Saturday, May 2, 2009


Situated off the eastern edge of the Asian continent, the Japanese archipelago is bounded on the n by the Sea of Okhotsk, on the e and s by the Pacific Ocean, on the sw by the East China Sea, and on the w by the Sea of Japan. The total area of Japan is 377,835 sq km (145,883 sq mi). Comparatively, the area occupied by Japan is slightly smaller than the state of California. It extends 3,008 km (1,869 mi) ne-sw and 1,645 km (1,022 mi) se-nw and has a total coastline of 29,751 km (18,486 mi).

The five districts are Honshu, Hokkaid, Kyushu, Shikoku, and Okinawa. Each of the five districts consists of a main island of the same name and hundreds of surrounding islands.

Of the thousands of lesser islands, four are of significance: Tsushima, in the straits between Korea and Japan; Amami Oshima, of the northern Ryukyu Islands at the southern end of the Japanese archipelago; Sado Island in the Sea of Japan off central Honshu; and Awaji Island, lying between Shikoku and Honshu. Two groups of islands returned to Japan by the United States in 1968 are located some 1,300 km (800 mi) due east of the Ryukyus: the Ogasawara (Bonin) Islands, about 885 km (550 mi) south of Tokyo, and the Kazan (Volcano) Islands, directly south of the Ogasawara group.

Japan's principal island is Honshu, on which are located the capital city of Tokyo, the principal cities and plains, and the major industrial areas. This island is divided into five regions: Tohoku, from north of Kanto to Tsugaru Strait; Kanto, embracing seven prefectures in the Tokyo-Yokohama region; the Chubu, or central, region, from west of Tokyo to the Nagoya area; Kinki, including the important cities of Kyoto, Osaka, Kobe, and Nara; and Chugoku, a narrow peninsula thrusting westward from Kinki between the Sea of Japan and the Inland Sea, which lies between southern Honshu and the island of Shikoku.

The Japanese government maintains that the Habomai island group and Shikotan, lying just off Hokkaid and constituting fringe areas of the Kurils, belong to Japan and should be returned to Japanese administration. These islands and the Kuril Islands are occupied by Russia, whose claims are not formally recognized by Japan.

Japan's capital city, Tokyo, is located on the east coast of the island of Honshu.


The Japanese islands are the upper portions of vast mountains belonging to what is sometimes called the Circum-Pacific Ring of Fire, which stretches from Southeast Asia to the Aleutian Islands. Mountains cover over 75% of the land's surface. Landforms are steep and rugged, indicating that, geologically, Japan is still a young area. Through the central part of Honshu, running in a north-south direction, are the two principal mountain ranges: the Hida (or Japan Alps) and the Akaishi mountains. There are 25 mountains with peaks of over 3,000 m (9,800 ft). The highest is the beautiful Mt. Fuji (Fuji-san), at 3,776 m (12,388 ft). Japan has 265 volcanoes (including the dormant Mt. Fuji), of which about 20 remain active.

The plains of Japan are few and small and cover only about 29% of the total land area. Most plains are located along the seacoast and are composed of alluvial lowlands, diluvial uplands, and low hills. The largest is the Kanto Plain (Tokyo Bay region), about 6,500 sq km (2,500 sq mi). Others include the Kinai Plain (Osaka-Kyoto), Nobi (Nagoya), Echigo (north-central Honshu), and Sendai (northeastern Honshu). There are four small plains in Hokkaid. The population is heavily concentrated in these limited flat areas.

Rivers tend to be short and swift. The longest is the Shinano (367 km/228 mi) in north-central Honshu, flowing into the Sea of Japan. The largest lake is Lake Biwa, near Kyoto, with an area of 672 sq km (259 sq mi). Lake Kussharo, in the Akan National Park of Hokkaid, is considered the clearest lake in the world, having a transparency of 41 m (135 ft). Good harbors are limited because in most areas the land rises steeply out of the sea. Yokohama, Nagoya, and Kobe are Japan's most prominent harbors.

The Ryukyu Islands, among which Okinawa predominates, are the peaks of submerged mountain ranges. They are generally hilly or mountainous, with small alluvial plains.

Japan is considered to be one of the most seismically active areas in the world; about 20% of all magnitude of six or higher earthquakes in the world take place in this region. The country experiences an average of 1,500 minor shocks per year. One of the world's greatest recorded natural disasters was the Kanto earthquake of 1923, when the Tokyo-Yokohama area was devastated and upward of 99,000 persons died. In 1995, a 7.2 magnitude quake shook Kobe and left over 6,400 people dead. On October 23, 2004, a series of seven earthquakes in two hours caused severe damage in northern Japan; at least 16 people were killed and over 900 were injured. In the days that followed, at least 450 lesser tremors were felt.


Japan is located at the northeastern edge of the Asian monsoon climate belt, which brings much rain to the country. The weather is under the dual influence of the Siberian weather system and the patterns of the southern Pacific; it is affected by the Japan Current (Kuroshio), a warm stream that flows from the southern Pacific along much of Japan's Pacific coast, producing a milder and more temperate climate than is found at comparable latitudes elsewhere. Northern Japan is affected by the Kuril Current (Oyashio), a cold stream flowing along the eastern coasts of Hokkaid and northern Honshu. The junction of the two currents is a bountiful fishing area. The Tsushima Current, an offshoot of the Japan Current, transports warm water northward into the Sea of Japan.

Throughout the year, there is fairly high humidity, with average rainfall ranging by area from 100 cm to over 250 cm (39-98 in). Autumn weather is usually clear and bright. Winters tend to be warmer than in similar latitudes except in the north and west, where snowfalls are frequent and heavy. Spring is usually pleasant, and the summer hot and humid. There is a rainy season that moves from south to north during June and July.

Average temperature ranges from 17°c (63° f) in the southern portions to 9°c (48° f) in the extreme north. Hokkaid has long and severe winters with extensive snow, while the remainder of the country enjoys milder weather down to the southern regions, which are almost subtropical. The Ryukyus, although located in the temperate zone, are warmed by the Japan Current, giving them a subtropical climate.

The typhoon season runs from May through October, and each year several storms usually sweep through the islands, often accompanied by high winds and heavy rains. In September 2005, Typhoon Nabi hit southern Japan causing the deaths of at least 77 people and temporarily displacing more than 300,000.

Flora and Fauna

Hokkaid flora is characterized by montane conifers (fir, spruce, and larch) at high elevations and mixed northern hardwoods (oak, maple, linden, birch, ash, elm, and walnut) at lower altitudes. The ground flora includes plants common to Eurasia and North America. Honshu supports a panoply of temperate flora. Common conifers are cypress, umbrella pine, hemlock, yew, and white pine. On the lowlands, there are live oak and camphor trees, and a great mixture of bamboo with the hardwoods. Black pine and red pine form the typical growth on the sandy lowlands and coastal areas. Shikoku and Kyushu are noted for their evergreen vegetation. Sugarcane and citrus fruits are found throughout the limited lowland areas, with broadleaf trees in the lower elevations and a mixture of evergreen and deciduous trees higher up. Throughout these islands are luxuriant growths of bamboo.

About 140 species of fauna have been identified. The only indigenous primate is the Japanese macaque, a small monkey found in the north. There are 32 carnivores, including the brown bear, ermine, mink, raccoon dog, fox, wolf, walrus, and seal. There are 250 breeding bird species and 8 species of reptiles. Japan's waters abound with crabs and shrimp; great migrations of fish are brought in by the Japan and Kuril currents. There are large numbers and varieties of insects. The Japanese beetle is not very destructive in its homeland because of its many natural enemies.


Rapid industrialization has imposed severe pressures on the environment. Japan's Basic Law for Environmental Pollution Control was enacted in 1967 and the Environment Agency was established four years later.

Air pollution is a serious environmental problem in Japan, particularly in urban centers. Toxic pollutants from power plant emissions have led to the appearance of acid rain throughout the country. In the mid-1990s, Japan had the world's fourth-highest level of industrial carbon dioxide emissions, which totaled 1.09 billion metric tons per year, a per capita level of 8.79 metric tons per year. In 2000, the total of carbon dioxide emissions was at 1.18 billion metric tons. Air quality is regulated under the Air Pollution Control Law of 1968; by 1984, compensation had been provided to 91,118 air-pollution victims suffering from bronchitis, bronchial asthma, and related conditions. However, the "polluter pays" principle was significantly weakened in 1987 as a result of years of business opposition. Nationwide smog alerts, issued when oxidant density levels reach or exceed 0.12 parts per million, peaked at 328 in 1973 but had declined to 85 (85% of which took place in the Tokyo and Osaka areas) by 1986, following imposition of stringent automobile emissions standards.

Water pollution is another area of concern in Japan. The nation has 430 cu km of renewable water resources with 64% used in farming activity and 17% used for industrial purposes. Increase in acid levels due to industrial pollutants has affected lakes, rivers, and the waters surrounding Japan. Other sources of pollution include DDT, BMC, and mercury. Environmental damage by industrial effluents has slowed since the promulgation of the Water Pollution Control Law of 1971, but there is still widespread pollution of lakes and rivers from household sources, especially by untreated sewage and phosphate-rich detergents. Factory noise levels are regulated under a 1968 law. Airplanes may not take off or land after 10 pm and the Shinkansen trains must reduce speed while traveling through large cities and their suburbs.

Most of the nation's forests, which play a critical role in retarding runoff and soil erosion in the many mountainous areas, are protected under the Nature Conservation Law of 1972, and large areas have been reforested. Parks and wildlife are covered by the National Parks Law of 1967. In 2003, 6.8% of Japan's total land area was protected. One of the world's chief whaling nations, Japan vigorously opposed the 1982 resolution of the IWC calling for a phaseout of commercial whaling by 1986/87. However, since most of its trading partners, including the United States, supported the measure and threatened retaliatory measures if whaling continued, Japan finally agreed to comply with the ban.

According to a 2007 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included 37 types of mammals, 39 species of birds, 11 types of reptiles, 20 species of amphibians, 40 species of fish, 25 types of mollusks, 18 species of other invertebrates, and 12 species of plants. Endangered species in Japan included the Ryukyu sika, Ryukyu rabbit, Iriomote cat, Southern Ryukyu robin, Okinawa woodpecker, Oriental white stork, short-tailed albatross, green sea turtle, and tailless blue butterfly. The Ryukyu pigeon, Bonin thrush, Japanese sea lion, and Okinawa flying fox have become extinct.


Archaeological discoveries revealed the existence of Paleolithic humans in Japan when the islands were connected to the Asian continental landmass. Little is known about the origins of the earliest Japanese beyond the fact that they migrated from the continent. The first distinctive Neolithic culture, the Jõmon, existed in Japan from 11,000 bc to 300 bc. The Jõmon was displaced by the Yayoi culture, which introduced new agricultural and metallurgical skills from the continent. Tradition places the beginning of the Japanese nation in 660 bc with the ascendance to the throne of the legendary Emperor Jimmu. It is generally agreed, however, that as the Yayoi developed, the Yamato clan attained hegemony over southern Japan during the first three or four centuries of the Christian era and established the imperial family line. Earlier contacts with Korea were expanded in the 5th century to mainland China, and the great period of cultural borrowing began: industrial arts were imported; Chinese script was introduced (thereby permitting the study of medical texts), the Chinese calendar and Buddhism also arrived from China. Japanese leaders adapted the Chinese governmental organization but based power upon hereditary position rather than merit. The first imperial capital was established at Nara in 710. In 794, the imperial capital was moved to Heian (Kyoto), where it remained until 1868, when Tokyo became the nation's capital.

Chinese influence waned as native institutions took on peculiarly Japanese forms. Outside court circles, local clans gained strength, giving rise to military clan influence over a weakening imperial system. The Minamoto clan gained national hegemony as it defeated the rival Taira clan in 1185, and its leader, the newly appointed Yoritomo, established a military form of government at Kamakura in 1192, a feudal system that lasted for nearly 700 years. Under the shogunate system, all political power was in the hands of the dominant military clan, with the emperors ruling in name only. The Kamakura period was followed by the Ashikaga shogunate (1336-1600) which saw economic growth and the development of a more complex feudalism. For over 100 years, until the end of the 16th century, continuous civil war among rival feudal lords (daimyo) ensued. During this time, the first contact with the Western world took place with the arrival in 1543 of Portuguese traders, and with that, the first guns were imported. Six years later, St. Francis Xavier arrived, introducing Christianity to Japan.

By 1590, the country was pacified and unified by Toyotomi Hideyoshi, a peasant who had risen to a top military position. Hideyoshi also invaded Korea unsuccessfully, in 1592-93 and in 1598, dying during the second invasion. Ieyasu Tokugawa consolidated Hideyoshi's program of centralization. Appointed shogun in 1603, Tokugawa established the Tokugawa shogunate (military dictatorship), which was to rule Japan until the imperial restoration in 1868. Tokugawa made Edo (modern Tokyo) the capital, closed Japan to foreigners except Chinese and Dutch traders (who were restricted to Nagasaki) and occasional Korean diplomats, and banned Christianity. For the next 250 years, Japan enjoyed stability and a flowering of indigenous culture, although from the end of the 18th century onward, Japan came under increasing pressure from Western nations to end its isolationist policy.

The arrival of Commodore Matthew C. Perry from the United States in 1853--with his famous "black ships"--started a process that soon ended Japanese feudalism. The following year, Perry obtained a treaty of peace and friendship between the United States and Japan, and similar pacts were signed with Russia, Britain, and the Netherlands based on the principle of extraterritoriality. A decade of turmoil and confusion followed over the question of opening Japan to foreigners. A coalition of southern clans led by ambitious young samurai of the Satsuma and Choshu clans forced the abdication of the Tokugawa shogun and reestablished the emperor as head of the nation. In 1868, Emperor Mutsuhito took over full sovereignty. This Meiji Restoration, as it is known, signaled the entry of Japan into the modern era.

Intensive modernization and industrialization commenced under the leadership of the restoration leaders. A modern navy and army with universal military conscription and a modern civil service based on merit formed the foundation of the new nation-state. The government undertook the establishment of industry, by importing technological assistance. In 1889, a new constitution established a bicameral legislature (Diet) with a civil cabinet headed by a prime minister responsible to the emperor.

By the end of the 19th century, irreconcilable territorial ambitions brought Japan into open conflict with its much larger western neighbors. The Sino-Japanese War (1894-95) was fought over the question of control of Korea, and the Russo-Japanese War (1904-05) over the question of Russian expansion in Manchuria and influence in Korean affairs. Japan emerged victorious in both conflicts, its victory over the Russians marking the first triumph of an Asian country over a Western power in modern times. Japan received the territories of Taiwan and the southern half of Sakhalin Island, as well as certain railway rights and concessions in Manchuria and recognition of paramount influence in Korea. The latter became a Japanese protectorate in 1905 and was annexed by Japan in 1910.

During the Taisho era (1912-26), Japan participated in a limited way in World War I, in accordance with the Anglo-Japanese Alliance of 1902. Japan was one of the Big Five powers at the Versailles Peace Conference and in 1922 was recognized as the world's third-leading naval power at the Washington Naval Conference. The domestic economy developed rapidly, and Japan was transformed from an agricultural to an industrial nation. Economic power tended to be held by the industrial combines (zaibatsu), controlled by descendants of those families that had instituted the modernization of the country decades earlier. In 1925, universal manhood suffrage was enacted, and political leaders found it necessary to take into consideration the growing influence of parties.

In 1926, Emperor Hirohito ascended the throne beginning the Showa era. By the 1930s, democratic institutions atrophied and the military-industrial complex became dominant. With severe social distress caused by the great depression, an ultranationalist ideology emerged, particularly among young army officers. Acting independently of the central government, the military launched an invasion of Manchuria in 1931, eventually establishing the puppet state of Manchukuo. In 1932, a patriotic society assassinated the prime minister, bringing an end to cabinets formed by the majority party in the Diet. Japan withdrew from the League of Nations (which had protested the Manchurian takeover) in 1933, started a full-scale invasion of China (the Second Sino-Japanese War, 1937-45), and signed the Anti-Comintern pact with Germany in 1936 and a triple alliance with Germany and Italy in 1940. The military leadership, viewing the former USSR and the United States as chief barriers to Japanese expansion, negotiated a nonaggression pact with the USSR in April 1941, thus setting the stage for the attack on Pearl Harbor and other Pacific targets on 7 December of that year. Thereafter, Japanese military actions took place in the context of World War II.

