Japan: Agriculture, Manufacturing, and Trade Services

This document provides an overview of the agriculture, manufacturing, and trade services sectors in Japan. It discusses the country's economy, labor market analysis, types of unemployment, government measures to achieve full employment, production output performance analysis, and price level analysis. The document also explores the causes of inflation in Japan and the government's measures to achieve stable prices.

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Japan
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Introduction
Agriculture with the value-added component as a percentage of GDP in Japan was
recorded at 1.16% in 2016, and this is as per World Bank’s development indicators that were
compiled from reliable recognized sources (Trading Economics, 2019). Agriculture, in this case,
entails forestry, hunting, fishing as well as farming which includes both crop and livestock
production.
Manufacturing as a percentage of GDP stood at 21% in 2016 based on development
index by the World Bank (Trading Economics, 2019). Manufacture in this context referred to
industries of ISIC divisions 15-37.
The trade services as a percentage of Japan’s GDP in 2016 was reported at 7.4% based on
the World Bank’s report of development indicators.
Japan has been ranked as the fourth-richest economy in the world and shipped more than
US$738 billion worth of merchandise across the globe in 2018. It is using the population of
Japan that is estimated at 126 million people, its total $738 billion from exports in 2018 means
that every individual is allocated approximately $5900 in the East Asian island nation. Vehicles
top the list of Japan’s products exported as they account for US$154.1 billion which is 20.9 of
the gross exports, machinery as the second in the list account for $148 billion representing 20.1%
of total exports, electrical machinery and equipment $109 billion representing 14.8%, optical,
technical and medical apparatus $41.3 billion representing 5.6% and lastly iron and steel
contributing $29.9 billion presenting 4.1% of gross exports.
List of importing countries based on Japan's percentage of gross exports. China tops the
list with US$ 144 billion representing 19.5% of total exports, the United States with $140 billion
accounting for 19% of gross exports, South Korea with $52.5 billion representing 7.1%, Taiwan

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accounting for $42.4 representing 5.7% and lastly Hong Kong accounting for $34.7 billion
representing 4.7%.
Japan was ranked as the third largest economy following a remarkable growth shortly
after world war two. However, in recent years, its economy has been declining due to the slump
of the world economy as well as due to natural catastrophes such as earthquakes and tsunami that
took place in 2011. Since 2011, Japan’s growth has been feeble.
Labor market analysis

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Based on the data from this graph it is evident that there was a falling trend of
unemployment from 2008-2018.Also, there was another falling trend of unemployment from
2015-2016 where the rate of unemployment was 0.5% and was brought down to -0.1%.
However, unemployment rose to 5.5% in 2009.
Definition
A mismatch of skills and talents between the unemployed and the number of existing jobs
is referred to as structural unemployment. In most cases, structural unemployment arises due to
changes in the economy for instance deindustrialization making it hard for the unemployed to
find work in emerging industries due to different skill specifications.
Types of unemployment
Frictional unemployment
For Japan, the frictional unemployment in the labor market is not prioritized as a primary
concern because the new graduates fresh from campuses seeking job opportunities as the
government provides simultaneous employment opportunities for fresh graduates.
Structural unemployment
Structural unemployment is common in Japan due to sophisticated and advanced technology. As
one of the countries topping the list of countries with top technology, Japan produces massive
quantities of machines and robots. Thus, a large share of industrial production and some sections
of service sectors employ machines to replace human capital.
Cyclical unemployment
Although Japan is ranked as the third largest economy in the world, Japan at times
experiences recession arising from some forms of global crisis and also due to natural
catastrophes, for instance, the tsunami. In such hard times, people end up being unemployed as

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employers have to reduce the number in their workforce since they are unable to pay for higher
wages.
Government’s measure to achieve full employment
In 2004, Japan was ranked as the second largest economy. However, following the global
financial crisis, there was a slump in the growth of the exports which play a vital role in Japan’s
economy and led to the country falling into recession. As a result, manufacturing companies
were forced to cut off jobs. The government in a bid to restore sanity in the labor market offered
on-job training courses to employment seekers particularly to those in the tertiary institutions and
colleges. The disruption caused by massive tsunami leads to employees being dismissed from
their jobs translating to increase in levels of unemployment. However, following the disaster, the
labor ministry convened several conferences to promote literacy of employment support and
creation of employment opportunities for the victims of the catastrophe. Also, temporary job
opportunities are crafted in sectors such as medical services, water supply and in the
reconstruction of some of the public amenities.
Production Output Performance Analysis
Real GDP
Definition of real GDP
The Real GDP is one of the microeconomic tools used in evaluating the agglomerate of market
value of finished commodities produced by a nation within a specified time. It is also used to
indicate the level of production levels and the size of the economy.

