The Japanese Economy
Tanya Savage
Pennsylvania College of Health Sciences

The Japanese Economy
This paper will analyze the economy of Japan including its people, geography and of aspects of the economy. Japan is a country that is located on a Pacific Ocean island on the eastern side of Asia (Gao, 2001). It stretches from Taiwan and East China Sea to the sea of Okhotsk in the north of Japan. Japan has a population of 126 million within its capital city; Tokyo having a population of 30 million, thereby making Japan the tenth most populated country in the globe (Flath, 2005). In total, Japan contains 6,852 islands with four major islands making up 97% of the total land area. This islands include Hokkaido, Shikoku, Honshu, and Kyushu (Alexander,2003). There is no particular official language and the recognized regional languages include Aynu itak, Eastern Japanese, Ryukyuan languages, and Western Japanese (Flath, 2005). The government of Japan is a unitary parliamentary constitutional monarchy, where the emperor is called Akihito and the prime minister is called Shinzo Abe.
Japan is the second largest developed country, the third largest economy in the globe in terms of nominal GDP, and fourth largest in terms of purchasing power. In addition, it is the leading creditor nation in the globe (Alexander,2003). Based on these facts, Japan is part of the Group of Eight. Japan has the largest industry of electronics in the globe and also the third largest manufacturing industry of automobiles. In the present day, Japan focuses on production of hybrid cars, robotics, optical equipment, and high-tech goods in order to contain the competition from South Korea and china (Flath, 2005). The currency used in Japan is referred to as the Japanese Yen. For the better part of the century, Japan has favored spending on economic growth as compared to defense (Alexander,2003).
The economy of Japan faced two shocks in past years that greatly affected the Japan economy. This included the 2011 earthquake in eastern Japan and the global financial crisis of 2008, which made Japan to fall into a recession (Flath, 2005). Japan had raised its public debt ratio to a 200% GDP level. In order for Japan to restore financial sustainability, it should implement protracted consolidation that is strong (Alexander, 2003). This has a negative effect of slow growth of GDP hence making financial adjustments hard to apply.
The key issues in solving the Japan financial dilemma, is to boost the potential of growth and exiting deflation. The government of Japan has come up with better ways of improving the economy through bold monetary policies, a proper strategy of growth, and a fiscal policy that is flexible. It is crucial for Japan to reverse the increase in debt to national income ratio (Flath, 2005). In order to stabilize the public debt ratio in years to come, it requires particular measures that include the following: controlled expenditure on the social security sector where there are more and more people ageing, raising the primary financial balance from a 9% deficit in the current year to a 4% surplus high in the next seven years (Alexander, 2003) and lastly, increasing dependency on the interest rate and national income evolution (Flath, 2005). The banking system in Japan is highly risked by the government debt. This is also threatened by high interest rates in the banking system (Alexander, 2003).
A major priority for the Japanese government is to put an end to the deflation that has lasted for the past fifteen years. To control the deflation, the Japanese government has committed its target on a 2% inflation rate, in addition, the Japanese government has considered monetary easing policy that is both quantitative and qualitative (Alexander,2003).
In order for the 2% inflation rate to be achievable within a period of two years, the Japanese government has planned to increase purchases of the government bond with a long maturity period in order to increase the monetary base. It has also planned to increase purchase of private assets weakening the Japanese currency; although not a major priority for the government this will boost the inflation and also the growth of the economy (Alexander, 2003).
It is evident that people live longer in Japan than in America even though Americans spend fifty percent more on health care (Flath, 2005). Health care in Japan takes only 8.5 percent of their total national income. Kaihoken is the Japanese universal health insurance system that is termed as cheap and responsible for the long healthy life (Alexander, 2003). It is said that the Japanese people see the doctor twice as much as the people in the west and take more life enhancing and prolonging drugs hence making the life expectancy to be at a high of eighty-five years. Japan has one of the lowermost infant mortality rates in the globe (Flath, 2005).