With its capture of the Philippines on 2 January 1942, Japan gained control of most of East Asia, including major portions of China, Indochina, and the southwest Pacific. Japanese forces, however, could not resist the continued mobilization of the US military. A series of costly naval campaigns--including battles at Midway, Guadalcanal, and Leyte Gulf--brought an end to Japanese domination in the Pacific. By 1945, the Philippines had been recaptured, and the stage was set for a direct assault on Japan. After the US troops captured Okinawa in a blood battle, US president Harry S. Truman argued that a full invasion of Japan would prove too costly and decided on aerial attacks to force Japan into surrendering. After four months of intense bombardment with conventional weapons, the United States dropped an atomic bomb on Hiroshima on 6 August 1945 and a second bomb on Nagasaki on 9 August. An estimated 340,000 persons died from the two attacks and the subsequent effects of radiation. In addition, all major cities, with the exception of Kyoto, were destroyed during the war and food and supply shortages continued for several years after the surrender.

On 14 August, Japan accepted the Potsdam Declaration for unconditional surrender with formal surrender documents signed aboard the USS Missouri on 2 September. After the surrender over 500 Japanese military officials committed suicide and hundreds more faced war crimes prosecution. Emperor Hirihito was not declared a war criminal and although he lost all military and political power he retained his royal title and became a symbol of the state until his death in 1989. The subsequent occupation (1945-52), under the direction of General Douglas MacArthur, Supreme Commander for the Allied Powers, began a series of ambitious reforms. Political reforms included the adoption of a parliamentary system of government based on democratic principles and universal suffrage, a symbolic role for the emperor as titular head of state, the establishment of an independent trade union, and the disarmament of the military. Economic reforms consisted of land reform, the dissolution of the zaibatsu, and economic and political rights for women. A new constitution was promulgated on 3 November 1946 and put into force on 3 May 1947.

The Postwar Period

Heavy economic aid from the United States and a procurement boom produced by the Korean War, coupled with a conservative fiscal and monetary policy allowed the Japanese to rebuild their country. The Japanese economy rapidly recovered, and the standard of living quickly surpassed the prewar level by a substantial margin. The state of war between the Western powers and Japan was formally ended by the San Francisco Peace Treaty, signed in September 1951 by 56 nations. The allied occupation ended officially when the treaty went into effect in April 1952. Japan renounced claims to many of its former overseas territories, including such major areas as Taiwan and Korea. The Amami island group, comprising the northern portion of the Ryukyu Islands, nearest to Kyushu Island, was returned to direct Japanese control by the United States in December 1953; the remainder of the group, including Okinawa, was returned to full Japanese sovereignty in May 1972. The Ogasawara (Bonin) Islands and Kazan (Volcano) Islands were returned to Japanese sovereignty in June 1968. The former USSR never signed the San Francisco Peace Treaty, and Japan and Russia have continued to dispute sovereignty over the Kurile Islands, to the northeast of Hokkaid, which the USSR occupied in 1945. In 1956, Japan and the former USSR agreed to establish diplomatic relations.

In 1956 Japan was elected to UN membership. A revision of the 1952 defense treaty with the United States, under which a limited number of troops were to remain in Japan for defense purposes, was signed amid growing controversy in 1960. On 22 June 1965, Japan signed a treaty with South Korea normalizing relations between the two countries. The US-Japanese Security Treaty was renewed in 1970, despite vigorous protest by the opposition parties and militant student organizations. In 1972, Japan moved to establish full diplomatic relations with the People's Republic of China. Formal diplomatic links with the Nationalist Chinese government on Taiwan were terminated by this move, but Japan's economic and cultural links with Taiwan nonetheless have survived virtually intact.

While Japan defined its new role in East Asian affairs, its remarkable economic expansion raised it to the level of a major trading power. Based on strong government support of export industries, political stability under the Liberal-Democratic Party (LDP), and public policy guidance from a powerful bureaucracy, Japan experienced a dramatic rise from the ruins of World War II. From 1955 to 1965, Japan experienced a nominal growth rate of 10-20% annually and real growth rates (adjusted for inflation) of 5-12%. In 1968, it surpassed the Federal Republic of Germany (FRG) to stand second after the United States among non-Communist nations in total value of GNP. The oil crisis of 1973--a combination of shortages and rising prices--revealed the crack in Japan's economic armor, the lack of domestic petroleum resources. A second oil crisis during the late 1970s was met by a reappraisal of Japan's dependence on foreign fuels and the institution of long-range programs for energy conservation and diversification. These oil crises led to a shift in the economy and to the creation of high-technology industries, most notably electric and electronic appliances.

The yen declined in value in the early 1980s, causing Japanese exports to become cheaper in overseas markets and leading to huge trade surpluses with the United States and other leading trading partners, who began to demand that Japan voluntarily limit certain exports and remove the barriers to Japan's domestic market. During 1985-87, the yen appreciated in value against the dollar and, by 1994, the dollar had hit a post-World War II low, but Japan continued to register substantial trade surpluses.

Political stability, maintained since the 1950s by the majority LDP, began to unravel in the 1970s, following the retirement from politics of Prime Minister Eisaku Sato in 1972. Sato's successor, Kakuei Tanaka, was forced to resign in December 1974 amid charges of using his office for personal gain in the Lockheed Corporation bribery scandal. Takeo Miki succeeded Tanaka and Takeo Fukuda became prime minister when Miki resigned in December 1976. Fukuda was defeated in intraparty elections by Masayoshi Ohira in 1978. When Ohira died in June 1980, he was succeeded by Zenko Suzuki. Suzuki stepped down as prime minister in November 1982 and was replaced by controversial and outspoken Yasuhiro Nakasone. Noboru Takeshita became prime minister in November 1987.

Policy regarding military force has been a major political issue in the postwar years. According to Article Nine of the 1947 constitution, Japan renounced the belligerency of the state but soon developed a Self-Defense Force with US encouragement. In 1986, breaking a long-standing policy, the government increased military spending to over 1% of the GNP. The Diet (parliament) approved a bill allowing the deployment of troops abroad for international peacekeeping in 1992 with troops participating with the United Nations in Cambodia, Israel, Iraq, Sudan, Indonesia, and other states.

Emperor Hirohito died of cancer on 7 January 1989, at the age of 87. He was succeeded by the Crown Prince Akihito, who was enthroned as the Heisei emperor in a formal ceremony in November 1990. The sense of entering a new era brought increased controversy over the assessment of Japan's role in the earlier part of the century, particularly during World War II. Some denied that Japan had committed atrocities during the war and there were attempts to further soften the wording of school textbooks. In March 1989, Prime Minister Takeshita apologized to North Korea (DPRK) for the suffering Japan caused over the 36 years of occupation of Korea (1910-45) and Emperor Akihito expressed similar regrets to President Roh Tae Woo of South Korea (ROK) in May 1990. In the same month, the government removed the requirement for fingerprinting of people of Korean descent living in Japan. In 1992, Prime Minister Kiichi Miyazawa apologized for the forced prostitution of Korean, Chinese, and Japanese women in Japanese military brothels during World War II. However, many minorities in Japan, Chinese and Koreans included, claimed that they still experienced social and economic discrimination in Japan well after the war.

The 1980s ended with a major scandal involving illegal stock trading and influence peddling by the Recruit Cosmos Company. Between the summer of 1988 and the closing of the case in May 1989, the scandal led to the implication and resignations of prominent business people and politicians in top government positions, among them then-finance minister Kiichi Miyazawa, and the former prime minister, Yashuhiro Nakasone. Scandals continued into the 1990s with stock rebates for politicians in 1991 and then in 1992, contributions to politicians from a trucking company linked to organized crime became public knowledge.

The economy entered a period of major stagnation and distress in the early 1990s. In 1990, the stock market declined more than 25% from January to April. Then, during the spring of 1992, the stock index fell rapidly again, until by the summer, the index was at its lowest point in six years at 62% below the record high of 1989. By the end of 1993, Japan was in the midst of its worst economic downturn in at least 20 years. This also led to a debt crisis that resulted in many banks becoming unsustainable causing a massive consolidation. Although the long-term economic prospects for Japan were good, it was further retarded by the impact of the Asian financial crisis of 1997-98. In 1998, the Japanese economy witnessed its most serious recession with a negative growth rate of 1.9%. As of 2005 there were only four national banks in Japan.

Against the background of scandals and an economic recession, the political landscape began a major change. Taking responsibility for political problems caused by the Recruit scandal, Noboru Takeshita resigned as prime minister in April 1989, to be succeeded in May by Sosuke Uno, who abruptly resigned when a sex scandal became public amidst the LDP loss of its majority in the upper house of the Diet. The next prime minister, Toshiki Kaifu, served his term from August 1989 to October 1991, but the LDP did not support him for a second term. Instead, Kiichi Miyazawa became prime minister in November 1991. When the lower house gave Miyazawa a vote of no confidence in June 1993 for abandoning electoral reform bills, Miyazawa dissolved the lower house and called for elections.

In the election for the 511 seats of the House of Representatives on 18 July 1993, the LDP, for the first time since its own formation in 1955, failed to secure the 256 seats needed for a majority. Without a majority, the LDP was unable to form a government and the new prime minister, Morihiro Hosokawa (JNP), was chosen on 29 July 1993, by a seven-party coalition of LDP defectors, socialists, and conservatives. Hosokawa, too, was tainted by questions regarding personal finances and stepped down as prime minister to be replaced by Tsutomu Hata (Shinseito) in April 1994. Just as Hata took office, the Socialist Party left the governing coalition, leaving the prime minister as the head of a minority government for the first time in four decades. Hata soon resigned and, in a surprise move, the LDP and the Socialist Party, traditionally opponents, allied to form a new coalition, which also included the Sakigake. The coalition selected as prime minister, Tomiichi Murayama, the head of the Socialist Party and the first Socialist prime minister since 1948. Within the coalition the LDP was the dominant factor but the decades of LDP rule appeared to be over and the nature of the LDP itself changed. The dissolution of the House of Representatives and the ensuing election on 18 July 1993 marked a major turning point for Japanese politics as the LDP lost its political dominance as new parties formed. One new party, the Japan New Party (JNP), was formed by Morihiro Hosokawa, a former LDP member, in May 1992. On 21 June 1993, 10 more members of the LDP, led by Masayoshi Takemura, left to form the Sakigake (Harbinger Party) and another 44 LDP members quit two days later to create the Shinseito (Renewal Party) with Tsutomu Hata as its head. By 28 June, one-fifth (57 members) of the LDP bloc of the dissolved lower house left the party.

In June 1994, Tomiichi Murayama became prime minister in a coalition consisting of the LDP, the Social Democratic Party of Japan (SDPJ), and Sakigake. In an unprecedented move, Murayama recognized the legal right for the existence of the Japanese Self-Defense force, much to the disapproval of left-leaning party members. The tumultuous reign of Murayama included the Kobe earthquake and political scandals which led to the resignation of the Justice Minister and the director of the Management and Coordination Agency. Elections in October 1996 resulted in a victory for the LDP, but the party still failed to obtain a majority of seats, only capturing 239 of 500. The Sakigake and Democratic Party of Japan agreed to support Prime Minister Ryutaro Hashimoto. In July 1998, Hashimoto resigned after a poor performance of the LDP in the House of Councilors election and was replaced by Keizo Obuchi. During the Obuchi regime, the Japanese economy showed signs of recovering with major fiscal stimuli including a massive public works program.

In April 2000, Obuchi suffered a stroke, entered into a coma, and was replaced by Yoshiro Mori who called summarily for elections. On 25 June parliamentary elections were held for the House of Representatives. Mori was reelected prime minister, with a ruling coalition of the LDP, the Buddhist-backed New Komeito, and the New Conservative Party (NCP). In early 2001, the Nikkei stock average fell to its lowest level since 1985 and unemployment rates reached 4.9%, the highest since the end of World War II. Plagued by scandal and the depressed economy, Mori resigned in April 2001. Junichiro Koizumi won control of the LDP and became prime minister on 26 April, promising to reinvigorate Japanese politics and radically reform the economy. He appointed members of his cabinet without seeking nominations from major factions of the LDP, as had been the practice in the past.

Koizumi immediately raised controversy by making a visit to the Yasukuni Shrine. Dedicated to Japan's war dead, it served as a symbol of nationalism during World War II and has been a lightning rod for anger among Asian nations that suffered under Japan's military aggression. He continued to visit the shrine annually. Japan was also the target of international criticism over its Education Ministry's approval of junior high-school textbooks that allegedly glossed over Japan's aggression in China, particularly the Nanjing Massacre and its annexation of the Korean Peninsula.

Koizumi's coalition dominated the July 2001 elections for the House of Councilors, with the LDP taking 65 of the 121 contested seats, its best performance in the House of Councilors since 1992. The victory was seen as a mandate for Koizumi. However, the economy remained in recession throughout 2002, which reduced his popularity.

In 2002, Japan began a diplomatic initiative to improve relations with North Korea. In September 2002, North Korean President Kim Jong Il apologized to Koizumi for North Korea's kidnapping of Japanese citizens during the 1970s and 1980s. Japan pledged a generous aid package to North Korea in return. In 2005 relations with South Korea and China soured over the continued use of Japanese junior high-school textbooks which downplayed the aggressive nature of Japan's role in WWII. In addition, South Korea objected to the reassertion of the Japanese claim to the Liancourt Rocks, which Korea occupies. China objected to the Japanese proposal for a permanent seat on the United Nations Security Council, while both countries objected to Japan's use of the East China Sea.

Elections in 2003 resulted in large gains for the opposition Democratic Party, but the LDP coalition retained a majority within the parliament. On 27 September 2004, Koizumi carried out a major cabinet reorganization dubbing his new ministerial lineup the "Reform Implementation Cabinet", in order to combat corruption and inefficiency. April 2005 public opinion polls showed Koizumi support ratings in the 40-50% range, which was very high by Japanese standards, and his tenure in office was one of the longest on record.

Koizumi called for early elections in September 2005 after he dissolved the lower House due to the defeat in the upper House of his landmark proposals to reform the country's postal system. The upper House cannot be dissolved in Japan, and thus a two-thirds majority was needed in the lower House to be able to pass new legislation without the consent of the upper House. The result was the second-largest landslide in a general election in the LDP's history. In combination with allied parties, the LDP coalition held over two-thirds of the seats, 296 out of 480. The results were a devastating setback for the Democratic Party, the main opposition, whose gains in 2001 and 2003 led some to believe that Japanese Democracy was evolving into a two-party system. Due to LDP term limits, Koizumi was expected to retire in 2006, although the possibility of his remaining in office still existed.

Koizumi retired in September 2006, and Shinzo Abe succeeded Koizumi as prime minister and head of the Liberal Democratic Party (LDP). Abe was Japan's youngest leader since World War II. Abe favored a more assertive role for Japan in world affairs, supported the revision of its pacifist constitution, and envisioned a closer relationship with the US.

In July 2006, the last contingent of Japanese troops left Iraq. That December, parliament approved the creation of a fully-fledged defense ministry, the first since World War II.

China and Japan were once again attempting to reconcile differences over the interpretation of their shared history in 2007. In April of that year, Wen Jiabao became the first Chinese premier to address Japan's parliament. It was an attempt to warm Japanese-Chinese relations that had grown tense over Japanese textbooks, which China says gloss over atrocities committed by the Japanese military during World War II; Japan's unwillingness to recognize its past war crimes; and former Prime Minister Koizumi's visits to the Yasukuni shrine dedicated to Japan's war dead, which also honors war criminals. In early 2007 another controversy arose, when Prime Minister Shinzo Abe denied that Japan's military had coerced women into sexual slavery during World War II. There are accounts of Japanese soldiers and sailors rounding up foreign women for use as sex slaves, euphemistically known as "comfort women."

By mid-2007, Prime Minister Abe's popularity ratings were at an all-time low. On 29 July, the LDP lost control of the upper house of parliament for the first time in its history. On 27 August, Abe reshuffled his cabinet, which briefly improved his popularity ratings. On 9 September, Abe announced he had no intention of staying on as prime minister if members of parliament blocked a move to extend Japan's support of the US-led mission in Afghanistan. On 12 September 2007 Abe resigned. On 23 September 2007, the LDP chose Yasuo Fukuda, a mild-mannered moderate known for his ability to build consensus behind the scenes, to become Japan's next prime minister.


Japanese nationals living in other countries totaled more than 600,000 in the 1990s, including some 250,000 in the United States and over 100,000 in Brazil. More than one million Japanese have emigrated since 1880; about 70% of them arrived on the US mainland and in Hawaii during the decades prior to World War II. Emigration continued after the war, encouraged by government policy as a way of relieving population pressure. By the mid-1960s, emigration had considerably decreased, as economic opportunities and living standards in Japan improved. From the 1970s-1990s, however, the number of emigrants rose, from 12,445 in 1975 to 34,492 in 1985 to 82,619 in 1992.

