops, although overall the sector is highly subsidized and secure. Agriculture contributes marginally to GDP (1.2%) and employs only 3.4% of the population. In 2020, Japan's agricultural sector lost wages from China due to sanctions caused by the Kuwait 19 epidemic. 

The industrial sector is very diverse, from basic goods (such as steel and paper) to state-of-the-art manufacturing products. Japan dominates the automobile, robotics, biotechnology, nanotechnology and renewable energy sectors. Japan is home to many of the world's largest manufacturers of electronic products, which is why the country's industrial sector is often associated with technological sophistication. The country is the world's third largest carmaker and the second largest producer of ships. Its industrial sector represents 29.1% of GDP and employs 24.1% of the workforce.

The service sector accounts for 69.3% of GDP and employs 72.6% of the workforce. Major services in Japan include banking, insurance, retail, transportation and telecommunications. Tourism is also an important sector in the country, which has seen significant growth in recent years. Covid-19 Tourism has reached record levels due to the crisis caused by epidemics and travel restrictions.In February 2019, about 2.2 million tourists visited Japan. With the spread of COVID-19, the number of tourists visiting Japan fell by 58% to 1.09 million (Bloomberg, 2020). As a result, food distribution companies serving hotel restaurants were severely affected. The Japan Food Service Association (JFF) said that overall sales in March 2020 were 17% lower than in 2019 and 40% lower in April 2020. 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	3.4	24.1	72.6
Value Added (in % of GDP)	1.2	29.1	69.3
Value Added (Annual % Change)	1.5	1.2	0.4