Japan

Politics:

• Analysis

  Japan politics: The government turns to free trade as a source of growth

  The government appears determined to rid Japan of its insular image and open the doors to major free-trade agreements (FTAs). The announcement by the prime minister, Shinzo Abe, on March 15th that Japan would join negotiations to widen a trans-Pacific trade area forms part of the government's wider plans to put the country on to a sustainable trajectory of economic growth-something that has eluded Japan for two decades now. The government is also pursuing a trilateral free-trade agreement with China and South Korea, in defiance of historical rivalries with those countries.

  The Trans-Pacific Partnership (TPP, a free-trade bloc originally consisting of Brunei, Singapore, New Zealand and Chile, which a number of other countries, including the US, Australia, Malaysia, Vietnam and Peru, are currently negotiating to join) will be unlike any of the 13 free-trade deals that Japan has struck since the 2000s. The 2008 Comprehensive Economic Partnership Agreement with the Association of South-East Asian Nations (ASEAN) is the biggest so far in Japan's portfolio of FTAs. There is none with any of Japan's major trading partners outside ASEAN. The TPP has the potential to change Japan from a free-trade laggard to a front-runner, given that it aims to be a high-level arrangement for deep and wide tariff elimination. Japan will be the 12th country to join the TPP talks, and its important regional trading partners, China and South Korea, may follow suit.

  Japan has been tepid about such sweeping trade deals because of its protectionist instincts toward agriculture. The country's farm lobby has long enjoyed much influence among politicians, including many members of the ruling Liberal Democratic Party (LDP). According to government data, most of the 940 items currently exempt from tariff elimination under existing FTAS are agricultural products. Japanese producers of these protected goods are shielded by high import duties that range from 38.5% on beef to 778% on rice.

  Changing attitudes

  However, Japan's attitude toward the farm sector is changing as it prepares for involvement in the TPP. The LDP leadership, Mr Abe included, is even expressing a willingness to offer concessions on the five "sanctuary" markets for rice, wheat, beef and pork, dairy goods, and sugar if that is what is required to secure Japan's involvement in the TPP. The timing is significant, as the LDP faces a crucial election to the House of Councillors (the upper house of parliament) in July, when Japan is expected to join the TPP negotiations. The LDP must win the poll if it is to gain control of both legislative chambers and push through its ambitious political and economic policy agendas, which will change the country in the long term, for better or worse.

  Financial markets have responded positively to the government's economic agenda, even before the implementation of any of the LDP's pledged policy changes under its three-pronged strategy for economic revival, which consists of unlimited monetary easing, aggressive fiscal stimulus and broad structural reform. Between December 2012 and mid-March 2013 Japan's main stockmarket index, the Nikkei 225, surged by 20%, while speculation about the likelihood of a prolonged period of ultra-loose monetary policy has seen the yen fall in value by more than 10% against the US dollar. The weakness of the yen is beneficial to Japan's exporters, and could help to push up consumer prices. The budget for fiscal year 2013/14 (April-March) is unlikely to be passed in parliament until May. In the meantime, Haruhiko Kuroda, the new governor of the Bank of Japan (BOJ, the central bank), who was hand-picked by Mr Abe to implement monetary easing and achieve the central bank's stated 2% inflation target, has yet to have his appointment confirmed in parliament (he is due to start his five-year term on April 9th).

  A piece of the growth puzzle

  Japan's involvement in the TPP negotiations is the first concrete economic measure under Mr Abe's administration, and forms a crucial part of the prime minister's plans to revitalise the economy. Following Mr Abe's announcement, the minister for economic and fiscal policy, Akira Amari, was quick to point out that the TPP would add ¥3.2trn (US$34bn), or 0.6 percentage points, to Japan's annual real GDP over the first ten years, comprising ¥2.6trn in increased exports, ¥3trn in higher private consumption and ¥500bn (US$5.3bn) in greater private investment, minus ¥2.9trn owing to the replacement by imports of (mainly agricultural) domestic output. The positive figures will grow if the added benefits of the three-way deal with China and South Korea are included.