Immigration to Japan is generally small-scale, although the illegal entry of workers from neighboring countries has come to be regarded as a problem. Since 1975, 10,000 Indo-Chinese refugees have settled in Japan. The total number of legal migrants who entered or departed Japan in 2002 was 44,651,272, an increase of 3.4% from 2001. The total number of migrants into Japan was 22,311,491, and the total number of people who left Japan was 22,339,781. The number of Japanese migrants increased by 1.9%, and the number of foreigners also increased by 9.8% from 2001. In the mid-2000s, there were 1.9 million foreign residents in Japan, half ethnic Koreans and Chinese who were mostly born in Japan, followed by 350,000 ethnic Japanese from Latin America, often the descendents of Japanese who emigrated.

Because citizenship is based on nationality of parent rather than place of birth, registered aliens may have spent their entire lives in Japan. According to Migration News, Japan continued to struggle with Zainichi, a term that literally means "to stay in Japan," but is used as a shorthand for Koreans who came to Japan during Japan's colonial rule, and their descendants. Zainichi are often considered outsiders in both Japan and Korea. Their numbers are reduced as more become naturalized Japanese. In 2003 there were 470,000 Zainichi in Japan. In 2005, the net migration rate was zero migrants per 1,000 population.

Internal migration, providing a steady exodus of people from farm and mountain communities to the cities and suburbs, has been accelerating since 1952. Most such migrants flocked to the three major population centers--the Tokyo, Osaka, and Nagoya metropolitan areas. As pollution and congestion in these areas increased, the government instituted programs to decentralize industry by directing new growth to smaller cities of the north and west, and also began efforts to improve rural living conditions and employment opportunities. Japan's Ministry of Internal Affairs and Communications reported that the number of inter-prefectural migrants had decreased steadily from 1996-2004; in 2004 inter-prefectural migration was 2.6 million persons, decreased by 2.6% in comparison with the previous year.

According to Migration News, Japan began to allow temporary workers in 1986, and by 2004 lifted almost all remaining restrictions on the categories of jobs where temporary workers were permitted. In 2005 about 20% of Japanese manufacturers hired part-time workers. In 2003, Japan had an estimated 760,000 foreign workers, 1.5% of the work force. Foreigners in Japan remitted $2.8 billion officially in 2003 and an estimated $5.5 billion unofficially, to China, Korea, the Philippines, Brazil, and Peru.

Since the 1980s some 497 Myanma have sought asylum in Japan, usually on the grounds of religious persecution as Christians in a Buddhist nation. In 2004 Japan had 1,960 refugees and 496 seeking asylum, mainly from Turkey and Myanmar.

Armed Forces

The reestablishment of Japanese defense forces has been a subject of heated debate in the period since World War II. Article 9 of the constitution renounces war as a sovereign right and the maintenance of "land, sea, and air forces, as well as other war potential." During the Korean War, General MacArthur recommended the establishment of a national police reserve. Following the signing of the San Francisco Peace Treaty, the reserve force was reorganized into a National Safety Agency (1 August 1952). Laws establishing a Defense Agency and a Self-Defense Force became effective on 1 July 1954, both under firm civilian control.

The strength of Japan's armed forces in 2005 was 239,900 active personnel, supported by a reserve force of 44,395. The Japan Ground Self-Defense Force (JGSDF) had 148,200 personnel, organized into one armored and nine infantry divisions. The JGSDF's weaponry included 980 main battle tanks, 100 reconnaissance vehicles, 70 armored infantry fighting vehicles, 730 armored personnel carriers, 1,980 artillery pieces, and 90 attack helicopters. The Japan Maritime Self-Defense Force (JMSDF) had an estimated 44,400 personnel, with 16 tactical submarines, 44 destroyers, 9 frigates, 31 mine warfare vessels, and 9 patrol/coastal craft. The JMSDF's naval aviation arm had an estimated 9,800 members with 80 combat capable aircraft that was made up of 80 fixed-wing maritime patrol aircraft. The service also had 10 mine countermeasures and 88 antisubmarine warfare helicopters. Japan Air Self-Defense Force (JASDF) personnel numbered up to 45,600, with 300 combat capable aircraft, including 150 fighters, and 130 fighter ground attack aircraft. Japan has a paramilitary coast guard of 12,250 operating 419 patrol vessels.

Although Japan's defense budgets rank high by world standards, they are modest in relation to gross domestic product (about 1%). In 2005, Japan's defense budget totaled $44.7 billion. The United States maintains extensive military facilities and several thousand troops in Japan. Japan participated in peacekeeping missions in the Middle East.

International Cooperation

Japan was admitted to the United Nations on 18 December 1956, and it holds membership in ESCAP and all the nonregional specialized agencies. It is a member of the WTO, participates in the Colombo Plan, and has permanent observer status with the OAS. In 1963, Japan became a member of IMF and the OECD. It is also a charter member of the Asian Development Bank, which came into operation in 1966; Japan furnished $200 million, a share equal to that of the United States. Japan is also a member of APEC, G-5, G-7, G-8, the Paris Club (G-10), the Inter-American Development Bank, and the Latin American Integration Association (LAIA). Japan is a dialogue partner in ASEAN, and observe to the Council of Europe, and a partner in the OSCE.

Japan has been actively developing peaceful uses for nuclear energy, and in 1970 it signed the Geneva Protocol, which prohibits the use of poisonous and bacteriological weapons. In June 1976, Japan--the only nation to have suffered a nuclear attack--became the 96th signatory to the international Nuclear Nonproliferation Treaty. Japan also participates in the Australia Group, the Zangger Committee, the Nuclear Energy Agency, the Nuclear Suppliers Group (London Group), the Organization for the Prohibition of Chemical Weapons, and as an observer in the European Organization for Nuclear Research (CERN).

Japan has been extending technical and financial aid to many countries, and in 1974 it established the Japan International Cooperation Agency to provide technical assistance to developing nations. Japan also was instrumental in establishing the Asian Productivity Organization, the objective of which is to organize national productivity movements in various Asian countries into a more effective movement on a regional scale. Japan has entered into cultural agreements with many European and Asian nations and maintains an educational exchange program with the United States. Through the Japan Overseas Cooperation Volunteers, Japan sends youths to work in developing countries.

In environmental cooperation, Japan is part of the Antarctic Treaty, the Basel Convention, Conventions on Biological Diversity and Whaling, Ramsar, CITES, the London Convention, International Tropical Timber Agreements, the Kyoto Protocol, the Montréal Protocol, MARPOL, the Nuclear Test Ban Treaty, and the UN Conventions on the Law of the Sea, Climate Change, and Desertification.

Customs and Duties

The Japanese tariff system is administered by the Customs Bureau of the Ministry of Finance. As of 1997, Japan imposed a general tariff rate of 2%. However, import duties remained relatively high for certain agricultural and manufactured goods. In addition, quantity quotas and tariff quotas are still applied to some goods. There is also a 5% consumption tax on imports based on cost, insurance, freight plus the duty. In August 2005, Japan imposed a 15% retaliatory duty on 15 products manufactured in the United States. These included ball bearings, steel products, navigational instruments, machinery accessories, printing machines, forklift trucks and industrial belts. There is a free trade zone at Naha, on Okinawa; no free trade zones function on the main islands.


Japan has no territories or colonies.

Local Government

Local government throughout Japan was strengthened by the Local Autonomy Law of 1947. Administratively, Japan is divided into 47 prefectures. Within these prefectures there are 670 cities and 2,562 towns and villages. The local chief executives, mayors, and village heads, together with prefectural assembly members, are directly elected. Governors and assembly members are elected by popular vote every four years. The 47 prefectures are divided as follows: 1 metropolitan district (to--Tokyo), 2 urban prefectures (fu--Kyoto and Osaka), 43 rural prefectures (ken), and 1 district (d --Hokkaid). Large cities are subdivided into wards (ku), and further split into towns, or precincts (machi or cho), or subdistricts (shicho) and counties (gun). The city of Tokyo has 23 wards.

Local public bodies have the right to administer their own affairs as well as to enact their own regulations within the law. The National Diet cannot enact legislation for a specific public entity without the consent of the voters of that district. Local governments control school affairs, levy taxes, and carry out administrative functions in the fields of land preservation and development, pollution control, disaster prevention, public health, and social welfare. However, the Ministry of Home Affairs has had enormous control over the designs the systems of local administration, local finance and taxation, and co-ordinates between the central government and local governments although its purpose is to support and develop local and regional autonomy. The result of this power is a high level of organizational and policy standardization among the different local governments. Because Japan does not have a federal system, and its 47 prefectures are not sovereign entities in the sense that the United States are, most depend on the central government for subsidies. Mainly through the actions of the Ministry of Home Affairs, the Japanese government was seeking to decentralize power, through a process termed "controlled decentralization," away from Tokyo by allowing prefectures to exercise greater fiscal and budgetary autonomy.


Japan follows the parliamentary system in accordance with the constitution of 1947. The most significant change from the previous constitution of 1889 was the transfer of sovereign power from the emperor to the people. The emperor is now defined as "the symbol of the state and of the unity of the people." The constitution provides for the supremacy of the National Diet as the legislative branch of the government, upholds the separation of legislative, executive, and judicial powers, and guarantees civil liberties. It is officially termed a constitutional monarchy with a parliamentary government.

The executive branch is headed by a prime minister selected from the Diet by its membership. The cabinet consists of the prime minister and 17 state ministers (as of February 2003) whom are elected by the prime minister, each heading a government ministry or agency. At least half the ministers must be selected from the Diet, to which the cabinet is collectively responsible. Upon a vote of no confidence by the House of Representatives, the cabinet must resign en masse.

The National Diet is bicameral. The 2005 House of Representatives (the lower House) has a membership of 480, with terms of office for four years, except that all terms end upon dissolution of the house (a law promulgated in February 2000 reduced the composition of the House from 500 to 480 members). Of the 480 seats, 180 are elected from 11 multi-member constituencies by proportional representation, and 300 are elected from single-member constituencies. The House of Councilors (the upper House) has 242 members, 144 members in multi-seat constituencies and 98 by proportional representation. The term of office is six years, with one-half elected every three years. This means that of the 121 members subject to election each time, 73 are elected from the 47 prefectural districts and 48 are elected from a nationwide list by proportional representation. The lower house holds primary power. In case of disagreement between the two houses, or if the upper house fails to take action within 60 days of receipt of legislation from the lower house, a bill becomes law if passed again by a two-thirds majority of the lower house.

Suffrage is universal, the voting age being 20 years, with a three-month residence requirement. The 1947 constitution granted suffrage to women. In January 1994, the Diet passed an electoral reform bill. In addition to new laws on campaign financing, the legislation abolished the multiple-member districts and replaced them with 300 single-member districts and 200 multimember districts. The number of multimember districts stood at 180. The 1996 elections resulted in the weakening of minor parties, in particular the SDPJ and Sakigake. Elections for the House of Representatives took place in 2005, two years before the official end of the term taken from the election in 2003 due to Koizumi's decision to dissolve the lower House. The next elections for the House of Councillors took place in 2007; the Liberal Democratic Party lost control of this house for the first time in its history.

Judicial System

The 1947 constitution provides for the complete independence of the judiciary. All judicial power is vested in the courts. There are five types of courts in Japan: the Supreme Court, High Courts (8 regional courts), District Courts (in each of the prefectures), Family Courts, and 438 Summary Courts. Family Courts, on the same level as the District Courts, adjudicate family conflicts and complaints such as partitions of estates, marriage annulments, and juvenile protection cases.

The Summary Courts handle, in principle, civil cases involving claims which do not exceed 900,000 yen; and criminal cases relating to offenses punishable by fines or lighter penalties; and civil conciliations. They are situated in 438 locations nationwide. The cases are handled by a single summary court judge. The District Courts handle the first instance of most types of civil and criminal cases. They are situated in 50 locations nationwide (one in each of the 47 prefectures and one in the 3 cities of Hakodate, Asahikawa, and Kushiro) with branch offices in 203 locations. Most cases are disposed by a single judge, aside from those cases in which it has been decided that hearing and judgment shall be made by a collegiate court or cases where the crimes are punishable by imprisonment with or without labor for a minimum period of not less than one year. The High Courts handle appeals filed against judgments rendered by the district courts, family courts or summary courts. The cases are handled by a collegiate body consisting of three judges.

The Supreme Court is the highest and final court that handles appeals filed against judgments rendered by the High Courts. It is composed of the Chief Justice and 14 Justices with a Grand Bench made up of all 15 Justices. The Supreme Court is divided into three Petty Benches each made up of 5 Justices to which cases are first assigned. Those cases that involve constitutional questions are transferred to the Grand Bench for its inquiry and adjudication. The chief justice is appointed by the emperor on designation by the cabinet; the other justices, by cabinet appointment. Judges of the lesser courts also are appointed by the cabinet from lists of persons nominated by the Supreme Court. Their term of office is limited to 10 years, with the privilege of reappointment.

The Supreme Court is the court of last resort for determining the constitutionality of any law, order, regulation, or official act that is challenged during the regular hearing of a lawsuit. Abstract questioning of a law is prohibited and thus there is no judicial review. The constitution affords criminal defendants a right to a speedy and public trial by an impartial tribunal. There is no right to a trial by jury. The constitution requires a judicial warrant issued by a judge for each search or seizure. Japan accepts compulsory jurisdiction of the International Court of Justice with reservation.

Japan has the death penalty and it can be enforced for the crimes of murder, arson, or crimes against humanity, although only 2-3 prisoners are executed a year. Japan has been widely criticized for giving lenient punishments for certain crimes, especially rape which carries a typical sentence of 2-5 years in prison. On 18 May 2005, the Diet enacted a new law to improve the treatment of inmates and to help prevent recidivism.

Libraries and Museums

In 1948, the National Diet Library Law established the National Diet Library to provide reference service to the Diet, other libraries, and the general public. In 1949, this library absorbed the Ueno Library (the former national library) as one of its branches. The National Diet Library acts as a legal depository for Japanese publications and is also a depository library for the United Nations. There are over 7.3 million volumes in the library's collection. The University of Tokyo (Tokyo Daigaku) has 7.6 million volumes, and Keio University, also in Tokyo has libraries with holdings of over 1 million volumes.

Public libraries are beginning to find their place in Japanese life. Prior to the enactment of the Library Law of 1950, 70% of those who utilized libraries were students and scholars. Today, libraries are information centers, and increasing numbers of citizens are patronizing them. The Tokyo Metropolitan Library consists of three main branches with ties to about 360 town and village libraries throughout the metropolitan region.

Except in large cities, typical Japanese museums take the form of the treasure halls of shrines or temples, botanical gardens, and aquariums. Important museums include the National Science Museum, Museum of Contemporary Art, Calligraphy Museum, and the Tokyo Metropolitan Art Museum, all located in Tokyo. Also in Tokyo are the Baseball Hall of Fame and Museum, a criminal museum, and a clock museum. In 2002 the Hyogo Prefectural Museum of Art opened in Kobe. Osaka houses a museum of natural history and the National Museum of Ethnography, and Kyoto, the former capital, has many historical sights and monuments. Yokohama is home to an equine museum and Kanazawa Bunko, a general museum dating back to 1275 and featuring Zen Buddhist documents. There is a Peace Memorial and Museum in Hiroshima.

Political Parties

Most political parties in Japan are small local or regional parties, with the total number of parties exceeding 10,000. Japan's most popular party, the Liberal-Democratic Party (LDP) represents a wide spectrum of Japanese society, but especially the conservative elements. Formed in 1955 by the merger of the two leading conservative parties, this party held the reins of government since its formation until July 1993. The LDP supports an alliance with the United States and the various security pacts enacted by the two countries.

The Japan Socialist Party (JSP) is Japan's principal opposition party, drawing its support mainly from the working class, but it suffers from personality as well as ideological problems within its ranks. The JSP split into right and left wings over the ratification of the US-Japan Security Treaty of 1952. In October 1955, however, the two factions reunited, preceding the unification of the conservative parties and actually forcing the conservative groups into a unified front, thus creating a formal two-party system in Japan.

Beginning in the late 1960s, a shift took place toward a multiple-party system, with the gradual increase of opposition parties other than the JSP. The Democratic Socialist Party (DSP) represented moderate elements of the working class. The Komeito (Clean Government Party), professing middle-of-the-road politics, was the political wing of the Soka-Gakkai, a Buddhist sect. The Japanese Communist Party, founded as an underground group in 1922 and legalized after World War II, experienced major shifts in platform. The party had traditionally sided with China in the Sino-Soviet ideological dispute, although in recent years the Japanese Communists have focused instead on social conditions at home.

The LDP continued to hold its majority in both houses until 1993. Traditionally, the LDP has functioned as a coalition of several factions, each tightly organized and bound by personal loyalty to a factional leader. In the mid-1970s, policy differences among the factions and their leaders became acute, with the resignation under pressure of Prime Minister Tanaka in December 1974.

