Economy

Close government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation have helped Japan become the second largest economy in the world,[44] after the United States, at around US$4.5 trillion in terms of nominal GDP[44] and third after the United States and China in terms of purchasing power parity.[45]

Banking, insurance, real estate, retailing, transportation and telecommunications are all major industries. Japan has a large industrial capacity and is home to some of the largest and most technologically advanced producers of motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles and processed foods. It is home to leading multinational corporations and commercial brands in technology and machinery.[46] Construction has long been one of Japan's largest industries, with the help of multi-billion dollar government contracts in the civil sector. Distinguishing characteristics of the Japanese economy have included the cooperation of manufacturers, suppliers, distributors and banks in closely-knit groups called keiretsu and the guarantee of lifetime employment in big corporations.[47] Recently, Japanese companies have begun to abandon some of these norms in an attempt to increase profitability.[48]

Japan is home to the world's largest bank,[49] the Mitsubishi UFJ Financial Group,[50] which has roughly US$1.7 trillion in assets;[49] the world's largest postal savings system; and the largest holder of personal savings, Japan Post, holding personal savings valued at around US$3.3 trillion. It is home to the world's second largest stock exchange, the Tokyo Stock Exchange, with a market capitalization of over 549.7 trillion Yen as of December 2006.[51] It is also home to some of the largest financial services companies, business groups and banks. For instance several large keiretsus (business groups) and multinational companies such as Sony, Sumitomo, Mitsubishi and Toyota own billion- and trillion-dollar operating banks, investment groups and/or financial services such as Sumitomo Bank, Fuji Bank, Mitsubishi Bank, Toyota Financial Services and Sony Financial Holdings.

From the 1960s to the 1980s, overall real economic growth has been called a "miracle": a 10% average in the 1960s, a 5% average in the 1970s and a 4% average in the 1980s.[52] Growth slowed markedly in the 1990s, largely because of the after-effects of over-investment during the late 1980s and domestic policies intended to wring speculative excesses from the stock and real estate markets. Government efforts to revive economic growth met with little success and were further hampered in 2000 to 2001 by the deceleration of the global economy.[46] However, the economy showed strong signs of recovery after 2005. 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.[53]

Because only about 15% of Japan's land is suitable for cultivation,[54] a system of terrace farming is used to build in small areas. This results in one of the world's highest levels of crop yields per unit area. However, Japan's small agricultural sector is also highly subsidized and protected. Japan must import about 50%[55] of its requirements of grain and fodder crops other than rice, and it relies on imports for most of its supply of meat. In fishing, Japan is ranked second in the world behind China in tonnage of fish caught. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch.[46] Japan relies on foreign countries for almost all oil and food.

Transportation in Japan is highly developed. As of 2004, there are 1,177,278 km (731,683 miles) of paved roadways, 173 airports, and 23,577 km (14,653 miles) of railways.[46] Air transport is mostly operated by All Nippon Airways (ANA) and Japan Airlines (JAL). Railways are operated by Japan Railways Group among others. There are extensive international flights from many cities and countries to and from Japan.

Japan's main export partners are the United States 22.9%, China 13.4%, South Korea 7.8%, Taiwan 7.3% and Hong Kong 6.1% (for 2005). Japan's main exports are transport equipment, motor vehicles, electronics, electrical machinery and chemicals.[46] With very limited natural resources to sustain economic development, Japan depends on other nations for most of its raw materials; thus it imports a wide variety of goods. Its main import partners are China 21%, U.S. 12.7%, Saudi Arabia 5.5%, UAE 4.9%, Australia 4.7%, South Korea 4.7% and Indonesia 4% (for 2005). Japan's main imports are machinery and equipment, fossil fuels, foodstuffs (in particular beef), chemicals, textiles and raw materials for its industries. Overall, Japan's largest trading partner is China.[56]