  The arithmetic sounds right for Mr Abe's stated goal of 2% annual real GDP growth. Much of what went wrong during Japan's struggle for economic growth in the past two decades is explained by the decline in domestic demand, which depressed growth in capital spending, wages and consumption in a vicious deflationary cycle. Mr Abe's idea for revitalising demand boils down to a combination of fiscal spending on building infrastructure and private spending on the construction of factories, together with purchases of goods with cheap money pumped into the economy. There is a caveat, as the planned increase in the public side of demand will make Japan's long-term fiscal challenge even more difficult to deal with. The Ministry of Finance forecasts that Japan's fiscal debt owed in government bonds alone will grow from ¥732trn at the end of March 2014 to more than ¥1,000trn ten years later.

  Meanwhile, private demand will encounter downward pressure from the weakness of the yen, which raises prices for imports of energy, food and everything else that Japan buys from abroad. Furthermore, if domestic companies build factories and create jobs abroad instead of at home in search of the overseas demand made accessible by the TPP and other trade deals, the desired boost to private demand growth at home will become harder to achieve. The odds are high this will be the case. Japan's mature economy and ageing population is not fertile ground for demand growth in the eyes of domestic and foreign companies. Moreover, the country's rigid immigration policy eliminates the potential for added demand from an immigrant population.

  Finding the right mix

  It will not be easy to strike the right balance between trade liberalisation and demand revitalisation as the government seeks a long-term solution to Japan's economic growth equation. Too much or too little of one or the other could derail the efforts to revive the economy that are only just beginning. Deregulation will be crucial to solving the problem. Mr Abe's government and its numerous councils of experts will need to act quickly before the time runs out and the country slips back into a deflationary trap.

  March 22, 2013

• Background

  Japan: Key figures

  Yukio Hatoyama

  Like many other leading Japanese politicians, Mr Hatoyama comes from a family with strong links to government: he is the grandson of a past prime minister, Ichiro Hatoyama, as well as being the son of a former foreign minister, Iichiro Hatoyama. Following the fall of his predecessor, Ichiro Ozawa, over a fundraising scandal, he was elected to lead the main opposition Democratic Party of Japan (DPJ) in May 2009, thus returning to a post that he had previously held between 1999 and 2002. He then led the DPJ to a historic victory over the Liberal Democratic Party (LDP) in the House of Representatives (the lower house of parliament) on August 30th 2009. Mr Hatoyama became prime minister in mid-September 2009 with high expectations, but since then his lacklustre leadership and tensions with Mr Ozawa have caused his public approval ratings to sink. If the DPJ performs poorly in the election to the House of Councillors (the upper house) in July 2010, or if public support for the ruling party continues to evaporate in the run-up to the polls, he may be forced to resign.

  Ichiro Ozawa

  Mr Ozawa had a major role in Japanese politics in the 1990s, playing a central part in triggering the brief fall from power of the LDP in 1993-94. He became the leader of the DPJ in early 2006, and led the party to victory in the 2007 upper house election. His sinking popularity amid a series of scandals relating to fundraising forced him to resign in May 2009, setting the stage for Mr Hatoyama to replace him as party head and to become the first DPJ prime minister. However, Mr Ozawa has continued to play an important role in party strategy, and his tactical skills were instrumental in securing the DPJ's victory in the lower house election in August 2009. He commands the largest faction within the DPJ, and this has made him more powerful in practice than the prime minister. Although still tainted by scandal, Mr Ozawa is likely to outlast Mr Hatoyama and may have a decisive say in choosing his successor as party leader.

  Naoto Kan

  Closer to Mr Ozawa than the prime minister, Mr Kan currently holds three cabinet posts—those of deputy prime minister, finance minister, and minister of economic and fiscal policy. He first rose to national prominence as health minister in an LDP government in the mid-1990s by exposing a scandal relating to HIV-contaminated blood that bureaucrats in his ministry had tried to cover up. As leader of the DPJ from 2002 to 2004, he helped to make the party a credible force in opposition to the LDP administration led by the enormously popular Junichiro Koizumi. In the lead-up to the 2003 general election, Mr Kan engineered a merger between his DPJ and Mr Ozawa's Liberal Party. He is one of the prime candidates to become the next prime minister if Mr Hatoyama steps down.