In the summer of 1993, after five years of scandals involving corruption, sex, organized crime, and in the midst of economic recession, the old political order disintegrated as dozens of younger LDP members defected to form new parties. Chief among these was the Japan New Party (JNP), formed in May 1992, and the Sakigake (Harbinger Party) and the Shinseito (Renewal Party), both formed in June 1993. A watershed election in July 1993 for the House of Representatives, the lower house of the parliament, resulted in the loss by the LDP, for the first time since 1955, of its majority. Of the 511 seats, the LDP won 223 seats (as compared with 275 in the 1990 election), the JSP won 70 seats (a loss of half of its previous seats), the Komeito won 51 seats, the Shinseito took 55 seats, the JNP won 35 seats, and the Sakigake won 13. A seven-party coalition, including new parties of LDP defectors, the JSP, and other conservative parties, formed the new cabinet, which governed for a year until the prime minister (Morihiro Hosokawa, JNP) resigned over a financial scandal. The coalition formed a new government, led by Tsutomu Hata of the Shinseito, in April 1993. However, the JSP, finding itself maneuvered out of any voice in the coalition, broke away and Hata, then with a minority in the House of Representatives, resigned after one month in office.

The next government was formed by a new, unorthodox coalition of the traditional opponents, the LDP and the JSP, as well as the Sakigake. Tomiichi Murayama, head of the JSP, was chosen prime minister in June 1994, the first Socialist to head a government since 1948, although the LDP appeared to be dominant in the coalition. This unusual partnership caused strains, leading to further defections, within the LDP and within the JSP. The Shinseito emerged as a serious focus of opposition, standing for an internationally more active Japan, including use of the military overseas, for a revision of the constitution, and for removing protective regulations to open the domestic economy to competition. The left wing of the JSP, unhappy with the alliance with the LDP, held that the Self-Defense Forces were unconstitutional, and that the North Korean government (DPRK) was the legitimate government of all of Korea, and advocated abolition of the security treaty with the United States.

The parliamentary election that took place on 20 October 1996 combined the 300 single seat constituencies with the proportional representation for the remaining 200 seats. After the dissolution of Shinshinto, a highly fractionalized party system emerged. Going into the 2000 election, the LDP had 266 seats, with the largest opponents being the Democratic Party of Japan (DPJ) with 94 seats, the Komeito with 52, the Liberal Party with 39, and the Communists with 23. The LDP worked closely with the Komei party and the Liberal Party, effectively making the DPJ the only significant opposition.

The 2000 House of Representatives election produced the following distribution of seats: LDP, 233; DPJ, 127; Komeito, 31; Liberal Party, 22; Japan Communist Party (JCP), 20; Social Democratic Party (SDP), 19; New Conservative Party (formed in 2000), 7; and 21 other seats. In the 2001 House of Councilors vote, the seats fell as follows: LDP, 110; DPJ, 59; Komeito, 23; JCP, 20; SDP, 8; Liberal Party, 8; New Conservative Party, 5; and independents took 14 seats. A new party emerged in Japanese politics, the New Conservative Party, formed in March 2000 by members who split off from the Liberal Party.

In November 2003, an election for the House of Representatives was held, and Prime Minister Junichiro Koizumi, leading the LDP, emerged victorious, although with a reduced majority. The election was seen as a victory for the DPJ, which won 180 seats, its largest share ever. In 2005 the six largest parties represented in the national Diet were the Liberal Democratic Party (LDP), the Democratic Party of Japan (DPJ), the New Clean Party Government (Komeito), the Japan Communist Party (JCP), the Socialist Democratic Party (SDP), and the Conservative New Party (CNP). The early election called by Koizumi in September of 2005, however, resulted in a firm majority for the LDP. Koizumi resigned as prime minister in 2006, and Shinzo Abe of the LDP took his place. After the LDP lost power in elections for the House of Councillors in July 2007, Abe reshuffled his cabinet, and then resigned in September 2007. The LDP chose Yasuo Fukuda to become Japan's next prime minister.

Tourism, Travel and Recreation

Tourism in Japan is regarded as a major industry, since many foreign visitors as well as the Japanese themselves tour the country extensively. In 2003, Japan had about 5.2 million visitors. There were 1,562,867 hotel rooms with an occupancy rate of 70%. Tourism expenditure receipts totaled $11.4 billion. A valid passport along with an onward/return ticket is required. A visa is not necessary for stays of up to 90 days.

Japan's chief sightseeing attractions are in the ancient former capital of Kyoto: Nijo Castle, Heian Jingu Shrine, the 13th-century Sanjusangendo temple, and the Kinkaku-ji (Temple of the Golden Pavilion); the Ryoan-ji (Temple of the Peaceful Dragon), famed for its garden of stones and raked sand, and numerous other ancient Buddhist temples and Shinto shrines. Nearby sights in the vicinity of Nara include the Great Buddha, a huge bronze statue originally cast in the eighth century; the Kofuku-ji pagoda; and Horyu-ji, the seventh century temple from which Buddhism spread throughout Japan. There are few historic sites in the capital--Tokyo was devastated by an earthquake in 1923 and virtually destroyed in World War II--but nearby attractions include Mt. Fuji and the hot springs of Fuji-Hakkone-Izu National Park; Nikko National Park, site of the Toshogu Shrine, where the first Tokugawa shogun is entombed; and the summer and winter sports facilities in the mountains of central Japan--the so-called Japan Alps. The Hiroshima Peace Park and Peace Memorial Museum commemorate the destruction of the city by an atomic bomb in 1945.

Baseball is Japan's national pastime; there are two professional leagues, each with six teams. Sumo, a Japanese form of wrestling, is also popular, with tournaments held six times a year. Golf, an expensive sport because of the lack of open space, is used mainly as a means of entertaining business clients. Other pastimes include judo, karate, table tennis, fishing, and volleyball. Gardening is the most popular hobby among men and women alike. Nagano hosted the 1998 Olympic Winter Games.

The costs of traveling in Japan, among the highest in the world, were reduced slightly when a 3% tourism tax, in effect since 1960, was abolished on 1 April 2000.

In 2005, the US Department of State estimated daily expenses for staying in Tokyo at $257. Okinawa was estimated at $354 from May through September and $238 the rest of the year. To stay in Osaka-Kobe the daily expenses were $260 and in Kanazawa, $195.

Social Development

Living standards reflect Japan's rapid economic development since the mid-1960s. Greatly contributing to the social stability of the nation is the strong sense of family solidarity among the Japanese; virtually every home has its butsudan, or altar of the ancestors, and most elderly people are cared for in the homes of their grown children. A further source of social stability has been Japan's employment system, noted for its "lifetime employment" of workers from the time they enter the company after completing their education to the time they retire. Traditionally, layoffs and dismissals of employees were rare, even during times of recession.

The present social insurance system includes national health insurance, welfare annuity insurance, maternity coverage, unemployment insurance, workers' accident compensation insurance, seamen's insurance, a national government employees' mutual aid association, and day workers' health insurance. It also provides pension plans designed to maintain living standards for the elderly, based on years of employment, and for families of deceased workers. Per capita expenditure on social security programs remained low, however, in relation to expenditure in many other industrial nations. There is a family allowance for low income residents with children under the age of nine.

Nearly the entire population receives benefits in one form or another from the health insurance system. Health insurance is compulsory for those employed at enterprises with five or more workers and premiums are shared equally by the insured and their employers. Those not covered at work are insured through the National Health Insurance program. Other sickness and health insurance is in force among farmers, fishermen, and their dependents. Unemployment coverage is obligatory for all enterprises regardless of size; workers' compensation must also be provided by employers.

The Daily Life Security Law laid the groundwork for an ever-growing livelihood assistance program. Out of this have come laws pertaining to child welfare, physically handicapped persons' welfare, social welfare service, welfare fund loans to mothers and children, aid to the war-wounded and ill, and aid to families of deceased soldiers. The system provides direct aid for livelihood, education, housing, medical, maternity, occupational disability, and funerals. More than a thousand welfare offices throughout the nation are staffed by full-time, salaried welfare secretaries and assisted by voluntary help. Institutions have been established to care for the aged, those on relief, and those needing rehabilitation. Numerous private organizations assist government agencies. There are special pension programs for public employees, private school teachers and employees, and employees of agricultural, forestry, and fishery cooperatives.

Women make up over 40% of the labor force. Although the law prohibits wage discrimination, there remained a significant gap between earnings for men and women in 2004. Women also retain the responsibility of child care and household chores. Domestic abuse and other violence against women are often unreported due to societal concerns about shame in the family. The government is taking some action in providing shelter facilities and passing laws to protect victims. There is also an increase in the molestation of women on the railways while commuting. Sexual harassment in the workplace is prevalent.

Discrimination against ethnic Koreans and other non-Japanese minorities also continued. Human rights are generally respected by the government, but there have been some reports of abuse of detainees and prisoners.

Ethnic Groups

In 2004, 99% of the population was Japanese while only 1% belonged to other ethnic groups (mostly Korean, Chinese, Brazilian, and Filipino). Although it is known that the Japanese are descended from many varied peoples of Asia, there is no agreement as to origins or specific ethnic strains. In physical characteristics, the Japanese belong to the Mongoloid group, with faint admixtures of Malayan and Caucasoid strains. Waves of migration from the continental hinterland reached Japan during the end of the Paleolithic period, blending into a complicated and diverse ethnic, linguistic, and cultural system. It is believed that the Japanese have their roots in the Old Stone Age race of at least 30,000 bc. A major migration appears to have taken place in the 2nd and 3rd centuries ad, and by the 4th century this group, called the Yamato clan, established a monarchy in the present Nara prefecture. Other ethnic strains may have come from Indonesia and China in the south, Korea in the west, and Siberia and Alaska in the north.

The one remaining distinct ethnic group in Japan is the Ainu. These people, living on the northern island of Hokkaid, are physically distinct from the contemporary Japanese, having Nordic-like features, including more pervasive facial and body hair. There is no agreement as to their origins; their current population is less than 20,000.


Japanese is the official language. Most linguists agree that Japanese is in a language class by itself, although there is some inconclusive evidence that traces it to the Malayo-Polynesian language family. In vocabulary, Japanese is rich in words denoting abstract ideas, natural phenomena, human emotions, ethics, and aesthetics, but poor in words for technical and scientific expression. For these latter purposes, foreign words are directly imported and written in a phonetic system (katakana). A distinct characteristic is the use of honorifics to show proper respect to the listener and his social status.

Written Japanese owes its origin almost entirely to Chinese forms. Having no indigenous script, the Japanese since the 5th century have used Chinese characters, giving them both an approximate Chinese pronunciation and a Japanese pronunciation. In addition, the Japanese invented phonetic symbols (kana) in the 9th century to represent grammatical devices unknown to the Chinese.

Attempts have been made to reduce the complexity of the written language by limiting the number of Chinese characters used. The government has published a list of 1,850 characters for use in official communications. Newspapers adhere to this list.


The Japan Chamber of Commerce includes several regional and local branches. Workers and employers are represented by a number of trade organizations, including the umbrella organizations of the General Council of Trade Unions, the Congress of Labor Unions, and Federation of Employers Associations. Specialized business and industry organizations include the Japan Silk Association, the Japan Whaling Association, and the Japan Pearl Exporters' Association.

The Japan Industrial Safety and Health Association serves an important role in regulating workplace safety standards. The Japan Medical Association promotes research and education on health issues and works to establish common policies and standards in healthcare. There are several other associations dedicated to research and education for specific fields of medicine and particular diseases and conditions. There are numerous professional associations representing a wide variety of careers.

There are numerous youth organizations, including the Scout Association of Japan, Girl Guides, YMCA/YWCA, and the Japan Youth Association. Numerous sports associations and clubs promote amateur competition in such pastimes as tae kwon do, horse racing, squash, table tennis, track and field, and cricket.

The Institute of Art Research and the National Institute of Japanese Literature are important in the cultural field. The Society for International Cultural Relations, established in 1934, is active in the publishing field and in cultural exchange. The Motion Picture Association of Japan is a prominent entertainment organization. There are many associations and clubs available for hobbyists.

There are national chapters of the Red Cross Society, CARE, Greenpeace, Habitat for Humanity, and Amnesty International.


According to a 2002 report by the Agency for Cultural Affairs, about 49.9% of the population practice Shintoism and 44.2% practice Buddhism. Religious identities are not mutually exclusive, however, and many Japanese maintain affiliations with both a Buddhist temple and a Shinto shrine.

Shinto, originally concerned with the worship of spirits of nature, grew under the influence of Chinese Confucianism to include worship of family and imperial ancestors, and thus provided the foundation of Japanese social structure. Shinto became an instrument of nationalism after 1868, as the government officially sponsored and subsidized it, requiring that it be taught in the schools and that all Japanese belong to a state Shinto shrine. After World War II, Shinto was abolished as a state religion, and the emperor issued an imperial prescript denying divine origin. Today, Shinto exists as a private religious organization.

Buddhism is considered by some the most important religion in Japan. Introduced through China and Korea around ad 552, Buddhism spread rapidly throughout Japan and has had considerable influence on the nation's arts and its social institutions. There are 13 sects (shu) and 56 denominations, the principal shu being Tendai, Shingon, Jodo, Zen, Soto, Obaku, and Nichiren. Japanese Buddhism was founded on the Mahayana school, which emphasizes the attainment of Buddhahood, whereas the Hinayana Buddhism of India emphasizes obedience to commandments and personal perfection. The great temples and gardens of Japan, the famous Japanese tea ceremony (chanoyu), and Japanese flower-arranging arts (ikebana) owe their development to the influence of Buddhism.

Religions designated as other are practiced by about 6% of the population (including 0.9% practicing Christianity). "Other" faiths that were founded in Japan include Tenrikyo, Seichounoie, Sekai Kyusei Kyo, Perfect Liberty, and Risho Koseikai. Christianity, introduced to Japan by the Jesuit St. Francis Xavier in 1549, was first encouraged by feudal lords but then banned in 1613, often under penalty of death. After that time, a unique sect known as "hidden Christians" developed, with no tradition of churches or public displays of faith and a syncretic doctrine that incorporated local ideas and history. The prohibition against Christianity was in force until 1873, following the reopening of Japan to international relations in 1854. Following World War II, when the emperor lost his claim to divinity, some Japanese gave up Shinto and converted to Christianity or Judaism.

After World War II, a considerable number of new religious groups sprouted up. One of these, the Soka-Gakkai, a Buddhist offshoot, controlled a political party (Komeito), the third-strongest political group in Japan, until politics and religion were officially separated in 1970. In addition to the established and new religions, Confucianism, an ethical system originating in China, has strongly influenced Japanese society since the earliest periods, providing underpinnings for some characteristically Japanese attitudes.

Science and Technology

The Japanese rank second only to the United States in spending on scientific research and technology development. However, in Japan, 80% of all research and development (R and D) is carried out by industry, in contrast to the United States, where industry undertakes about half of all R and D (the US government supports the rest). This is important because industry is more likely to support the type of research that will result in new technologies and products. For many people, this breakdown of R and D funding explains why Japan has become such an economic powerhouse. Much more of the total R and D budget is focused on near-term and commercial science and technology. Some of the more successful applications of the fruits of Japanese R and D include high-speed trains, robotics, semiconductor chips, telecommunications, cancer research, and environmental technologies.

In 1987-97, science and engineering students accounted for 21% of college and university enrollments. In 2002, of all bachelor's degrees awarded, 18.6% were in the sciences (natural, mathematics and computers, and engineering) In that same year, there were 5,085 scientists and engineers per million population actively engaged in R and D. In 2000 (the latest year for which the following data was available) R and D spending in Japan totaled $98,242.931 million, or 2.98% of GDP, for which business accounted for 72.4%, and government 19.6%. Higher education, that same year, accounted for 7.6%, while foreign sources provided 0.4%. Despite Japan's economic downturn in the 1990s, it was likely that investments in both equipment and personnel would grow. In 2002, high-tech exports were valued at $94.730 billion and accounted for 24% of manufactured exports.

In terms of the Japanese government's role in national science and technology, three ministries are important. The Ministry of Education, or Monbusho, provides most of the support and funding for scientific education and training at the university level in Japan. In the 1990s, Monbusho led a national effort to improve science and technology education at universities, particularly in "basic" research (areas where research does not necessarily have to pay off in commercial products). Another organization, the Science and Technology Agency (STA) promotes science and technology policies, and acts as the prime minister's leading policy and budgetary agency. It performs this function through annual "white papers" which describe the current state--and future goals--of Japanese science and technology. The Ministry of International Trade and Industry (MITI) is probably the ministry best known by Americans. MITI promotes and protects Japanese industry by sending them signals and giving guidance to those firms which undertake research and development. MITI has been instrumental in providing close government-industry cooperation in many high technology fields, including computers, electronics, and biotechnology.

