The economy of Japan is a highly developed free-market economy. It is the third largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). It is the world’s second-largest developed economy. Japan is also a member of both the G7 and G20.
According to the World Bank, the country’s per capita GDP (PPP) was at $40,193 (2020). Due to a volatile currency exchange rate, Japan’s GDP as measured in dollars fluctuates sharply. Accounting for these fluctuations through the use of the Atlas method, Japan is estimated to have a GDP per capita around $39,048.
The Japanese economy is forecast by the Quarterly Tankan survey of business sentiment conducted by the Bank of Japan. The Nikkei 225 presents the monthly report of top blue-chip equities on the Japan Exchange Group, which is the world’s fifth-largest stock exchange by market capitalization.
In 2018, Japan was the world’s fourth-largest importer and the fourth-largest exporter. It has the world’s second-largest foreign-exchange reserves, worth $1.4 trillion. It ranks 29th on Ease of doing business index, 5th on Global Competitiveness Report, and first in the world in the Economic Complexity Index. Japan is also the world’s fourth-largest consumer market.
Japan is the world’s second-largest automobile manufacturing country. It is often ranked among the world’s most innovative countries, leading several measures of global patent filings. Facing increasing competition from China and South Korea, manufacturing in Japan currently focuses primarily on high-tech and precision goods, such as integrated circuits, hybrid vehicles, and robotics. Besides the Kantō region, the Kansai region is one of the leading industrial clusters and manufacturing centers for the Japanese economy.
Japan is the world’s largest creditor nation. Japan generally runs an annual trade surplus and has a considerable net international investment surplus. Japan has the third-largest financial assets in the world, valued at $12 trillion, or 8.6% of the global GDP total as of 2020. As of 2017, 51 of the Fortune Global 500 companies are based in Japan, down from 62 in 2013. The country is the third largest in the world by total wealth. As of 2021, Japan has significantly higher levels of public debt than any other developed nation, standing at 266% of GDP, with 45% of this debt is held by the Bank of Japan. The Japanese economy faces considerable challenges posed by an aging and declining population, which peaked at 128 million in 2010 and has fallen to 125.5 million as of 2022. Projections show the population will continue to fall, potentially to below 100 million by the middle of the 21st century.
There are 3.8 million Japanese SMEs that account for 99.7% of total companies and employ 60% of all workers in the country. Their main sectors include manufacturing, trade, services, and retail.