  Seiji Maehara

  Mr Maehara is currently minister of land, infrastructure, transport and tourism, a key portfolio in terms of its power to dole out public spending. As a youthful leader in his mid-40s, he led the DPJ from September 2005 to March 2006. However, he struggled to assert his authority over the party, reflecting both the DPJ's internal ideological divisions and his own inexperience. But he remains a major figure on the party's right wing, which advocates the revision of Article 9 of Japan's constitution (the article renounces permanently “the threat or use of force as a means of settling international disputes”). He is seen as one of the younger prime ministerial candidates who are waiting in line to succeed Mr Hatoyama.

  Sadakazu Tanigaki

  Mr Tanigaki is president of the LDP. He took over the leadership position after the party's drubbing by the DPJ in the 2009 general election. He has held a string of senior cabinet positions, including that of finance minister in Mr Koizumi's administration. Mr Tanigaki leads a small faction of the LDP, and has struggled to hold the party together as a number of senior figures have bolted to found their own parties.

  May 14, 2010

• Structure

  Japan: Political structure

  Official name

  Japan

  Form of government

  Representative democracy

  The executive

  The prime minister is chosen by a ballot of the Diet (parliament) and appoints a cabinet, the majority of whose members must also be members of parliament

  Head of state

  Emperor Akihito

  National legislature

  Bicameral Diet, comprising the 480-member House of Representatives (the lower house), which is elected every four years, and the 242-member House of Councillors (the upper house), one-half of whose members are elected every three years for six-year terms. There are 300 seats representing geographical constituencies and 180 seats filled by proportional representation in the lower house

  Legal system

  A Supreme Court, appointed by the cabinet, presides over a legal system of lesser courts divided into four arms: the High Court, district courts, family courts and summary courts

  National elections

  The last election for the lower house was held on December 16th 2012; the next poll must take place by December 2016. The next election for one-half of the seats in the upper house is due in July 2013

  National government

  The Liberal Democratic Party (LDP) regained power in the December 2012 lower house election, winning 294 seats; its coalition partner, New Komeito, won 31 seats. The ruling coalition has a two-thirds majority in the lower house

  Main political organisations

  Government: coalition of the LDP and New Komeito

  Opposition: Democratic Party of Japan; Japan Restoration Party; Your Party; Japan Future Party; Japan Communist Party; Social Democratic Party