Regional research institutions such as Tskuba Science City and Kansai Science Park also play a role in fostering Japanese research and development. Their growth since the 1970s has begun to shift some of the focus and power of the national government and industry in Tokyo to the regional prefectures. International cooperation with the United States in areas like global warming and space launches may create new opportunities for greater scientific research at local, regional, and national levels in Japan.

Japan has numerous universities and colleges that offer courses in basic and applied sciences. The country's National Science Museum, founded in 1877, is located in Tokyo. The University of Tokyo has botanical gardens that were established in 1684.


Despite its rugged terrain, Japan has a highly developed transportation system. In 2004, Japan had 23,577 km (14,664 mi) of railways, of which about 86% was 1.067-m narrow gauge. Of that total, 13,277 km (8,258 mi) were electrified. Standard gauge lines totaled 3,204 km (1993 mi), all of which are electrified. The government-owned Japan National Railways (JNR) was privatized in April 1987 and divided into six railway companies. Feeding into these six lines were 144 other private railroads. Like their counterparts elsewhere, Japan's rail lines face increasing competition from automotive, sea, and air transport, as well as rising operating costs. High-speed lines, however, have been successful in partially meeting these problems; the most famous of these is the Shinkansen, which opened to traffic in October 1964 between Tokyo and Osaka and was extended in March 1975 to Fukuoka in northern Kyushu. In 1984, the Shinkansen superexpress trains covered the 1,069 km (664 mi) between Tokyo and Fukuoka in less than seven hours, with maximum speeds of 210 km/hr (130 mph). In 1982, the first section of the northern Shinkansen line, between Tokyo and Omiya, began operations. This line was extended in 1983 to Niigata and to Morioka, in northern Honshu. By far the longest railway tunnel in the world, the 54.2 km (33.7 mi) Seikan tube linking Honshu with Hokkaid, was opened in 1983 and completed in 1985. The tunnel, lying beneath the Tsugaru Strait, cost well over $2 billion. A bridge links Honshu and Shikoku. Subway lines serve nine cities--Tokyo, Osaka, Nagoya, Kobe, Yokohama, Sapporo, Kyoto, Fukuoka, and Sendai. There are 410 km (255 mi) of track, with 196 km (122 mi) in Tokyo's 11 lines. Since 1964, downtown Tokyo has also been linked with that city's Haneda Airport by a monorail transport system, and several other monorails have been put into operation. In addition, a 7 km (4.3 mi) monorail serves the city of Yokohama.

Roads have become the most important means of domestic transport. Motor vehicles in 2003 numbered 55,212,593 passenger cars and 17,312,192 commercial vehicles, up from 25,848,000 and 8,306,000, respectively, in 1985. To speed traffic flow, a total of 6,946 km (4,320 mi) of expressways were open to traffic in 2002. In total, there were 1,177,278 million km (732,267 mi) of roadways, of which about 914,745 km (568,971 mi) were paved.

Japan is one of the world's great maritime nations. The chief ports are Yokohama (for Tokyo), Nagoya, and Kobe. In 2005, Japan's merchant fleet included 702 ships of 1,000 GRT or more, totaling 10,149,196 GRT. Since 1959, Japan has emerged as the world's leading shipbuilder, but output declined in the late 1970s and 1980s in the face of a worldwide recession and increased competition from the Republic of Korea (ROK). Although Japan had 1,770 km (1,101 mi) of navigable inland waterways, as of 2004, they are not used by ocean-going vessels, which prefer to use the country's inland seas.

Japan had an estimated 174 airports in 2004. As of 2005 a total of 142 had paved runways, and there were also 15 heliports. Principal domestic airports include Haneda in Tokyo, Itami in Osaka, Itazuke in Fukuoka, and Chitose on Hokkaid. Principal international facilities include Kansai International at Osaka and New Tokyo International at Tokyo. Japan Air Lines (JAL), the nation's major domestic and international airline, began operations in 1952 and inaugurated international flights in 1954. All Nippon Airways, established in 1957, began as a domestic system serving smaller areas of the country and acting as a feeder line to JAL but now serves overseas routes; it began to carry freight in 1987. In 2003, Japan's airlines performed 7,985 million freight ton-km. In that same year, about 103.606 million passengers were carried on scheduled domestic and international airline flights.

Famous Japanese

Murasaki Shikibu (late 10th-early 11th cent.) was the author of The Tale of Genji, probably the best-known Japanese literary classic in English since it was first translated in the 1920s. Zeami (Motokiyo, 1363-1443) was an actor who established Noh theater and wrote a number of plays that have been part of the Noh repertoire ever since. Monzaemon Chikamatsu (1653-1724) wrote plays for the Bunraku theater, many of which later became part of the repertoire of Kabuki. Basho (Matsuo Munefusa, 1644-94) perfected the writing of the poetic form now known as haiku. In this genre, three other poets are also known: Buson Yosa (1716-83), Issa Kobayashi (1763-1827), and the modern reformer Shiki Masaoka (1867-1902). Ryunosuke Akutagawa (1892-1927) is best known for his story "Rashomon." Prominent modern novelists include Jun'ichiro Tanizaki (1886-1965); Yasunari Kawabata (1899-1972), winner of the 1968 Nobel Prize for literature; Kobo Abe (1924-93); Yukio Mishima (1925-70); Shusako Endo (1923-96); Haruki Murakami (b.1949); and Kenzaburo Oe (b.1935) who won the 1994 Nobel Prize in literature. A leading modern writer and Zen Buddhist scholar was Daisetz Teitaro Suzuki (1870-1966).

In art, Sesshu (1420-1506) was the most famous landscape artist of his day. Ogata Korin (1658-1716) was a master painter of plants, animals, and people. The leader of the naturalist school was Maruyama Okyo (1733-95). The best-known painters and wood-block artists of the "ukiyo-e" style were Kitagawa Utamaro (1754-1806), Katsushika Hokusai (1760-1849), Saito Sharaku (fl.1794-95), and Ando Hiroshige (1797-1858). Four 20th-century Japanese architects whose work has had a marked influence on international style are Mayekawa Kunio (1905-86), Hideo Kosaka (1912-2000), Kenzo Tange (1913-2005), and Yoshinobu Ashihara (1918-2003).

Noted Japanese film directors include Kenjii Mizoguchi (1898-1956), Yasujiro Ozu (1903-63), and Akira Kurosawa (1910-92). Toshiro Mifune (1920-97) was the best-known film star abroad. Important composers include Toshiro Mayuzumi (1929-97) and Toru Takemitsu (1930-96). Seiji Ozawa (b.1935) is a conductor of world renown. The leading home-run hitter in baseball history is Sadaharu Oh (b.1940), manager of the Yomiuri Giants, who retired as a player for the same team in 1980 after hitting 868 home runs.

Hideyo Noguchi (1876-1928), noted bacteriologist, is credited with the discovery of the cause of yellow fever and is famed for his studies on viruses, snake poisons, and toxins. Hideki Yukawa (1907-81), Japan's most noted physicist, received the 1949 Nobel Prize for research on the meson. In 1965, Shinichiro Tomonaga (1906-79), a professor at Tokyo University of Education, became one of the year's three recipients of the Nobel Prize for physics for work in the field of quantum electrodynamics. Leo Esaki (b.1925) won the Nobel Prize for physics in 1973; Kenichi Fukui (1918-1998) shared the 1981 chemistry award; and Susumu Tonegawa (b.1939) won the 1987 medicine award. Hideki Shirakawa (b.1936) shared the 2000 Nobel Prize in chemistry; Ryoji Noyori (b.1938) shared the chemistry prize in 2001; and Koichi Tanaka (b.1959) shared the 2002 chemistry prize. Masatoshi Koshiba (b.1926) shared the Nobel Prize in physics in 2002.

Hirohito (1901-89) became emperor of Japan in 1926. His eldest son, Akihito (b.1933), succeeded him in 1990. The leading statesman after World War II was Eisaku Sato (1901-75), prime minister from 1964 to 1972 and winner of the Nobel Peace Prize in 1974.


Japan's entire educational system was reorganized along US lines after World War II, adhering to a six-three-three-four plan (six years of primary school, three years of lower secondary school, three years of upper secondary school--full-time, part-time or correspondence--and four years of college). Education is compulsory and provided free of charge for the first nine years, from age 6 through 14. Entrance into high schools, the stage following the compulsory level, is by examination only, and most of these schools charge tuition. Coeducation has become an accepted principle.

In 2005, about 85% of age-eligible children were enrolled in some type of preschool program. Primary school enrollment that year was estimated at about 100% of age-eligible students, while secondary school enrollment was also estimated at about 100% of age-eligible students. The student-to-teacher ratio for primary school was at about 19:1 in 2005.

Would-be national and local public university students must pass entrance examinations in Japanese, English, mathematics, science, and social studies. There are three types of institutions for higher education--universities, junior colleges and technical colleges, all of which receive prefectural and national support or annual subsidies. There are 95 national universities, with each prefectural capital having one school; the remainder are in the principal cities. The largest religious bodies, both Christian and Buddhist, maintain important universities and other educational institutions. There are many special schools for the handicapped. In 2005, about 55% of the tertiary age population was enrolled in some type of higher education program; with 59% for men and 52% for women. The adult literacy rate for 2002 was estimated at about 99%.

Educational activities for adults and youths are organized both by government and private bodies. There is a board of education in each of the 47 prefectures and 3,000 municipalities and these serve as the local education authority. The central education authority is the Ministry of Education, which provides guidance and financial assistance to the local bodies. As of 2004, public expenditure on education was estimated at 3.6% of GDP, or 9.8% of total government expenditures.


The Ministry of Health and Welfare has become the central administrative agency responsible for maintaining and promoting public health, welfare, and sanitation. All hospitals and clinics are subject to government control with respect to their standards and spheres of responsibility. In 2007 there were an estimated 198 physicians, 779 nurses, 71 dentists, and 121 pharmacists per 100,000 people. Every practitioner in the field of medicine or dentistry must receive a license from the Ministry of Health and Welfare. In addition, the ministry recognizes and authorizes certain quasi-medical practices, including massage, acupuncture, moxa-cautery, and judo-orthopedics, all based upon traditional Japanese health professions. The total expenditure on health care in Japan in 2007 was an estimated 7.8% of gross domestic product.

Expanded examination and treatment have brought about a dramatic decrease in the death rate from tuberculosis, the major cause of death in the 1940s. The incidence of tuberculosis was 30 per 100,000 people in 2007. Death rates from cancer and heart disease have risen considerably and now rank among the leading causes of death, trailing cerebrovascular diseases. Japanese medical researchers have been working on research for a new cure for breast cancer.

Infant mortality dropped to 2.8 per 1,000 live births in 2007, one of the lowest in the world. Only 3% of children under age five were malnourished. The total fertility rate was 1.23 as of 2007. Immunization rates for children up to one year old are nearly 100%. Average life expectancy was 82.02 years in 2007, among the highest rates in the world.. The HIV/AIDS prevalence was less than 0.10 per 100 adults in 2007.


A severe housing shortage plagued Japan after World War II. It was estimated that in 1947, two years after the war's end, the housing deficit amounted to more than four million units. A construction program resulted in 9.7 million new units by the end of 1965. The following year, the government undertook a five-year plan for the construction of 7.6 million houses by mid-1971; the plan was designed to fulfill the goal of "one house for each family."

Housing construction peaked at 1.9 million units in 1973; despite efforts to promote construction as a means of stimulating the domestic economy, construction lagged in later years, falling to between 1.1 million and 1.5 million units in the 1980s. The decline reflected not so much a saturation of demand--many Japanese regard their housing as inadequate--as a rapid rise in land and construction costs, especially in the Tokyo, Nagoya, and Osaka metropolitan areas, which put new housing out of the reach of potential buyers.

In the mid-1990s, the average salaried worker in Tokyo could only afford a house 40 km outside the Tokyo metropolitan area. Condominiums and prefabricated homes provided much of the nation's new housing in the 1980s. In fiscal 1987, low interest rates pushed new housing starts to 1.729 million units; they declined in 1988 to 1.6 million, and fell to 1.343 million in 1991 with the start of the recession. However, in 1998, there was a total of 50.25 million dwellings, representing 13% more than the number of households. In 2000, about 58.5% of all households were living in detached houses. About 61% of all households lived in owner-occupied dwellings.


The population of Japan in 2007 was estimated by the US Census Bureau at 127,467,972, which placed it at number 10 in population among the 194 nations of the world. In 2007, approximately 20.6% of the population was over 65 years of age, with another 14.2% of the population under 15 years of age. There were 95.3 males for every 100 females in the country. According to the UN, the annual population rate of change for 2005-10 was expected to be 2.6%, a rate the government viewed as satisfactory. The projected population for the year 2020 was 123,254,059. The population density was 340 per sq km (881 per sq mi).

Japan is the only Asian country thus far with a birthrate that has declined to the level of industrial areas in other parts of the world. According to the UN, the annual population rate of change for 2005-10 was expected to be 0.1%, a rate the government viewed as too low. The estimated 10 births per 1,000 population in 2000 compares with about 343 births per 1,000 population in 1947. The steep drop since 1950 has been attributed to legalization of abortion, increased availability of contraceptives, and the desire to raise living standards.

Even with the low birth rate, Japan is one of the most densely populated countries in the world. Urban density rates were 14,245 per sq mi (5,500 per sq mi). The UN estimated that 79% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 0.27%. The capital city, Tokyo, had a population of 34,997,000 in that year. Other major metropolitan areas and their estimated populations include Osaka, 11,286,000; Nagoya, 3,189,000; Kitakyushu, 2,815,000; Sapporo, 1,828,000; Kyoto, 1,805,000; Hiroshima, 1,005,000; and Sendai, 940,000.


Japan's telecommunications system is modern and highly developed. Service, domestically and internationally, is rated as excellent. The Central Intelligence Agency reported that as of 2006, there were some 55.155 million main phone lines in use, while in 2005, there were 94.745 million mobile cellular phones in use.

A semigovernmental enterprise, the Japan Broadcasting Corp. (Nihon Hoso Kyokai--NHK), plays a large role in Japan's radio and television communications. Started in 1935, Radio Japan is also beamed by NHK throughout the world. There are four other national commercial networks. Some commercial stations are connected with large newspaper companies. Color television broadcasting began in 1960; multiplex broadcasting, for stereophonic or multiple-language programming, was made available in Tokyo and other metropolitan areas in 1978. As of 2001 there were 215 AM and 89 FM radio stations. In 2003, there were an estimated 956 radios and 785 television sets for every 1,000 people. About 193.4 of every 1,000 people were cable subscribers. In 2006 the country had about 28.322 million Internet hosts. As of December 2005, there were some 86.3 million Internet users in Jaspan, accounting for 67.1% of the population.

The Japanese press is among the world's largest in terms of newspaper circulation and is also a leader in ratio of copies to population. The leading Japanese dailies, with their 2002 morning (and evening) circulations, are: Yomiuri Shimbun, 10,224,70 (4,183,130 evening); Asahi Shimbun, 8,322,050 (4,070,610); Mainichi Shimbun, 3,976,360 (1,708,910); Nihon Keizai Shimbun, 1,796,310 (959,730); Sankei Shimbun, 1,997,700 (907,370); Tokyo Shimbun, 653,120 (348,750); Hochi Shimbun, 438,420; Osaka Nichi-Nichi Shimbun, 225,000; Chunichi Shimbun (in Nagoya), 3,075,320 (1,247,820); Nishi-Nippon Shimbun (in Fukuoka), 841,460 (187,530); Hokkaid Shimbun (in Sapporo), 677,550 (387,520); Kyoto Shimbun (in Kyoto), 504,600 (319,730); Kobe Shimbun (in Kobe), 546,080 (269,640); and Chugoku Shimbun (in Hiroshima), 732,730 (89,310).

There are two domestic news agencies: the Kyodo News Service, with 50 domestic bureaus and with foreign bureaus in every major overseas news center; and the Jiji Press, serving commercial and government circles.

The constitution of Japan provides for free speech and a free press and the government is said to respect these rights in practice. The Japanese press enjoys the reputation of having the most vigorous and outspoken in the world. It operates under the constitutional provision of absolute prohibition of censorship.


Crop production is vital to Japan despite limited arable land (13% of the total area) and the highest degree of industrialization in Asia. Steep land (more than 20°) has been terraced for rice and other crops, carrying cultivation in tiny patches far up mountainsides. With the aid of a temperate climate, adequate rainfall, soil fertility built up and maintained over centuries, and such a large farm population that the average farm has an area of only 1.2 hectares (3 acres), Japan has been able to develop intensive cultivation. Agriculture exists in every part of Japan, but is especially important on the northern island of Hokkaid, which accounts for 10% of national production. Since World War II (1939-45), modern methods, including commercial fertilizers, insecticides, hybrid seeds, and machinery, have been used so effectively that harvests increased substantially through the 1970s. Japan is the third-largest agricultural product importer in the world (after the United States and Germany), with total agricultural product imports of $41.5 billion in 2004. At $39.6 billion, Japan had the largest agricultural trade deficit in the world that year.