Even with all the positives in the healthcare system of Japan, there are several issues affecting the system. The Japan population has shrunk and aged in the last few decades yet it needs a strong workforce to cater for the bills (Alexander, 2003). Since the health care insurance was introduced, the population over sixty-five years has quadrupled. It is evident that the Japanese health care system was efficient in past decades has begun to face major challenges.
It is also evident that in the present economic stagnation, it is not possible to handle the health system’s inefficiency in a period of increased growth (Alexander, 2003). For the first time in history, in 2002 there was a decrease in medical spending due to the increase in copayment rates and also the controlling of prices through fee schedules (Flath, 2005). There is slow but meaningful progress and increasing accountability of health delivery system to patients. A cut in the prices of drugs and health services led to an average health spending change (Alexander, 2003). Several proposals induced by the economic stagnation aimed at increasing efficiency in the health insurance system, payment structure, and delivery of medical care (Flath, 2005).
The most relevant sectors in the consumer index include food, housing, communication and transportation, recreation, fuel, and medical care (Flath, 2005). The highest inflation rate that has ever been recorded is 25% in 1974, while the lowest was -2.5 in 2009. There was a gross domestic product increase in Japan’s economy by 0.9% in 2013 (Alexander, 2003). Between 1980 and 2013 the highest growth rate of GDP was recorded in 1990 and was 3.2%, while the lowest was -4% in 2009 (Gao, 2001). That is why Japan has the third largest industrialized economy in the world. Its growth rate is attributed to its competitiveness, and efficiency in the export sector.
As seen before, productivity is high in the automobile sector, the electronics sector, and generally the high-tech robotic sector. In areas like agriculture, services, and distribution, it has less productivity (Flath, 2005). The gross domestic product per capita as recorded in 2012 was at $36938.01. This is equivalent to the global average of 298% (Alexander, 2003). Between 1960 and 2012, the highest GDP per capita that has ever been recorded was $37185.3 in 2007 while the lowest was $7079.44 in 1960 (Flath, 2005). To obtain the gross domestic product per capita, the GDP with inflation adjustment is divided by total population.
The unemployment rate in Japan is currently at 4.1%. The unemployment rate measures the number able bodied people that are actively involved in job search as a percentage of the total labor force (Gao, 2001). The highest unemployment to ever be recorded between 1953 and 2013 was in 2009 at 5.6% (Flath, 2005). The lowest was recorded in 1968 at 1%. In 2011, Japan had a national debt of 211.7% to GDP (Alexander, 2003). The national debt as a percentage of GDP is calculated in order to know whether it is possible for a country to make payments for its debts in future, and this is very crucial to investors (Flath, 2005). This affects the yields of government bonds and Japan’s borrowing cost. Between the year 1980 and 2011, the highest record of national debt to GDP was at 211.7% in 2011 and a low of 50.6% in 1980 (Alexander, 2003).
In Japan, taxes are paid on property, income, and consumption at all levels (Flath, 2005). Income tax that is known as the resident tax is paid by individual on an annual basis, and calculated basing on the net income of the individual. Enterprise tax is imposed on self-employed people, and is based on net income and type of business (Gao, 2001). Property tax is paid on ownership of land and other depreciable assets. Consumption tax is paid on purchased goods and services by consumers. At present, the tax rate is at 5% which includes 4% that is nationally distributed and 1% that is prefectural (Flath, 2005). Regarding Japan’s net import and export, it recorded a 960.3 billion Japanese Yen deficit in 2013. The main exports from Japan have mostly been high technology products while most imports have been agricultural products (Gao, 2001).
In conclusion, the economy of Japan seems to be extremely successful especially in the engineering related fields (Flath, 2005). Their biggest let down is the population composition, which consists of a larger population of ageing people hence limiting the workforce (Gao, 2001).
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References
Alexander, A. J. (2003). In the Shadow of the Miracle: The Japanese Economy Since the End of High-speed Growth. Virginia: Lexington Books.
Flath, D. (2005). The Japanese Economy. London: Oxford University Press.
Gao, B. (2001). Japan's Economic Dilemma: The Institutional Origins of Prosperity and Stagnation. London: Cambridge University Press.