Introduction
Japan is among the most developed countries in the Asian continent. It has an unregulated trade and is a member of the two major global governance clubs, namely the G7 and G20. The country’s main industries are manufacturing, agriculture, fishing, and tourism. It lies off the eastern coast of Asia, consisting of approximately 7000 islands (Bart 54). It has a population of above 120 million people, making it the 10th most populated country worldwide (Hyomin and Takahashi 105). The country is associated with high standards of living and futuristic technology. In addition, its rich cultural diversity makes it a potential hub for different commercial activities. A breakdown of the country’s natural resource endowment, cultural business customs, and government involvement in trade form the basis of discussion for this paper.
Natural Resource Endowment, GDP, Exchange Rate, and Inflation Rates in Dollar Value
Japan is predominantly known as the biggest importer of oil, coal, and natural gas. For over a decade, the country has been importing fossil fuels due to the closure of the nuclear reactors after it experienced a series of Tsunamis and earthquakes in 2011(Hyomin and Takahashi). Although coal is extracted at Hokkaido and Kyushu, its quality is inferior and less competitive in the global market. Other mineral resources such as natural gas, copper, gold, silver, manganese, zinc, and tin are exported but in very small quantities (Bart 57). Concurrently, Japan exports non-metals like antimony, graphite, and sulfur.
In agriculture, crop farming dominates all other economic activities in the country. Marginalized households range between three to four million (Selden 306), leading to insufficient arable land in the country. Therefore, the few productive portions available are maximized for more profits. The Reform Package introduced six years ago aims to solve the problem of land deficiency through the consolidation of farmlands. For 55 years now, Japan has recorded a margin increase of approximately 5000 billion Japanese Yen from exports (Hyomin and Takahashi). Exporting technology products has boosted the country’s economy since 1960, with goods ranging from automobiles, computers, and aerospace, to electrical machinery.
On average, Japan’s Gross Domestic Product improves four times a year, and it is estimated to increase to $ 6000 Billion by 2023. In 2020, the country’s GDP was approximately five trillion dollars, making it third in ranking worldwide. It has managed its inflation rate to below 5% since 2004 (Takahashi 110). In 2021, the consumer price inflation rate increased by 0.3% in two successive months, with February having the highest inflation rate since March 2020 (Selden 310), as shown in the table below.
For almost 50 years now, Japan has utilized a floating exchange rate system. Its current currency is the yen which buys US Dollars at 125.5, an increase of almost $ 15 within a year (Bart 57). Japan has one of the highest standards of living globally, with a quality environment, safety, and education. However, it is constrained by poor social coherence, life satisfaction, and public participation.
Political and Legal Environment
Japan is among the countries with highly developed economies across the globe. However, the COVID-19 pandemic recessed its economy until last year, when it recorded a 2.7% increase in the economy (Bart 59). The pandemic retraced the economy by more than 15% of its GDP in one year. The main predisposing factors for this drawdown were concessional loans, bail schemes for small and medium-sized enterprises, and employment adjustment subsidies. In early 2022, there was an estimated GDP increase of 3.5% (Bart 60). According to IMF statistics, the country is estimated to experience a 3.8% deficit in late 2022. However, in 2021 and 2022, IMF projected a positive change in the inflation rate of 0.6% and 0.8%, respectively (Bart 62). The country is currently consolidating its budget to control debt levels and lower the unemployment rate.
Doing business with Japan demands a wide scope of legal actions and compliance with the laws and regulations. Foreign investment is controlled by the Foreign Exchange and Foreign Trade Act enforced by the Ministry of Trade and Industry. Foreign investment in some economic sectors has experienced several trade restrictions and prohibitions. Investment in sectors such as leather making, fisheries, forestry, agriculture, nuclear energy, petroleum products, sea transport, air transport, and defense must be approved by the Bank of Japan five months in advance. Consequently, investments meant to harm the public, interfere with the safety of its citizens, or affect the operation of the economy are rejected by the government. The importation of narcotics, fake currencies, military weapons, explosives, and pornographic items is prohibited in the country. The foreign investors are not restricted from engaging in real estate in Japan but must report to the ministry of finance.
Japan’s economy has experienced a change in its tax system since the World War II as a result of economic developments. Its taxes are paid on income, properties, and consumption at the municipal, prefectural and national levels. Furthermore, the tax rates are based on the number of taxable incomes citizens earn. A consumption tax of approximately 10% is imposed on imported goods or those manufactured within Japan (Hyomin and Takahashi 115). This helps to regulate the consumption of tobacco products and liquor.
Government Intervention in Trade
Japan has enforced several trade barriers, both tariff and non-tariff, to foreign trade. The country experiences non-tariff barriers in areas such as cartels and licensing powers. In addition, the country records one of the lowest tariff rates across the globe. Averagely, Japan’s tariffs for non-agricultural products are less than 3% (Bart 62). Its tariff rates were 2.30% in 2017, 2.49% in 2018, and 3.63% in 2019, indicating a decreasing trend in tax rates over the years (Hyomin and Takahashi 115). The government signed a deal with the Information Technology Agreement, which targeted abolishing tariffs on information technology products. Similarly, Japan imposes quotas on certain imported products such as chemical weapons, firearms, grains, and silk.
Cultural business customs in Japan
Japan has a rare quality culture determined by age, dress code, relationships, and modesty. Compared to Australia, Japan does business in a friendly manner and has developed relationships through informal social gatherings. Japanese have a conservative business dress code that is observed by all organizations. They exchange business cards (meishi) following a clearly defined protocol during opening meetings to identify them by their titles or ranks. Virtues of modesty and humility are valued and considered crucial qualities when addressing clients. Lastly, in Japan, respect varies directly with age and status, ensuring good customer service and relations.
Conclusion
The rapid economic development in Japan makes it a powerhouse in commercial activities. The high population exerts pressure on the available arable land, prompting the use of technology in agriculture. The country is dominated by the manufacturing, agriculture, fishing, and tourism industries and only imports a few energy products such as coal, natural gas, and oil. Additionally, it exports a small portion of natural resources as well as non-metals. This analysis can be used by economics students in studying economic trends and development in Japan.
Works cited
Selden, Mark. “9. China, Japan, and the Regional Political Economy of East Asia, 1945-1995.” Network Power. Cornell University Press, 2018, pp. 306-340. Web.
Kerremans, Bart. “US trade policy: Japan vs. China, from politically economic to existential.” A Geo-Economic Turn in Trade Policy. Palgrave Macmillan, Cham, 2022, pp. 55-72. Web.
Jung, Hyomin, and Motoki Takahashi. “Quest for economic development and poverty reduction: Dual features of Japan’s aid in the post-cold war era and after.” International Development Cooperation of Japan and South Korea. Palgrave Macmillan, Singapore, 20221, pp. 05-128. Web.