Almost all soybeans, feedstuffs, and most of the nation's wheat are imported. In 2004, Japan produced 10.9 million tons of rice, the chief crop. In that year, rice accounted for about 90% of all cereal production. About 39% of all arable land is devoted to rice cultivation. Overproduction of rice, as a result of overplanting and a shift to other foods by the Japanese people, led the government in 1987 to adopt a policy of decreasing rice planting and increasing the acreage of other farm products. For many years the government restricted imports of cheaper foreign rice, but in 1995 the rice market was opened to imports, as the government implemented the Uruguay Round agreement on agriculture. Other important crops and their annual production in 2004 (in thousands of tons) included potatoes, 2,839; sugar beets, 4,656; mandarin oranges, 1,200; cabbage, 2,400; wheat, 860; barley, 240; soybeans, 163; tobacco, 53; and tea, 95. In 2003, the government estimated that Japan's self-sufficiency rate for cereals was 60%; for fruits, 44%; and for vegetables, 82%.

As a result of the US-occupation land reform, which began in late 1946, nearly two-thirds of all farmland was purchased by the Japanese government at low prewar prices and resold to cultivators on easy terms. By the 1980s, nearly all farms were owner-operated, as compared with 23% before reform. A more telling trend in recent years has been the sharp growth in part-time farm households. Farmers are aging, and 84% of farm income is derived from other sources, such as industrial jobs. Although agriculture accounts for only 1% of GDP, about 10% of the population lives on farms. Despite increasing urbanization, 59% of all farms still cultivated less than one hectare (2.7 acres) in 2004. As a result, Japanese agriculture intensively utilizes both labor and machinery for production. In 2003, Japan had 2,028,000 tractors and 1,042,000 combines.

Animal Husbandry

Livestock production has been the fastest-growing sector in Japanese agriculture, with meat production increasing from 1.7 million tons in 1970 to 3 million tons in 2005. In 2004, Japan imported $8.8 billion in beef, pork, and poultry meat. In 2005 there were 9,600,000 hogs, 4,401,000 head of beef cattle, and 283,000,000 chickens. That year, pork production reached 1,250,000 tons (up from 147,318 tons in 1960); beef, 500,000 tons (142,450 tons in 1960); milk, 8,255,000 tons (1,886,997 tons in 1960); and eggs, 2,465,000 tons. Japan is the single largest recipient of US agricultural exports; over a third of Japan's meat imports come from the United States. In 2003, the government estimated that Japan's self-sufficiency rate for meat was 45%; for eggs, 96%; and for dairy products, 69%.

Energy and Power

As of August 2004, Japan was the fourth-largest energy consumer in the world, and the second-biggest importer of energy topped only by the United States. Japan's primary energy needs in 2002 were supplied by oil (49.7%), coal (18.9%), nuclear power (13.7%), natural gas (12.7%), hydropower (3.7%), and other renewable sources (1.1%).

Japan's proven oil reserves are miniscule. As of 1 January 2004, these reserves were estimated at 59 million barrels. In 2003, oil production averaged an estimated 120,000 barrels per day, of which 5,000 barrels per day consisted of crude oil. However, oil demand by Japan in 2003 was estimated at 5.57 million barrels per day. Thus imports for that year made up the difference, at an estimated average of 5.45 million barrels per day. However, Japan has been involved in exploration for petroleum and its production overseas. However, in 2000, Japan lost its drilling rights in Saudi Arabia. To make up for this loss, Japan began making investments in Iran, and has sought equity stakes in the Caspian Sea region. Japan is also looking at the Russian Far East.

As of 1 January 2004, Japan's crude oil refining capacity was estimated at 4.7 million barrels per day, spread among 32 refineries.

As of 1 January 2004, Japan's proven natural gas reserves were estimated at 1.4 trillion cu ft. However, additional deposits may lie under the seabed around Japan. Domestic natural gas output is small. In 2002, Japan's production of natural gas came to an estimated 0.10 trillion cu ft. As a result, Japan must import the vast majority of the natural gas it consumes. Demand for natural gas in 2002 was estimated at 2.67 trillion cu ft, with imports for that same year estimated at 2.57 trillion cu ft. Almost all of Japan's natural gas imports are in the form of liquefied natural gas (LNG).

Although Japan has coal reserves estimated in 2002 at 852 million short tons, Japan ceased all coal production in January 2002, when it closed its last operating mine at Kushiro, on the island of Hokkaid. With demand for coal at an estimated 179.1 million short tons in 2002, Imports of coal that year came to an estimated 175.8 million short tons. In 2002, the last year of domestic production, output came to 3.3 million short tons.

In 2002, Japan's electric power generating capacity stood at 236.995 million kW, of which conventional thermal plants accounted for 168.728 million kW, nuclear generating plants 45.907 million kW, hydropower facilities 45.907 million kW, and geothermal/other 0.709 million kW. Electric power output in 2002 came to 1036.208 billion kWh, of which 646.457 billion kWh came from conventional thermal plants, 280.339 billion kWh from nuclear plants, 81.554 billion kWh from hydropower facilities and 27.858 from geothermal/other sources. Electricity is provided by several private companies, with the public Electric Power Development Co. and the Japan Atomic Power Co. playing supplementary roles in distribution.

To reduce its reliance on oil and its carbon dioxide emissions, Japan has aggressively pursued the development of nuclear power since the 1980s. In 2002, nuclear generated electric power accounted for 27% of all power produced. According to Japan's 10-year energy plan, which was approved in March 2002, nuclear generation is to be increased by about 30% by 2011. It is anticipated that between 9 and 12 new nuclear plants would be needed. As of 2002, Japan had 51 reactors in operation, with a total capacity of 45 GW. These included the world's first Advanced Boiling Water Reactor, which came online in 1997.


Japan is one of the world's foremost fishing nations, accounting on average for about 8% of the world's catch. In 2004, the total catch was 5.73 million tons, with marine fishing accounting for 78%. The waters off Japan include cold and warm currents in which fish abound. In 2003, there were 335,938 registered fishing boats which sailed both on nearby waters and in other fishing grounds in the Pacific Ocean, the South China Sea, and the Indian and Atlantic Oceans, with a total capacity of 320,010 gross tons. Annual per capita fish and shellfish consumption from 1999 to 2001 averaged 66 kg (145 lb). In 2003, despite domestic fish production, about $12.4 billion in fish and shellfish was imported in order to satisfy domestic demand.

Whales have been prized in Japan as a source of both food and a variety of by-products, and Japanese whalers caught 2,769 whales in 1986. Japan ended commercial whaling in 1987, following the imposition of a worldwide ban on the hunting of endangered species of whales by the International Whaling Commission, but announced that it would catch 875 whales for "research" purposes. The 2003 Japanese whale catch of 820 blue and fin whales represented about 42% of the world's whale catch.

Competition for overseas fishing privileges has at various times brought Japan into conflict with Canada over salmon, with Russia over fishing in the Sea of Okhotsk (between 1905 and 1945 Japan had special treaty privileges in these waters), with the ROK and China over their limitations on Japanese fishing operations, with Australia over pearl fishing in the Arafura Sea, with Indonesia over fishing in what Indonesia regards as inland waters, and with the United States, especially over fishing in north Pacific and Alaskan waters. Japan has been adversely affected by the adoption of the 200 mi fishing zone by the United States and more than 80 other world nations. Fishing in waters claimed by the United States (where about 70% of the Japanese catch originates) or by many other nations now requires payment of fees and special intergovernmental or private agreements.

Fish culture in freshwater pools, as well as in rice paddies, has long been practiced in Japan. Aquaculture provides an additional 1.2 million tons of fish annually. The leading species cultivated are laver (nori), yesso scallops, Pacific cupped oysters, and Japanese amberjack. Seaweed culture provides winter season activity for many fishermen. Pearl culture has for more than half a century been the foundation of a valuable export industry.


Forests cover nearly 64% of the total land area of Japan and in 2000 supplied about half the domestic demand for lumber and wood pulp. Of 24 million hectares (59.5 million acres) of forest, the Japanese government owns 30%, which it maintains under strict regulations limiting overcutting. On private forest lands, cutting is less controlled. About 6.6 million hectares (16.3 million acres) are reforested with trees less than 20 years old. Forest management and erosion control are urgent necessities in a land where gradients are very steep and flooding is frequent. Japan was the world's third leading producer of paper and paperboard in 2004 (after the United States and China), at over 30.5 million tons.

About 45% of the forest area consists of plantations. The Japanese cedar (sugi), which grows in most of Japan, is the most exploited species, followed by Japanese cypress (hinoki), and Japanese red pine (akamatsu). These three species grow on 10 million hectares (24.7 million acres) of plantation forest and were first planted in the 1950s and 1960s. In 2004, roundwood production totaled 15.2 million cu m (537 million cu ft), as compared with 49.1 million cu m (1.7 billion cu ft) in 1965. Domestic roundwood production met 51% of Japan's total wood fiber demand that year (up from 48% in 2003); the rest was supplied by imports. In 2004, Japan's 9,420 sawmills processed 13.6 million tons of logs.

During the 1980s and 1990s, Japan became more reliant on imported wood to satisfy domestic demand. In 2004, Japan imported $11.1 billion in forest products, second only to the United States. Japan is the world's dominant importer of softwood and tropical hardwood logs, and has become one of the largest importers of softwood lumber, which is mainly used for housing construction.

In the early 1960s, 42 public corporations were formed to help private landowners with harvesting and replanting Japan's forests. Since timber prices have fallen 75% since the 1980s, many of these public corporations are now unable to pay back loans and are accruing large debts. As of 2004, the failure of these corporations left several prefectures with a great deal of unpaid loans.


The mining sector was the smallest of Japan's industrial-based economy, accounting for 0.2% of GDP in 2003. The mineral-processing industry, however, was among the world's largest and most technologically advanced, accounting for 6.3% of Japan's GDP, in 2003 and it played a key role in supplying steel, nonferrous metals, and chemicals for the country's world-class manufacturing sector, as well as to those of the region. Japan is among the largest producers and consumers of cadmium, and a leading producer of selenium metal, electrolytic manganese dioxide, titanium sponge metal iodine, pig iron, nickel metal, crude steel, copper metal, diatomite, zinc metal, and cement. Japan also produced and had considerable resources of limestone, carbonate rocks (construction aggregates and dolomite), clays (bentonite and fire clay), pyrophyllite, and silica. Since the beginning of the 20th century, most mineral production has undergone a steady decline, and Japan has become a net importer of minerals, relying heavily on imports for petroleum, iron ore, chromium, cobalt, copper concentrate copper metal, primary aluminum, ilmenite, rutile, natural gas, gallium, uranium, manganese (for all its requirements), indium, nickel and coal, although coal accounted for slightly more than half of all mineral production by value. With the exception of gold and zinc, Japan's ore reserves for other minerals, especially oil, gas, and metallic minerals, were very small.

Of Japan's $470.7 billion in total exports in 2003, minerals, mineral-related chemicals, and processed minerals products were valued at $38.5 billion; iron and steel products, and nonferrous, rare, and other base metals totaled $27.3 billion; processed mineral products of asbestos, cement, ceramics, glass, mica, and stone, $4.7 billion; mineral-related chemicals and fertilizer, $2.4 billion; precious and semiprecious stones, and precious metals, $2.1 billion; salt, sulfur, earths, stone, plastering materials, lime, and cement, $2.0 billion.

Among metal minerals, preliminary data for 2003 shows that Japan produced 8,143 kg of mine gold (metal content), and 78,862 kg of mine silver. In addition, Japan produced the metal minerals alumina, antimony oxide, high-purity arsenic, bismuth, mine copper, germanium oxide, iron ore, iron sand concentrate, mine lead, manganese oxide, rare-earth oxide (including oxide of cerium, europium, gadolinium, lanthanum, neodymium, praseodymium, samarium, terbium, and yttrium), elemental selenium, high-purity silicon, elemental tellurium, titanium dioxide, mine zinc, and zirconium oxide. Gold ore reserves totaled 178,762 kg (metal content); and zinc ore (metal content), 3.25 million tons.

Among industrial minerals, preliminary output totals for 2003 were: hydraulic cement, 68.766 million tons; iodine, 6,524 metric tons; diatomite, 1850,000 metric tons; limestone (crushed), 163.565 million tons; dolomite (crushed), 3.579 million tons; bentonite, 425,945 tons (estimated); crude fire clay, 460,000 metric tons (estimated); pyrophyllite (from Nagasaki, Okayama, and Hiroshima prefectures), 600,000 metric tons (estimated); silica sand, 4.699 million tons; and silica stone (quartzite), 12.838 million tons. In addition, Japan produced asbestos, elemental bromine, kaolin clay, feldspar, aplite, gypsum, quicklime, nitrogen, perlite, salt, sodium compounds (soda ash and sulfate), sulfur, talc, and vermiculite. Reserves of iodine totaled 4.9 million tons; limestone, 57.9 billion tons; dolomite, 1.19 billion tons; pyrophyllite, 160.4 million tons; silica sand, 200.95 million tons; white silica stone, 880.7 million tons; and kaolin, 36.03 million tons.

Japan's mineral industry consisted of a small mining sector of coal and nonferrous metals, a large mining sector of industrial minerals, and a large minerals-processing sector of ferrous and nonferrous metals and industrial minerals. Mining and mineral-processing businesses were owned and operated by private companies. There were two major nonferrous metal mines and around 40 major industrial mineral mines in 2003.About 50,000 people were employed by Japan's mining sector in 2003. The mineral-processing industry produced, among other things, inorganic chemicals and compounds, ferrous metals, industrial minerals, nonferrous metals, petrochemicals, and refined petroleum products--for domestic consumption and for exports.

The government, through its Metal Mining Agency of Japan (MMAJ), collaborating with the Japan International Cooperation Agency, continued to promote overseas mineral exploration by providing loans and technical assistance, and by carrying out basic exploration. In line with its mineral policy to secure and diversify its long-term supply of raw materials, Japan was expected to continue its active search for direct investment in joint exploration and development of minerals in developed and developing countries. The targeted minerals were antimony, chromium, coal, columbium (niobium), copper, gold, iron ore, lead, lithium, manganese, molybdenum, natural gas, nickel, crude petroleum, rare earths, silver, strontium, tantalum, titanium, tungsten, vanadium, and zinc.

Banking and Securities

Japan's highly sophisticated banking system continued to play a dominant role in financing the country's and the world's economic development, despite Japan's decade long recession. In the mid-1980s, while the United States was becoming a debtor nation, Japan became the world's largest creditor. Banks provide not only short-term but also long-term credit, which often in effect becomes fixed capital in industry. In terms of sheer size, Japanese banks occupy some of the top spots in worldwide bank ratings.

The controlling national monetary institutions are the Bank of Japan (founded in 1882) and the Ministry of Finance. The Bank of Japan, as central bank, has power over note issue and audits financial institutions to provide guidance for improving banking and management practices. Ceilings for interest rates are set by the bank, while actual rates, commissions, and discounts are arranged by unofficial agreements among bankers and other financial institutions, including the National Bankers' Association. A new banking law, replacing the National Banking Law of 1928, was adopted in 1982. Its objectives were to increase competition in the financial world by enabling banks to sell bonds and by authorizing both banks and securities firms to sell commercial paper and certificates of deposit.

Eleven important city banks, with branches throughout the country, account for about two-thirds of all commercial bank assets, the rest accruing to 131 regional banks, 7 trust banks, and 83 foreign banks. In addition, 112 foreign banks have representative offices in Japan. Of special interest are the postal savings facilities, which are used by many Japanese families and have assumed many of the aspects of a huge state-owned banking business.

The Foreign Exchange Law was changed to totally liberalize cross-border transactions in 1998. Important foreign exchange banks include the city banks, long-term credit banks, trust banks, major local banks, major mutual loan and savings banks, and the Japanese branches of foreign banks. Such governmental financial institutions as the Japan Export-Import Bank, the Central Bank for Commercial and Industrial Associations, and the Central Bank for Agriculture and Forestry also participate in foreign exchange markets.

The rapid expansion of bank lending and the importance of land and stocks as assets in Japan's financial sector have exposed its financial institutions to the risks stemming from falling asset prices. Thus one of the root problems of Japan's difficulty in returning to a trend rate of GDP growth lies in the fragility of the financial sector. Banks and other financial institutions have been rocked by the huge sums of nonperforming debt, stemming from an earlier lending spree based on inflated land values as collateral. In the aftermath of the collapse of the "bubble economy," many of the generous loans extended, especially to land and property developers, cannot be repaid or even serviced. Japan's 21 major banks, including the 11 city banks, wrote off about Y11 trillion ($102 billion) of bad debts at the end of March 1996.