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The graph displays the real GDP from 2008 to 2018. It is evident that from 2011 to 2012,
real GDP remained fairly stable and increased from $ 6157 to $6203.It is apparent that from
2008 to 2011 that there was a tremendous increase in real GDP. From 2008-2011 onwards, real
GDP moved from $5037 to $6157.However, from 2012 to 2014, there was a drastic decrease of
GDP from $6203 to $4840, and this mainly arose from the slowdown with regards to the global
economy as well as the tsunami and the earthquake that took effect in 2011. In 2014, positive
results were not reported with regards to the market value of finished products that were
produced in Japan. This translated to the economy’s level of production in Japan going low.
The real GDP annual growth rate of Japan
Definition
The real gross domestic product growth rate evaluates a country’s total domestic product
as it varies or grows annually. Real gross domestic product incorporates the impacts of inflation
and plays a vital part in the GDP of the economy.

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Based on the above data, the growth rate of Japan’s real GDP as from 2008 to 2018, it is
evident that the growth rate of GDP over the past few years has not been stable and records a
decline coupled by a rise in growth rate subsequently. However, from 2016 to 2018, the GDP
growth rate was roughly steady in the same period. It is after 2009 that growth rate rose from a
negative 9% to 4.5% in 2009. This can be explained better by private consumption that may have
snowballed forcing the GDP growth rate to decline than anticipated. Japan’s economy seemed to
be recovering in 2010 as the GDP growth rate surged across the year to 2% at the end of the year
later on decreasing to hit the -0.5%. In economics, such a phenomenon is knowns as a trough and
happens whenever the country is experiencing a downturn. However, the GDP growth rate was
recovered soon as depicted by the graph and Japan began experiencing a high rate of inflation.
Real GDP per capita in Japan
Definition
The real GDP per capita evaluates the total economic product of a nation divided by the
gross population and inflation. It is an essential tool of comparing countries over a particular
period as it reveals the relative performance of the economies under scrutiny.

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Based on the data of the above graph, it reveals real GDP per capita of Japan from 2008-
2018. It is apparent that the GDP per capita from 2012 onwards there is a surge indicating that it
is not constant; Unfortunately, deflation sets in 2009. The GDP per capita as from 2010
increased from $44507 to $45276.As from 2011 to 2014, the real GDP per Capita recorded a
tremendous performance and rose on an annual basis as the Real GDP per Capita moved from
$44538 to 46484. It is from this observation that it can be deduced that there is high inflation in
Japan’s economy.
Measures adopted by Japan’s government to attain production output performance
The government of Japan pursued a set of interventions to help fight inflation that has
sought refuge in Japan for more than two decades (McBride & Xu, 2018). The three-pronged
approach that was dubbed as Abenomics by Shinzo Abe, Japan’s premier aims to integrate fiscal
growth, monetary easing, and structural reform. Its first objective is to boost domestic demand
and growth of gross domestic product while increasing inflation to more than 2 percent (McBride
& Xu, 2018). The structural changes by Abe’s government seek to improve Japan’s prospects by
intensifying competition, restructuring labor markets and expanding commercial partnerships.

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Abenomics is a group of monetary and fiscal policies that are aggressive coupled with structural
changes directed toward pulling Japan out of the deflationary slump that has invaded Japan for
many decades. In 2013, a fiscal stimulus package was introduced as an economic recovery
measure amounting to more than 20 trillion yen where 10.3 trillion was allocated for direct
government spending (McBride & Xu, 2018).
Price level analysis
The graph displays data from 2008-2018.As per the graph, it is clear that there is general
deflation as well as rate of inflation. The rate of inflation rose in between 2009-2015 but after
2008, the figures deflated reaching a trough in 2009 recording a deflation rate of -2.5%. Inflation
soon found its way up and reached 0% in 2013 and crept back to -2.5 % in 2014.
Definition of inflation
Inflation is a general increase in the prices of commodities across the economy (Riley,
2018). Inflation can arise from the aggregate demand and supply sector of the economy. Internal
and external events are also responsible for inflation.
Demand-pull inflation