  Main members of the cabinet

  Prime minister: Shinzo Abe

  Deputy prime minister: Taro Aso

  Chief cabinet secretary: Yoshihide Suga

  Key ministers

  Agriculture, forestry & fisheries: Yoshimasa Hayashi

  Defence: Itsunori Onodera

  Economy, trade & industry: Toshimitsu Motegi

  Education, culture, sports, science & technology: Hakubun Shimomura

  Environment: Nobutera Ishihara

  Finance: Taro Aso

  Foreign affairs: Fumio Kishida

  Health, labour & welfare: Norihisa Tamura

  Internal affairs & communications: Yoshitaka Shindo

  Justice: Sadakazu Tanigaki

  Land, infrastructure & transport: Akihiro Ohta

  Reconstruction: Takumi Nemoto

  State ministers

  Consumer affairs & gender equality: Masako Mori

  Disaster management: Keiji Furuya

  Economic & fiscal policy: Akira Amari

  Regulatory reform: Tomomi Inada

  Science & technology policy: Ichita Yamamoto

  Central bank governor

  Masaaki Shirakawa

  March 06, 2013

• Outlook

  Japan: Key developments

  Outlook for 2013-17

  • The new Liberal Democratic Party (LDP) government is likely to serve a full four-year term, but Shinzo Abe's tenure as prime minister depends on his party winning the upper house election in July.
  • If the LDP proves itself capable of managing economic policy competently and wins the upper house poll, Mr Abe will have a strong mandate to press ahead with the more hawkish elements of his agenda.
  • The political environment will be volatile, with further splits and realignments among the opposition parties likely to occur ahead of the July election.
  • Although a diplomatic solution to Japan's dispute with China over the Senkaku islands (known as Diaoyu in China) may be possible eventually, the risk of a military clash will increase in the absence of a compromise.
  • Monetary policy is expected to be loosened even more, once the government appoints a new governor and two new deputy governors to the Bank of Japan (BOJ, the central bank) in March.
  • The Economist Intelligence Unit forecasts GDP growth of 0.9% in 2013 and 1.9% in 2014, but this masks a slowdown in the forecast quarterly rate of growth in 2014. Real GDP is forecast to grow by 1.3% a year in 2013-17.
  • Consumer price inflation will return during the course of 2013, and will accelerate in 2014-15 as the yen weakens and increases in the consumption tax rate take effect.

  Review

  • Opinion polls conducted since the LDP's election victory in December 2012 have been encouraging for Mr Abe, as voters approve of the government's focus on reviving the economy.
  • Relations between Japan and China hit a new low in early February when Japan lodged a formal complaint with China over two incidents in the East China Sea relating to the disputed Senkaku/Diaoyu islands.
  • At its policy meeting on February 13th-14th, the BOJ did not announce any further change in policy following the significant changes made at its January meeting.
  • Although the economy contracted for the third consecutive quarter in Q4 2012, the sharp rise in stock prices since the LDP's election victory suggests an improvement in business confidence.
  • The yen's dramatic depreciation has continued--it has lost 17% of its value against the US dollar in the last four and a half months, a development that has been warmly welcomed by Japanese exporters.

  March 06, 2013

Economy:

• Background

  Japan: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	126.5	Population growth	-0.2
  GDP (US$ bn; market exchange rate)	5,899b	Real GDP growth	-0.1
  GDP (US$ bn; purchasing power parity)	4,400b	Real domestic demand growth	-0.2
  GDP per head (US$; market exchange rate)	46,643	Inflation	-0.2
  GDP per head (US$; purchasing power parity)	34,789	Current-account balance (% of GDP)	4.9
  Exchange rate (av) ¥:US$	79.8b	FDI inflows (% of GDP)	0.5
  a Economist Intelligence Unit estimates. b Actual.

  Download the numbers in Excel

  Background: Japan's post-war economic growth model achieved extraordinarily impressive results in the 1950s and 1960s, and a period of consolidation and maturation followed in the 1970s and 1980s. But Japan's economic miracle ended in the late 1980s, when a huge asset price bubble burst, leading to Japan's "lost decade" of financial distress and economic stagnation in the 1990s. The population is now shrinking and the economy has found it hard to shake off persistent deflationary pressures, while the fiscal position continues to deteriorate at an alarming rate.

  Political structure: Legislative and executive powers are vested in the Diet (parliament), which consists of the House of Councillors (the upper house) and the more powerful House of Representatives (the lower house). The Liberal Democratic Party (LDP) won a resounding victory in the December 2012 general election, and, with its coalition partner, New Komeito, has a two-thirds majority in the lower house.

  Policy issues: Gross public debt in 2012 was 214% of nominal GDP-by far the highest ratio in the developed world. Emergency relief and reconstruction spending in the aftermath of the March 2011 earthquake and tsunami have pushed the budget further into deficit. The new LDP government is committed to increasing public spending in order to boost the economy, while the Bank of Japan (BOJ, the central bank) has signalled a move to open-ended monetary loosening to combat deflation. But it remains to be seen how far the LDP will be able to go along its new fiscal path, given the very poor state of the public finances.

  Taxation: The standard national corporate tax rate is 35%. Including local taxes, the effective standard corporate tax rate is 40.9%. The top effective personal income tax rate, including local taxes, is 50%. The consumption tax rate currently stands at 5%, but it is due to rise to 8% in April 2014 and then to 10% in October 2015.

  Foreign trade: Japan's merchandise trade deficit (on a fob-fob, balance-of-payments basis) stood at US$73.2bn in 2012, with exports of US$771bn and imports of US$844bn. The current account recorded a surplus of US$58.2bn, equivalent to 1% of GDP, in that year.