The bad debt held by the seven failed jusen (housing loan companies established by banks and agricultural financiers), which were liquidated partly at public expense, led to huge secondary losses in other areas of the financial sector. The liquidated jusen moved their assets to the newly established Housing Loan Administration Corp., which had the responsibility, from the beginning of its operations in October 1996, of recovering loans from the seven companies. This was unlikely, however, since not only would many property companies go bankrupt, but also much of the bad debt was extended illegally or to companies associated with yakuza (gangsters). Consequently, several jusen executives were arrested in 1996 on charges of alleged aggravated breach of trust.

The most dramatic merger was that between the Bank of Tokyo and Mitsubishi Bank in April 1996. This "mega-merger" created the world's largest bank, which became highly competitive in global financial markets. In 1999, three Japanese banks: Dai-Ichi Kangyo Bank, Fuji Bank, and IBI, announced a merger worth more than $1.3 trillion, surpassing all other large financial institutions. The other premier Japanese banks in 1999 were Sumitomo Bank, Sanwa Bank, and Sakura Bank. The International Monetary Fund reports that in 2001, currency and demand deposits--an aggregate commonly known as M1--were equal to $2,318.7 billion. In that same year, M2--an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds--was $5,293.5 billion.

In 2002 (the latest year for which data was available), the money market rate, the rate at which financial institutions lend to one another in the short term, was 0.01%. In 2005, the discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 0.1%. At the end of 2005, the nation's gold bullion deposits totaled 24.60 million fine troy ounces.

Major securities exchanges are in Tokyo, Hiroshima, Fukuoka, Nagoya, and Osaka. Small regional exchanges are in Kyoto, Niigata, and Sapporo. Although prior to World War II most stocks were held by large business firms (zaibatsu), stocks are now available for public subscription. The Tokyo Stock Exchange, the largest in the world, is the most important in Japan.

In the late 1980s, there were three categories of securities companies in Japan, the first consisting of the "Big Four" securities houses (among the six largest such firms in the world): Nomura, Daiwa, Nikko, and Yamaichi. The Big Four played a key role in international financial transactions and were members of the New York Stock Exchange. Nomura was the world's largest single securities firm; its net capital, in excess of us$10 billion in 1986, exceeded that of Merrill Lynch, Salomon Brothers, and Shearson Lehman combined. In 1986 Nomura became the first Japanese member of the London Stock Exchange. Nomura and Daiwa were primary dealers in the US Treasury bond market. The second tier of securities firms were affiliates of the Big Four, while some were affiliated with banks. In 1986, 83 of the smaller firms were members of the Tokyo Securities and Stock Exchange. Japan's securities firms derived most of their incomes from brokerage fees, equity and bond trading, underwriting, and dealing. Other services included the administration of trusts. In the late 1980s a number of foreign securities firms, including Salomon Brothers and Merrill Lynch, became players in Japan's financial world.

The Tokyo Securities and Stock Exchange became the largest in the world in 1988, in terms of combined market value of outstanding shares and capitalization, while the Osaka Stock Exchange ranked third after Tokyo and New York. As of 2004, there was a combined total of 3,220 companies listed on the Tokyo Stock Exchange and the JASDAQ, which had a combined market capitalization of $3,678.262 billion. In 2004, the TOPIX index rose 10.2% from the previous year to 1,149.6.

Economic Development

Japan's phenomenal economic growth since the 1950s has been based on an efficient blend of two economic tendencies. First is government activism in national planning and implementation, with guidance of the largely free economy via sophisticated and powerful monetary and fiscal policies. Second is the distinctively Japanese way of coupling largely private ownership of assets with conservative, public-spirited management. Especially significant was the role of the Ministry of International Trade and Industry (MITI), which coordinated national industrial policies consistent with economic and social growth. In a unique government-industry collaboration sometimes referred to overseas as "Japan, Inc.," MITI selected and nurtured industries targeted as important to Japan's future economic growth. Industries so targeted have included chemicals, iron and steel, shipbuilding, and transistor radios in the 1960s; automobiles and electronics in the 1970s; and computers, computer chips, and other high-technology industries for the 1980s. In addition to stimulating new industries, MITI also smoothed the way for plant closings and worker retraining in industries targeted for de-emphasis, such as textiles in the 1970s and the ailing coal-mining and shipbuilding industries in the 1980s. MITI also assumed an active role in lessening Japan's positive trade imbalances through a variety of import promotion measures, in collaboration with both domestic companies and foreign firms. Close ties between government and industry are illustrated by the ministries' issuance of informal "administrative guidance" to Japanese companies, the frequent placement of retired bureaucrats in Japanese companies and trade associations, and the delegation of quasi-regulatory authority to trade associations (which are often allowed to devise and regulate their own insider rules). In 2001, MITI was reorganized as the Ministry of Economy, Trade, and Industry (METI).

The objectives of maintaining rapid GNP growth, controlling inflation, and developing Japan's social and industrial infrastructure have been the concern of the Economic Planning Agency, which produced the successful Ikeda plan (to double the national income between 1961 and 1970) and released projections of key indicators at frequent intervals. (In 2001, the offices and functions of the Economic Planning Agency were reassigned to the newly-formed Cabinet Office, where they function as a secretariat to the Council on Economic and Fiscal Policy.) In the main, the Ikeda plan consisted of a series of projections of growth in a free market economy, with the basic assumption--the continued growth of Japan's overseas trade--largely outside of government control. During the plan's 10-year span, an annual growth of 11% in GNP was realized, as against the forecast rate of 7.2%. An economic and social development plan (1967-75) accomplished a GNP growth rate of 10.6%, as against 8.2% projected.

A second economic and social plan (1970-75) projected a continued annual growth rate of 10.6%. The 1973 world oil crisis and its aftermath severely shook Japan's trade-dependent economy, however; in 1974, the GNP actually shrank by 1.8%, the first such negative growth in three decades. In 1975, the cabinet approved a new economic and social plan for 1979-85 calling for an average annual growth rate of 5.7%. However, the impact of the second oil crisis in 1978 necessitated downward revisions of projected growth targets. Plans to stimulate the economy by increasing public-works spending and cutting taxes were approved in October 1983 and in May 1987. Also enacted in 1989 was a value-added tax to strengthen the government's revenue base while allowing reductions in personal and corporate income tax.

In 1988, a five-year plan was adopted to sustain real GNP growth at 3.8% per year, maintain low unemployment (2.5% per year), contain inflation, reduce the country's trade surplus, and improve the quality of life through a shorter work week and stabilized property prices. Many of these objectives were achieved or surpassed in the closing years of the decade. After 1992, however, the economy's downturn was likened by some analysts to the 1974 recession in its severity and length. Economic indicators included steep declines and sluggish recovery in the stock market index after 1989, falling real estate prices, as well as a shrunken rate of GNP growth, despite surging exports. To prompt a recovery, the Ministry of Finance approved large stimulus packages for 1992 and 1993, totaling $85.6 billion and $119 billion in expenditures, respectively. Under the Structural Impediments Initiative, the government sought to sustain growth while also reducing the country's external trade imbalances. Among the main steps taken under the Initiative was a 10-year program targeting the expenditure of up to $8 trillion for the construction or renovation of airports, bridges, roads, ports, telecommunications systems, resorts, retirement communities, medical facilities, and other forms of public infrastructure development. Real growth during the 1990s hovered around 1% a year, however. The Asian Tigers, such as Singapore, Taiwan, and Hong Kong, saw their economies grow at a much higher rate than Japan's, and China's economic growth rate of 10% a year during the 1990s. In 1999, Japan began a tentative recovery from its longest and most severe recession since the end of World War II. By 2005, the economy was growing by a rate of approximately 2.3%.

Japan's financial assistance to developing countries and international agencies has grown significantly, making it one of the world's leading donor countries. The government has committed itself to large increases in official development assistance to developing countries and multilateral agencies since the late 1980s. Among the top recipients of bilateral ODA from Japan have been Indonesia, China, the Philippines, Thailand, Bangladesh, and Malaysia. Japan's increasing financial assistance to developing countries like China and Indonesia is an indication that the Japanese government is willing to sacrifice short term gain for longer term prosperity and stability. In essence, Japan is helping to create viable trading partners; and since Japan is a trading state, this strategy will enhance Japan's economic development over the long term. From 1992-2001, Japan was the largest donor of ODA, in terms of raw dollars. That was until 2001, when the United States reclaimed that position, and Japan's amount of aid dropped by nearly $4 billion. A key factor accounting for this was the 12.7% depreciation of the yen. In 2004, Japan donated $8.859 billion in ODA, or 0.19% of GNP, down from $9.678 billion in 2001 (0.23% of GNP).


Japan's economy is the most technologically-advanced in Asia and the second most technologically-advanced in the world, behind the United States. Total GDP at market exchange rates in 2005, estimated at $4.617 trillion, was second only to the United States, but in purchasing power parity (PPP) terms, given the high price level in Japan and the low price level in China, Japan's estimated GDP of $4.008 trillion (PPP) put it third behind the United States and China. In per capita GDP at market exchange rates, Japan was among the leading nations of the world, at an estimated $36,236 in 2005. GDP per capita in PPP terms was $31,457 that year. Japan was the first Asian country to develop a large urban middle-class industrial society. It was also the first Asian country where a sharp reduction in the birthrate set the stage for notable further increases in per capita income.

Since 1952, the number of farmers has fallen sharply, while expansion has been concentrated in industry and trade. The agriculture sector in 2004 accounted for only 1.3% of the GDP, although it remained highly subsidized, employing a relatively high 5% of the labor force. Domestic raw materials are far too limited to provide for the nation's many needs, and imports must be relied on for such basics as raw cotton, raw wool, bauxite, and crude rubber, with fuels and foodstuffs heading the list of materials. The primary engine of Japan's modern growth has been the need to pay for these basic imports with manufactured exports. The exchange of high value-added finished products for low value-added commodities and raw materials has been the basis for both its high level of industrialization and its persistently high trade surpluses. Up until the mid-1980s, economic development depended on continued expansion in exports. With the steady appreciation of the yen in real terms after 1985, however, the country's economic structure underwent some adjustment. Business investment became the second major engine of growth. Facilitated by growing wage rates, favorable credit conditions, cuts in personal and corporate income tax rates and other stimulus measures by the government, domestic demand as well as direct foreign investment have played an increasingly important role as a source of growth in recent years.

After a period of recovery following World War II (from 1947 to 1960), Japan entered into about 15 years of rapid growth (1961 to 1975) that was arrested by the world oil crisis, signaled by the first oil shock in 1973. In 1974, for the first time since World War II, the GNP fell (by 1.8%). The recession was cushioned, however, by the nation's ability to improve its trade balance (by $11 billion) by increasing exports while reducing imports. The recovery of the mid-1970s was slowed by the second oil shock, in 1978-79, and although the Japanese economy continued to outperform those of most other industrial countries, growth in GNP slowed to an estimated 4.1% yearly in real terms for 1979-82, compared with 8.9% for 1969-72.

Meanwhile, the continued stimulation of exports, especially of automobiles and video equipment, combined with Japan's restrictive tariffs and other barriers against imports, led to increasingly strident criticism of the nation's trade practices in the United States and Western Europe. As early as 1971, Japan agreed to limit textile exports to the United States, and in the 1980s it also imposed limits on exports of steel, automobiles, and television sets. Similar limits were adopted for exports to Canada, France (where criticism focused on videocassette recorders), and West Germany. Nevertheless, Japan's trade surpluses with the United States and other countries continued to swell through the mid-1980s, helped by a number of factors, most notably the misalignment of major currencies, particularly between the dollar and the yen.

During the late 1980s, a 70% appreciation of the yen's value against the US dollar helped narrow Japan's trade surplus by 19% for two consecutive years in 1988/89 and 1989/90. This was accompanied by low rates of unemployment as well as strong growth in consumer spending and private investment, in turn contributing to a healthy 5% annual growth rate in the GNP between 1987 and 1990. The end of the period of high growth, 1975 to 1990, coincided with the collapse of the Cold War confrontation. The period that followed, after 1991 and until about 2003, had been characterized by very low to stagnant growth, and three dips into recession. The investment boom of the late 1980s, known retrospectively as the bubble economy, had its corresponding bust from 1991 to 1994, leaving mountains of debts that still constitute a drag on the economy. GDP growth rates fell to 1.0%, 0.3%, 0.6%, and 1.5% in the period 1992 to 1995. A spurt of recovery to 5% in 1996 was cut short by the Asian financial crisis of 1997, and Japan saw its first recession year since 1974 when GDP declined 1% in 1998.

Recovery from the Asian financial crisis was itself cut short in 2001, with the onset of a global slowdown and the aftershocks of the 11 September 2001 terrorist attacks on the United States: real GDP growth dropped from 2.2% in 2000 to -0.5% in 2001. The depth of recessions have been minimalized by massive stimulus packages and tax cuts across the period of stagnant growth. Recently, major tax cuts were made in 1999 and 2003, and in 2001, the government implemented its ninth massive stimulus package since 1992, this one for Y11 trillion (about $960 billion). Total national debt, at 164.3% of GDP in 2004, is proportionately the highest among developed countries.

As of 2006, however--despite a currency that rose more than 20% from 2002-05--Japan's economy was beginning to show signs of improvement. GDP was forecast to grow by 2.3% in 2005 and by 2% in 2006. Japan remained set to end persistent deflation in 2006, although fiscal tightening could slow GDP growth. Consumer prices were forecast to fall by 0.1% in 2005 and to rise by 0.3% in 2006. The unemployment rate was forecast to fall from 3.9% in 2006, to 3.8% in 2007, to just 3.5% in 2008.

Public Finance

Plans for the national budget usually begin in August, when various agencies submit their budget requests to the Ministry of Finance. On the basis of such requests, the ministry, other government agencies, and the ruling party start negotiations. The government budget plan usually is approved by the Diet without difficulty, and the budget goes into effect in April. Deficits, financed by public bond sales, have steadily increased in size since the 1973 oil crisis. As a result, the ratio of gross debt to GNP has risen from 8% in 1970 to 60% by 1987. By 1990, debt servicing was absorbing over 20% of budgeted expenditures. Since 1982, Japan has pursued tight fiscal policies and has attempted to constrain government debt. In June 1987, however, as a response to appeals from other nations to reduce international imbalances, Japan initiated a $35 billion public works spending package, followed up by $10 billion in tax cuts. In recent years, however, fiscal stimulus policies have contributed to an increasing budget deficit. Japan's government deficit was 3% of GDP in 1994 and reached 4.3% of GDP in 1995, due to ongoing high levels of public sector borrowing. The government's focus on fiscal policy to compensate for a tight monetary policy has restricted spending on infrastructure, yet by 2002, the deficit had reached 7.8% of GDP.

The US Central Intelligence Agency (CIA) estimated that in 2005 Japan's central government took in revenues of approximately $1.4 trillion and had expenditures of $1.7 trillion. Revenues minus expenditures totaled approximately -$346 billion. Public debt in 2005 amounted to 170% of GDP. Total external debt was $1.545 trillion.


The US Central Intelligence Agency (CIA) reports that in 2005 Japan's gross domestic product (GDP) was estimated at $3.9 trillion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $30,400. The annual growth rate of GDP was estimated at 2.1%. The average inflation rate in 2005 was -0.2%. It was estimated that agriculture accounted for 1.3% of GDP, industry 25.3%, and services 73.5%.

According to the World Bank, in 2003 remittances from citizens working abroad totaled $1.078 billion.

The World Bank reports that in 2003 household consumption in Japan totaled $2.448 trillion or about $19,123 per capita based on a GDP of $4.3 trillion, measured in current dollars rather than PPP. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the period 1990 to 2003 household consumption grew at an average annual rate of 1.4%. In 2001 it was estimated that approximately 12% of household consumption was spent on food, 7% on fuel, 2% on health care, and 22% on education.


Manufacturing has been a key element in Japan's economic expansion during three periods of phenomenal growth. First, during the 50-year rise of Japan from a feudal society in 1868 to a major world power in 1918, output in manufacturing rose more rapidly than that of other sectors. Second, during the 1930s, when Japan recovered from the world depression earlier and faster than any other country and embarked on an aggressive course in Asia, manufacturing, especially heavy industries, again had the highest rate of growth. Third, in the remarkable recovery since World War II, manufacturing, which had suffered severely during the latter stages of the war, was again a leader, although commerce and finance expanded even more rapidly.

Japanese industry is characterized by a complex system of exclusive buyer-supplier networks and alliances, commonly maintained by companies belonging to the same business grouping, or keiretsu. Such a system utilizes a web of vertical, horizontal, and even diagonal integration within the framework of a few large conglomerations. Keiretsu firms inhibit the foreign acquisition of Japanese firms through nontransparent accounting and financial practices, cross-holding of shares among keiretsu member firms (even between competitors), and by keeping a low proportion of publicly traded stock relative to total capital.