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Demand-pull inflation arises whenever the aggregate demand is expanding at an alarming
rate translating to pressure on the limited resources and a favorable product vacuum. Producers
always take advantage of excess demand as they can hike prices and attain huge profit margins
(Riley, 2018). Demand-pull inflation only becomes a threat and a concern for the economy when
a nation experiences a boom and the GDP proliferating than the anticipated long-run growth of
real GDP (Economics Help, 2017). Demand-pull inflation is a possible phenomenon whenever
there is total employment of resources, and short-term total supply is inelastic.
Wage push inflation
A rise in wage prices is a constant cause of inflation. The impact of this kind of inflation
is a combination of both the demand and cost-push inflation (Riley, 2018).Wage increments
would raise the cost of production for firms, and the consumers would be charged higher prices.
It benefits the employees as it gives them a higher disposable income which leads to increased
consumption raising aggregate demand.
Imported inflation
With this kind of inflation, it impacts on the exchange rate making imports expensive.
Thus, the prices increase as they are affected primarily by the exchange rate (Riley, 2018).
Alternatively, depreciation may affect exports making them competitive which in turn raises the
aggregate demand.
Causes of inflation in Japan
It is important to note that Japan has been experiencing spontaneous deflation for many
decades. The primary reasons for deflation being reduction in the supply of money, a boom in
the supply of goods, and a decline in demand for commodities (UK Essays, 2018). Two primary
types of deflation are benign and malign deflation. With benign deflation, it arises due to an

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increase in aggregate supply and productive efficiency that translates to a reduction in the
marginal cost of production. Malign deflation arises due to the absence of total demand and has
far-reaching consequences on economic activities, policies, planning by businesses and
bargaining with regards to wages (Riley, 2018). Japan seems to be experiencing malign deflation
arising from declining growth rate trend and the presence of a flexible wage system. In the past
two decades, Japan’s population has aged dramatically, and this has resulted in a decline in the
labor force making the amount of money spent on purchasing goods to decline.
Government’s measure to achieve stable prices
A close look at the impacts of inflation from a service perspective, mainly taking note of
services being offered to be labor intensive, a flexible wage system and low wages would
translate to a decline in the prices of commodities. However, Japan through the central bank
responds to the impacts of deflation through implementing particular innovative policies
(Stiglitz, 2016). For instance, with policies such as the 0% interest rate, the government is
optimistic about keeping interest rate, expansion of balance sheet and quantitative easing at bay.
It is imperative to fathom that the above-stated policies though effective in establishing financial
foundation, they have not been entirely prosperous in curbing the underlying challenge
experienced in Japan of a declining growth trend. Thus, the gap between supply and demand is
too broad. The governor of the Bank of Japan had the monetary base of Japan increased by 90%
between 1997-2010, and money supply was also increased by 30% (UK Essays, 2018). This was
possible through quantitative easing but was not substantial to overcome the deflation and mild
inflation problem.
Conclusion

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It is evident that Japan has a strong economy based on the real GDP, growth rate of GDP
and GDP per capita. The country has also managed to keep unemployment low and currently
stands at 15%. However, cases of deflation are rampant, and Japan has been suffering from this
phenomenon for many decades. The government has tried using some policies to push in
inflation though not for long. The report carefully analyzed all aspects of Japan’s economy from
GDP, unemployment to inflation.

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References
Economics Help. (2017, June 7). Causes of inflation. Retrieved from Economics help:
https://www.economicshelp.org/macroeconomics/inflation/causes-inflation/
McBride, J., & Xu, B. (2018, March 23). Abenomics and the Japanese Economy. Retrieved from
Council on foreign relations: https://www.cfr.org/backgrounder/abenomics-and-japanese-
economy
Riley, G. (2018). Inflation - Main Causes of Inflation. Retrieved from tutor2u:
https://www.tutor2u.net/economics/reference/inflation-causes-of-inflation
Stiglitz, J. (2016, September 15). A better economic plan for Japan. Retrieved from The
Guardian: https://www.theguardian.com/business/2016/sep/15/a-better-economic-plan-
for-japan
Trading Economics. (2019). Japan - Agriculture, value added (% of GDP). Retrieved from
Trading Economics: https://tradingeconomics.com/japan/agriculture-value-added-
percent-of-gdp-wb-data.html
Trading Economics. (2019). Japan - Manufacturing, value added (% of GDP). Retrieved from
Trading Economics: https://tradingeconomics.com/japan/manufacturing-value-added-
percent-of-gdp-wb-data.html
UK Essays. (2018, November). Deflation and inflation trends in Japan. Retrieved from UK
essays: https://www.ukessays.com/essays/economics/deflation-and-inflation-trends-in-
japan-economics-essay.php

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