  Main exports 2012	% of total	Main imports 2012	% of total
  Transport equipment	23.5	Mineral fuels	34.1
  Non-electrical machinery	20.1	Electrical machinery	11.9
  Electrical machinery	17.9	Chemicals	8.4
  Manufactured goods	13.2	Food	8.3
  Chemicals	10.0	Manufactured goods	7.8
  Leading markets 2012	% of total	Leading suppliers 2012	% of total
  China	18.1	China	21.3
  US	17.6	EU	9.4
  EU	10.2	US	8.6
  South Korea	7.7	Australia	6.3

  Download the numbers in Excel

  Download text file (csv format)

  March 06, 2013

• Structure

  Japan: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 06, 2013

• Outlook

  Japan: Country outlook

  Japan: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: Opinion polls conducted since the Liberal Democratic Party (LDP) swept back into power in the December 2012 House of Representatives (lower house) election have been encouraging for the prime minister, Shinzo Abe, and his government. Voters approve of the government's focus on reviving the economy, especially the introduction of a supplementary budget and the adoption of a 2% inflation target. Mr Abe is well aware that his previous premiership in 2006-07 was cut short by neglecting the economy and leading his party to defeat in the July 2007 election for the House of Councillors (the upper house). This time around, he does not intend to make the same mistake, and all government policy in the next six months will be geared to winning the upper house election in July; hence, the focus on economic revival and the promulgation of what has become known as Abenomics.

  ELECTION WATCH: The LDP is likely to serve a full four-year term in government, meaning that the next lower house election is unlikely to take place before 2016. However, Mr Abe's tenure as prime minister will depend on how the ruling party performs in the July 2013 election for one-half of the seats in the upper house. Of the 121 seats at stake, 60% are elected by single and multi-member districts and 40% by proportional representation. The LDP should do well in the largely rural, single-member districts, provided it does not mishandle the Trans-Pacific Partnership (TPP, a free-trade pact) issue. However, it will face stiffer competition elsewhere, especially if the opposition parties form electoral pacts to avoid splitting their vote. The Japan Restoration Party (JRP) and Your Party are expected to make gains, while the Democratic Party of Japan (DPJ) will face another trouncing.

  INTERNATIONAL RELATIONS: Relations between Japan and China hit a new low in early February, when Japan lodged a formal complaint with China over two incidents in which Chinese vessels had locked weapons-targeting radar on Japanese military units--a helicopter on January 19th and a naval vessel on January 30th. This reflects the steady heightening of tensions over the issue of sovereignty regarding the uninhabited Senkaku/Diaoyu islands in the East China Sea, which are administered by Japan, but claimed by China. Although a diplomatic solution may prove possible eventually, the risk of a military clash over the islands will continue to increase if the two sides continue to show an unwillingness to compromise. Mr Abe will also have to manage difficult relations with South Korea, given the ongoing dispute with that country over the Takeshima islets (known as Dokdo in South Korea). More generally, Mr Abe has pledged to restore Japan's alliance with the US and to expand the role of the country's military.

  POLICY TRENDS: The government's sizeable economic stimulus package is making rapid legislative progress and should be enacted in late February, while the next governor of the Bank of Japan (BOJ, the central bank) will be announced within the next month. Mr Abe wants to raise annual nominal GDP growth to 3%-plus by spending Y200trn (US$2.7trn) on public works over the next ten years. He has said that he is also willing to consider waiving the implementation of the increase in the consumption tax rate that was approved by parliament in August 2012, should the economy fail to recover. On the monetary front, the BOJ has adopted an inflation target of 2% and will move to open-ended quantitative easing from January 2014.

