The economic context of Japan

Main Sectors of Industry

Even though Japan has some deposits of gold, magnesium, coal and silver, the country has very limited natural resources overall and, as a result, is highly dependent on imports to meet its raw material and energy needs. On the other hand, thanks to its large maritime area, the country is one of the world’s largest producers of fishing products. However, given that only 11% of Japan’s surface is suitable for cultivation, the agricultural sector is small, contributing marginally to GDP (1%) and employing only 3% of the workforce (World Bank, latest data available). Tea and rice are the country’s two largest crops, though the sector as a whole is highly subsidised and protected. Other major crops are corn, wheat, soybeans, barley, peanuts, rapeseed, and oats. The 5-year average harvested area for various crops is as follows: rice covers 1.5 million hectares (MHA), wheat 214,000 hectares (ha), soybeans 146,000 ha, barley 62,000 ha, peanuts 8,000 ha, and corn 1,200 ha. In terms of production volume, rice leads with an average of 10.4 million metric tons (mmt), followed by wheat at 991,000 metric tons (mt), soybeans at 224,000 mt, barley at 218,000 mt, peanuts at 20,000 mt, corn at 5,400 mt, rapeseed 4,000 mt, and oats 1,000 mt (data USDA). Japan's agricultural, fisheries, and forestry product exports hit a record USD 9.6 billion in 2024, rising 3.7% from the previous year, driven by growing international demand for Japanese cuisine.

Japan’s industrial sector represents 26.9% of GDP and employs 24% of the workforce (World Bank). The Japanese industrial sector is a multifaceted landscape characterized by a mix of traditional and innovative industries. Historically, Japan has been renowned for its manufacturing prowess, particularly in the automotive, electronics, and machinery sectors. Companies like Toyota, Sony, and Panasonic have shaped the global industrial landscape. Additionally, Japan leads in advanced manufacturing technologies, robotics, and precision engineering, fostering a competitive edge in industries such as robotics, semiconductors, and high-tech materials. Overall, the World Bank estimates that the manufacturing sector alone accounts for 19% of GDP, making Japan the fourth-biggest manufacturing country. Nevertheless, Japan's industrial output fell by 2.3% year-on-year in 2024, marking the third consecutive annual decline (governmental data). The drop was driven by the temporary shutdown of Toyota Motor Corp. and other automakers' plants in the first half of the year following a certification scandal. In recent years, Japan continued to explore emerging sectors such as renewable energy, biotechnology, and artificial intelligence, leveraging its strong research and development capabilities and skilled workforce to maintain its position as a global industrial leader.
 
The service sector accounts for around 71.4% of GDP and employs over 73% of the workforce. Dominating this sector are finance, insurance, and real estate, reflecting Japan's status as a global financial hub. Retail and wholesale trade also play significant roles, with iconic Japanese brands like Uniqlo contributing to both domestic and international commerce. Moreover, Japan's hospitality and tourism industry attracts millions of visitors annually: the country welcomed a record 36.9 million international visitors in 2024, a 47.1% increase from the previous year, surpassing the pre-pandemic record of 31.9 million in 2019 by 5 million (data Japan National Tourism Organization). Emerging sectors in Japan's tertiary landscape include healthcare and eldercare services, driven by the country's ageing population, as well as information technology and digital services.

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

74,1/100

World Rank:

23

Regional Rank:

6

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation