Finance Ministers on the Global Economic Outlook, Japanese Economy - Paul Krugman (2002)

In the three decades following 1960, Japan ignored defense spending in favor of economic growth, thus allowing for a rapid economic growth referred to as the Japanese post-war economic miracle. By the guidance of Ministry of Economy, Trade and Industry, with average growth rates of 10% in the 1960s, 5% in the 1970s, and 4% in the 1980s, Japan was able to establish and maintain itself as the world's second largest economy from 1978 until 2010, when it was supplanted by the People's Republic of China. By 1990, income per capital in Japan equalled or surpassed that in most countries in the West. However, in the second half of the 1980s, rising stock and real estate prices caused the Japanese economy to overheat in what was later to be known as the Japanese asset price bubble caused by the policy of low interest rate by Bank of Japan. The economic bubble came to an abrupt end as the Tokyo Stock Exchange crashed in 1990--92 and real estate prices peaked in 1991. Growth in Japan throughout the 1990s at 1.5% was slower than growth in other major developed economies, giving rise to the term Lost Decade. Nonetheless, GDP per capita growth from 2001-2010 has still managed to outpace Europe and the United States. But Japan public debt remains a daunting task for the Japanese government due to excessive borrowing, social welfare spending with an aging society and lack of economic/industrial growth in recent days to contribute to the tax revenue. Japan had recently embraced the new strategy of economic growth with such goals to be achieved in 2020 as expected. The modern ICT industry has generated one of the major outputs to the Japanese economy. Japan is the second largest music market in the world (for more, see Japan Hot 100). With fewer children in the aging Japan, Japanese Anime industry is facing growing Chinese competition in the targeted Chinese market. Japanese Manga industry enjoys popularity in most of the Asian markets. A mountainous, volcanic island country, Japan has inadequate natural resources to support its growing economy and large population, and therefore exports goods in which it has a comparative advantage such as engineering-oriented, Research and Development-led industrial products in exchange for the import of raw materials and petroleum. Japan is among the top-three importers for agricultural products in the world next to the European Union and United States in total volume for covering of its own domestic agricultural consumption. Japan is the world's largest single national importer of fish and fishery products. Tokyo Metropolitan Central Wholesale Market is the largest wholesale market for primary products in Japan, including the renowned Tsukiji fish market. Japanese whaling, ostensibly for research purposes, has been challenged as illegal under international law. Although many kinds of minerals were extracted throughout the country, most mineral resources had to be imported in the postwar era. Local deposits of metal-bearing ores were difficult to process because they were low grade. The nation's large and varied forest resources, which covered 70 percent of the country in the late 1980s, were not utilized extensively. Because of political decisions on local, prefectural, and national levels, Japan decided not to exploit its forest resources for economic gain. Domestic sources only supplied between 25 and 30 percent of the nation's timber needs. Agriculture and fishing were the best developed resources, but only through years of painstaking investment and toil. The nation therefore built up the manufacturing and processing industries to convert raw materials imported from abroad. This strategy of economic development necessitated the establishment of a strong economic infrastructure to provide the needed energy, transportation, communications, and technological know-how. Deposits of gold, magnesium, and silver meet current industrial demands, but Japan is dependent on foreign sources for many of the minerals essential to modern industry. Iron ore, copper, bauxite, and alumina must be imported, as well as many forest products. http://en.wikipedia.org/wiki/Japan_economy Image By Prolineserver (Own work) [GFDL 1.2 (http://www.gnu.org/licenses/old-licenses/fdl-1.2.html)], via Wikimedia Commons