  ECONOMIC GROWTH: While the latest data show that the economy contracted for the third consecutive quarter in Q4 2012, the sharp rise in stock prices since the LDP's election victory in December 2012 suggests an improvement in business confidence. Moreover, the yen's dramatic depreciation has continued--it has lost 17% of its value against the US dollar in the last four and a half months, which has been warmly welcomed by Japanese exporters. The Economist Intelligence Unit's GDP growth forecast for 2013 remains unchanged, at 0.9% in 2013, but this requires quarterly growth of 0.4% in the first quarter, speeding up to 0.7% in the following three quarters as the government's fiscal package begins to take effect. GDP growth is forecast to average 1.9% in 2014, although this masks a slowdown in the quarterly rate of growth. Japan's economy is forecast to grow by 1.3% a year on average in 2013-17. Government expenditure, investment and exports will be the main beneficiaries of fiscal stimulus, but the external trade environment is not expected to improve dramatically in 2013. Furthermore, heightened tensions between Japan and China over the disputed Senkaku islands will continue to depress bilateral trade. The underlying problems contributing to Japan's slow rate of economic expansion in recent decades will not disappear. The ageing of the population will continue; moreover, both the population as a whole and the workforce will contract steadily in the forecast period. These unfavourable demographic trends will combine with the disorderly state of the public finances to make it difficult for policymakers to engineer a self-sustaining recovery in domestic demand.

  INFLATION: Deflationary pressures have been reducing gradually over the last four years, with consumer prices falling by 1.3% in 2009, 0.7% in 2010 and 0.3% in 2011, before stabilising in 2012. There are several factors that will accelerate this trend in 2013-17. The most important of these will be even looser monetary policy, as the BOJ pursues its new inflation target of 2%. We also assume that the rises in the consumption tax rate, to 8% from April 2014 and to 10% in October 2015, will go ahead, causing rises in the level of prices. In addition, the output gap is likely to narrow, while the yen will weaken; both trends will put upward pressure on consumer prices. We forecast that consumer price inflation will re-emerge during the course of 2013 and will accelerate to 1.6% in 2015.

  EXCHANGE RATES: After five years of significant appreciation as a result of its status as a safe-haven currency, the yen will fall in value gradually in 2013-16, before stabilising in 2017. Its decline has already started: the currency has fallen in value by 17% against the US dollar since October 2012. The yen's continued depreciation, which should correct its current overvaluation, reflects further monetary loosening, as well as the forecast absence of any improvement in the current-account position during the forecast period. We now expect a greater share of the overall fall in the currency's value in the next five years to occur in 2013. The interest rate differential between Japan and the US is likely to remain negligible for the next 12-24 months, as the Federal Reserve (the US central bank) is expected to keep its funds rates at 0­0.25% until 2015, while Japan's overnight call rate will remain at 0%. Low rates in Japan will continue to encourage the carry trade (whereby investors borrow in currencies that are subject to low interest rates and lend in currencies attracting higher ones, profiting from the difference), and this too will put downward pressure on the yen. From 2016 we expect US interest rates to rise faster than those in Japan, further reducing the yen's attractiveness. After averaging Y79.8:US$1 in 2012, the yen is forecast to weaken gradually, to Y97.5:US$1 by 2016 and then to stabilise at Y96.5:US$1 in 2017.

  EXTERNAL SECTOR: Japan's traditional merchandise trade surplus has been obliterated by the March 2011 earthquake and tsunami, the strength of the yen until recently, and weak global demand. These factors have caused the trade account to swing from a surplus of US$91bn in 2010 to a deficit of US$73.2bn in 2012. The trade deficit is forecast to widen to almost US$90bn in 2013, as the depreciation of the yen will push up the import bill before benefiting export performance. Thereafter, the weakening of the yen will have a beneficial impact on Japan's trade position, with the merchandise trade deficit narrowing to US$50bn by 2017. The services account will remain in the red, mainly owing to outbound tourism, which will keep services debits high. There will be a substantial positive balance on the income account owing to Japan's large stock of overseas direct and portfolio investment. The current account will remain in surplus during the next five years, ranging from 0.6% of GDP in 2013 to 1.6% of GDP in 2015.

  March 11, 2013

• Forecast

  Japan: Country forecast summary

  Country forecast overview: Highlights

  • Despite its landslide victory in the December 2012 general election, the Liberal Democratic Party (LDP) faces a number of constraints on its ability to move ahead rapidly with the more hawkish policies on its agenda. The LDP is likely to serve a full four-year term in government, but Shinzo Abe's tenure as prime minister will depend crucially on how the LDP performs in the July election to the House of Councillors (the upper house of parliament).
  • After the upper house poll, the LDP may feel less constrained by the demands of its pacifist coalition partner, the Buddhist-backed New Komeito. The success in the recent election of new conservative parties, and notably the Japan Restoration Party (JRP), means that the LDP may have an alternative source of parliamentary support if New Komeito decides to leave the government.
  • The LDP government is committed to increasing public spending in order to boost the economy. Mr Abe wants to raise nominal GDP growth to at least 3% a year by spending ¥200trn (US$2.7trn) on public-works stimulus over the next ten years. He has also said that he may consider waiving the implementation of the increase in the consumption tax rate that was approved by parliament in August 2012, should the economy fail to recover.
  • Yielding to government pressure, the Bank of Japan (BOJ, the central bank) has committed itself to open-ended monetary loosening from January 2014. The bank has also adopted an explicit inflation target of 2%. However, some analysts argue that more could be done, and Mr Abe still has considerable leverage, as the government is due to appoint a new central bank governor and two new deputy governors in March.
  • As a result of the stimulus package announced in January and the prospect of other fiscal and monetary measures to come, the Economist Intelligence Unit forecasts that GDP will grow by 1.3% a year in 2013-17. This low rate of growth reflects underlying problems, such as unfavourable demographic trends and the disorderly state of the public finances.
  • The current-account surplus will be small by historical standards during the forecast period, at the equivalent of 1.2% of GDP on average. The merchandise trade deficit will remain large, but the external position will be supported by the large positive balance on the income account-a product of Japan's substantial stock of overseas direct and portfolio investment.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	1.9	0.9	1.9	1.5	1.0	1.1
  Consumer price inflation (av; %)	0.0	0.2	1.4	1.6	1.2	1.0
  Budget balance (% of GDP)	-9.9	-9.0	-8.2	-7.9	-7.8	-7.8
  Current-account balance (% of GDP)	1.0	0.6	1.1	1.6	1.5	1.3
  Commercial banks' prime rate (year-end; %)	1.5	1.5	1.5	1.7	2.4	2.7
  Exchange rate ¥:US$ (av)	79.8	92.7	94.5	96.3	97.5	96.5
  Exchange rate ¥:€ (av)	102.6	123.4	124.0	122.2	122.9	121.7

  Download the numbers in Excel

  Download text file (csv format)

  March 06, 2013

View detailed map

Country Briefing

Land area

377,899 sq km

Population

127.8m (2011)

Main towns

Population in millions (August 2009):

Tokyo (capital; 23 central wards): 8.8

Yokohama: 3.7

Osaka: 2.7

Nagoya: 2.3

Sapporo: 1.9

Kobe: 1.5

Kyoto: 1.5

Fukuoka: 1.5

Climate

Temperate, with the monsoon season in June, seasonal winds and typhoons in August-September, and heavy snow in December-February on the Japan Sea side

Weather in Tokyo (altitude 5.3 metres)

Hottest month, August, 29°C; coldest month, January, 7.6°C; driest month, August, 9.5 mm rainfall; wettest month, September, 319.5 mm rainfall

Language

Japanese

Measures

Mainly metric system; local measures include: 1 tsubo = 3.3 sq metres; 1 sun = 3 cm; 1 ri = 4 km; 1 kairi = 1.8 km (used for sea distances)

Currency

Yen (¥); ¥1 = 100 sen. Average exchange rates in 2011: ¥79.8:US$1; ¥111.3:EUR1

Fiscal year

April 1st-March 31st

Time

9 hours ahead of GMT

Public holidays

New Year, January 1st; Coming of Age Day, January 14th; National Foundation Day, February 11th; Vernal Equinox, March 20th; Golden Week holidays, April 29th and May 3rd-6th; Marine Day, July 15th; Respect for the Aged Day, September 16th; Autumnal Equinox, September 23rd; Sports Day, October 14th; Culture Day, November 3rd; Labour Thanksgiving, November 23rd; Emperor's Birthday, December 23rd

January 01, 2013