During the 1970s and early 1980s, the rate of Japan's industrial growth surpassed that of any other non-Communist industrialized country. Of the 26 largest industrial companies in the world in the mid-1980s--those with sales of $20 billion or more--four were Japanese: Toyota Motor, Matsushita Electric, Hitachi, and Nissan Motor. In addition to spectacular expansion in the volume of output, Japanese industry has also achieved impressive diversity, with maximal application of efficiency standards and technological input. In 1997, industry accounted for about 38% of GDP and 33% of the total labor force. However, the Asian financial crisis that beset the region impacted Japan's industrial production growth, which went from 9.6% in 1997 to -6.9% in 1998. Growth was still negative in 1999, but only by -0.1%, and in 2000 positive growth had returned as industrial production rose 5.3%. The recovery was short lived. The global slowdown of 2001 compounded by the economic aftershocks of the 11 September 2001 terrorist attacks on the United States contributed to a massive 8.3% decline in industrial production in Japan in 2001. The percentage of Japan's labor force in industry had dropped from 40% in 1997 to 30% in 2001. However, by 2003, industrial production had improved, and by 2004 was growing by 6.6%, even though the percentage of Japan's labor force in industry had dropped further, to 25%.

A brief recession forced production cutbacks in 1965; a deeper recession in 1974, related to rising world oil costs and diminished supplies, slowed Japan's economy in 1973-75 and again in 1978-80. At the same time, wage rates rose substantially, thereby reducing Japan's competitive advantage vis-à-vis other industrialized nations and prompting a major government effort to promote high-technology industries capable of making the most efficient use of the high educational level and technical competence of the Japanese labor force. Japan's industrial strategy, which involves close cooperation between business, government, and labor, was coordinated by the Ministry of International Trade and Industry (MITI). Particular emphasis was given by MITI and other government agencies to encouraging and assisting research and development of new products and technologies.

Facing increasingly stiff competition from overseas trading partners in the 1980s, Japanese firms responded with several strategies, including product diversification, increased investment in overseas plants, as well as a greater focus on production for the domestic market. Despite declining profits with the economic downturn of the early 1990s, Japanese companies continued to make large investments in new plants and equipment; in 1992, these outlays amounted to over 20% of the GDP, well outstripping the level of private investment in the United States. Since 1992, the government has implemented nine massive stimulus packages, including large investments in public projects like roads, bridges, and airports, in its efforts to spark renewed growth, or, at least, prevent a deeper recession.

Manufacture of electrical machinery ranks first in value added. Nonelectrical machinery ranks second, followed by transportation equipment and chemicals. The electronics industry grew with extraordinary rapidity in the 1980s and now leads the world. Radio and television sets and household appliances have been exported in large quantities since World War II; in addition to generators, motors, transformers, and other heavy equipment, the industry now produces automatic devices, electronic computers, videocassette recorders, tape recorders, calculators, and communications and broadcasting equipment. Japan plays an increasingly important role in the computer industry. By 1987, Japan was fiercely competing with the United States in developing high-tech products, such as superconducting materials.

Japan is the world's leading shipbuilder; more than half the ships built are exported, including some of the world's largest oil tankers. Rapid increases in shipbuilding capacity by Brazil and South Korea reduced demand for Japanese-built ships from a peak of 38 million gross tons of new orders in 1973 to 7.0 million gross tons in 1991. The decline prompted direct government intervention in the ailing industry and the closing of close to 37% of dockyard facilities in 1980. As of 2001, Japan had 33% market share in new orders of ships, followed by South Korea with 30%, and China with 11%.

Passenger car production expanded rapidly in the 1970s, as Japan moved to fill rising demand for fuel-efficient cars in the United States and Europe. In the early 1980s, Japan emerged as the world's leading automobile producer, topping the United States for the first time in the history of the industry. Dominant industry giants are Nissan and Toyota, which together produced about three-fifths of all passenger cars in the mid-1980s. Restrictions imposed on Japanese automobile exports have promoted a marked increase in Japanese investment in automobile manufacturing facilities (engine manufacture, assembly as well as research and development) in the United States, Western Europe, and other overseas markets. Japanese manufactures have also sustained growth through greater focus on producing for the booming domestic motor vehicle market. Japan's superior technology in the design of bicycles, motorcycles, buses, and high-speed trains has been another major factor in the growth of the transport industry. In 2004, Japan produced 10,511,518 cars, trucks, and buses, of which 4,957,663 were exported. Leading car makers included Daihatsu, Fuji, Hino, Mitsubishi, Nissan, Honda, Isuzu, Mazda, Suzuki, and Toyota.

The chemical and petrochemicals industry has been another of the economy's key growth sectors since the late 1960s, in part due to rising domestic demand. Products include industrial chemicals such as sulfuric acid, caustic soda and fertilizers, as well as plastics, dyestuffs, paints, and other items for domestic use. Japan must import much of the iron ore and coking coal used in its steel industry, which ranked second only to the former USSR's in the mid-1980s. Output of crude steel peaked at 119.32 million tons in 1973 but declined to 101.6 million tons in 1995. In 2004, crude steel production totaled 112.72 million tons.

Textiles and apparel, Japan's main exports during the years immediately following World War II, have steadily declined in importance. Output of cotton and woolen fabrics, yarns, and rayon and acetate remains substantially below 1965 levels. The Japanese textile industry has been especially hard hit by rising wage rates and competition from developing nations, especially the other industrializing countries of East Asia.

Japan's semiconductor business has grown in size and profit due to the trade pact between Japan and the United States. While some argue that this pact had a negative effect on Japan's domestic chip market, it now appears, that these chip companies have become more efficient and therefore more profitable. Both the United States and Japan have become so intertwined in the semiconductor area that neither could afford to terminate the relationship.


After 56 years, the Japanese Insurance Business Law was revised in 1997. The purpose of the newly revised law is competition, to protect policy holders, and to promote greater management efficiency. The law allowed, for the first time, cross entries of life and nonlife companies into each other's sector through the establishment of subsidiary companies. In response to this development, 6 life and 11 nonlife insurance companies set up subsidiaries. Firms may not engage in life and nonlife insurance at the same time. In 2003, leading Japanese nonlife insurance firms included Tokio, Mitsui Sumitomo, Aioi, and Nippon Koa. Leading life insurance companies included Nippon, Dai-Ichi, Sumitomo, Meiji Yasuda, and ALICO Japan. Direct premiums written in 2003 totaled us$478.865 billion.

Life insurance is by far the most extensive of all classes of insurance. Premium income is more than three times that of all nonlife premium income. In 2003, direct life insurance premiums written totaled us$381.335 billion, while nonlife insurance premiums totaled us$97.530 billion. Japan is the world's largest holder of life and health insurance. More than 90% of the population owns life insurance, and the amount held per person is at least 50% greater than in the United States. Nippon Life Insurance Co., the world's largest insurance firm, had us$44,356.7 million in gross premiums written in 2003.

In the nonlife field, automobile insurance is the largest sector. (Automobile liability insurance is compulsory.) Personal accident insurance was next in importance, followed by fire, marine cargo, and marine hull insurance. Worker's compensation, nuclear liability and health insurance are also compulsory. In 2003, Tokio was the nation's leading nonlife insurer, with direct premium income (net cancellations and returns, but including savings in maturity funded policies) of $14,861.1 million.

In the mid-1990s the combined Japanese life and nonlife insurance market had the world's largest share with 30.8% of the world total premium. The life insurance market was 42.6% of the world market, and the nonlife market with 15.2%, the second-largest in the world after the United States. The Japanese nonlife insurance market consisted of 29 domestic companies and the life insurance market consisted of 36 domestic companies in 1997.

Foreign Investment

Japanese investments abroad have expanded steadily since the 1970s, the result both of liberalization on the outflow of capital and of the prosperity of the Japanese economy. It has also been due in part to increased investment in the United States and European Union (EU) as a conciliatory move to lessen the trade gap between Japan and the two industrial regions. Net annual direct investment outflows remained near $5 billion in the late 1970s but climbed steadily between 1985 and 1991 when they reached $48 billion, declining somewhat to $30.7 billion in 1992. Overseas direct investments made by Japan totaled $41 billion in 1993/94 and $51.4 billion in 1994/95. In 1996, Japan reportedly invested $50 billion overseas and attracted only about $7 billion in inward direct investment. In 2003, inward FDI was $6.3 billion, and outward FDI amounted to $28.8 billion.

Foreign investment in Japan has historically been less than in other G-7 countries. One reason for this is that in the past, the Japanese government discouraged foreign investment. A second but perhaps more significant reason is the high cost of doing business in Japan, which, in turn, reduces profits. Some of the barriers became less significant with the signing of the US-Japan Investment Accord signed in 1995. As of 2005, Japan's government imposed few formal restrictions on FDI in Japan, and had removed or liberalized most legal restrictions that applied to specific economic sectors. In 2005, President Koizumi promised to double the amount of FDI in Japan by 2010.

During the early 1990s, there was a significant imbalance in Japan's investment in other countries compared to other countries investing in Japan--the former was far greater than the latter. As an example, Japan invested $17,331 million in the United States in 1994 and $22,649 million in 1995. During those same two years, the United States invested $1,915 million and $1,837 million, respectively, in Japan. Since the mid-1990s, however, investment in Japan soared. FDI stock in Japan had more than tripled (on a yen basis) from 1998-2003. Reforms in the financial, communications, and distribution sectors have encouraged foreign investment in these sectors.

In 2003, inward FDI to Japan slowed to $6.3 billion, from $9.2 billion in 2002, but this followed continued strong increases in FDI in the preceding several years. In 2003, Japan's overseas investments also shrank, to $28.8 billion, from $32.3 billion in 2002. In 2003, China attracted 90% of Japan's FDI in the Asia region alone. The primary foreign investors in Japan in 2003 were (in order): the United States, the Netherlands, France, Germany, and the Cayman Islands. Japanese direct investment abroad went to (in order): the United States, the Netherlands, the United Kingdom, China, and the Cayman Islands.


Japan's labor force in 2005 numbered an estimated 66.4 million persons. The distribution of employed workers in 2004 was as follows: services, 67.7%; industry, 27.8%; and agriculture, 4.6%. The unemployment rate in 2005 was estimated at 4.3%. Employers tend toward traditional, paternalistic, often authoritarian, control over their workers, but in turn, most regular workers have traditionally enjoyed permanent status.

Union membership in 2005 was about 10.3 million or 19.2% of the workforce. Union strength is greatest in local government employees, automobile workers, and electrical machinery workers. Most members are organized in units called enterprise unions, which comprise the employees of a single firm. Virtually all organized workers are affiliated with national organizations, of which the largest is the Japanese Trade Union Confederation (Shin-Rengo), established in 1987 following the dissolution of the Japanese Confederation of Labor (Domei), and incorporating the General Council of Trade Unions (Soyho) as of 1989. Collective bargaining is widely utilized, and the right to strike is available to most workers.

Strict enforcement of child labor laws as well as societal values protects children from exploitation in the workplace. Children under age 15 are not permitted to work, and those under 18 are restricted. As of 2005, the minimum wage ranged from $5.77 to $6.76 per hour, depending on region. Labor legislation mandated a standard workweek of 40 hours, with premium pay rates for overtime.

Balance of Payments

Beginning in 1981, surpluses in Japan's current accounts increased rapidly, reaching $49 billion in 1985 and $86 billion in 1986, the latter being 18 times the level of 1981. These huge surpluses resulted largely from the high value of the dollar relative to the yen; price declines of primary goods, such as petroleum, also enhanced Japan's favorable trade position. Japan's mounting surpluses and the rising deficits of the United States forced the United States and other leading industrial nations to attempt to realign their currencies, especially the dollar and the yen, in September 1985. Within two years the yen rose 70% against the dollar. The yen's appreciation increased the competitiveness of American products and contributed to the reduction of Japan's external imbalances through 1990, when the current account surplus fell by 37.4%, due to higher expenses for imported oil and rising expenditures by Japanese traveling abroad. Whereas long-term capital outflows exceeded Japan's current account surplus from 1984 through 1990, by 1991 the outflow shifted predominantly to short-term capital, and overseas direct investment slowed.

In 2004, Japan's merchandise trade surplus, on a balance-of-payments basis, stood at $132.1 billion, with exports totaling $539 billion and imports totaling $406.9 billion. The current account recorded a surplus of $172.1 billion, or 3.7% of GDP in 2004. Japan's current account balance averaged 3% of GDP over the period 2001-05. Japan had the highest trade and current account surpluses in the world in the early 2000s; however, Japan is less open to trade than other highly developed economies. As a percentage of current-price GDP, the value of Japan's two-way foreign trade in 2003 was just 18%, compared with Germany's 54% and China's nearly 60%. This was due in part to restrictions on merchandise imports to protect the country's less efficient industry sectors. Due to this lack of openness to trade, companies in the nontradable sectors have not been productive.


After World War II, Japan adopted a tax system relying mainly on direct taxes, like those in the United States and the United Kingdom. The most important of these are the income tax and corporation tax.

Japan's standard corporate tax rate is 30%, but local enterprise and inhabitant taxes can push that rate to 41%. Corporations capitalized at Y100 million or less are taxed at a 22% rate that is applied to the first Y8 million of taxable income. Capital gains received by companies are taxed as income at normal tax rates. In the past, capital gains received from the sale of land had been subject to a special surplus tax. As of 2005, that tax was suspended until 31 December 2008. Dividends are generally subject to a withholding tax of 20%. However, dividends paid on listed shares from 1 April 2003 through 31 March 2008 are taxed at a lower 10% rate. Interest paid to residents and nonresidents is also subject to a 20% withholding rate, although interest received by nonresidents from debentures, bank deposits, and bonds are subject to a lower rate of 15%.

Japan has a progressive individual income tax that has a top rate of 37%. However, local taxes can push the effective rate to 50%. Local taxes can include municipal and prefectural inhabitant and per capita taxes. There is also a 5% consumption tax that is applied to most services and goods. However, a number of items are zero-rated. These include: exports; foreign cargo handling, carriage, and storage; certain services to nonresidents; and patent, trademark and copyright loans or transfers to nonresidents. Exemptions include land transfers, medical services, residential rents, and financial services.

Additional national taxes include customs duties; a stamp tax; inheritance and gift taxes; a monopoly profits tax; a sugar excise tax; taxes on liquor, gasoline, and other commodities; and travel, admissions, and local road taxes.

Domestic Trade

Traditionally, Japan's distribution system was characterized by a long term and carefully cultivated relationship that extended from the supplier and wholesaler, down to the retailer and the consumer. However, that relationship has begun to change. Japan's retail sector has been shifting away from small stores (those with five or fewer employees), toward larger outlets such as self-service discount stores and so-called "superstores." Previously, at least half of all consumer goods were purchased through small, privately owned and operated shops, which rarely stocked imported goods. However, the economic stagnation and the accompanying deflation in prices that has afflicted the country's economy since the 1990s has taken a heavy toll on small stores. More importantly, Japanese consumers have begun to appreciate low prices. Another trend has been the growth of foreign retailers entering the Japanese market. Large retailers such as Toys 'R' Us, COSTCO and Wal-Mart have either entered Japan's retail market, or are in the process of doing so. In addition, there are an increasing number of specialty stores, many of which are also foreign controlled. As of 2005, Japan's franchise industry was the second-largest in the world in total sales with over 1,000 chains. The number of outlets in Japan exceeds 218,000.

As the number of large retail outlets have grown in Japan, legal revisions have loosened government regulation of these stores. In 2000 the Large-Scale Retail Store Location Law went into effect. This law limited the ability of local authorities to regulate new large stores to only environmental issues. As a result, cities and towns in Japan have begun to implement laws governing such issues as parking and store operations.

At the wholesale level, the rise of larger, more efficient retailers has also reduced the number of layers in the Japanese distribution system. Direct importing is growing, bypassing traditional trading houses and other intermediaries, as the retail sector has become more cost conscious and more streamlined.

In retail, cash transactions have been traditional, but various forms of installment selling are increasingly being used, especially in the sale of durable goods. The use of charge accounts is growing rapidly. Promotion by displays, advertising, and other methods used in Western countries is increasing rapidly in Japan. Advertising appears in the daily press, in the numerous weekly and monthly magazines, and in special publications of many kinds. Radio and television also carry extensive advertising, excepting those channels run by the government's Japan Broadcasting Corporation.

Electronic commerce (e-commerce) has also been growing in Japan. According to the Ministry of Economy, Trade and Industry (METI), the Japanese e-commerce market in 2004 was valued at over Y100 trillion (about $912 billion). In the business-to-business (B2B) sector, the automotive and electronics portions accounted for 57.4% of the e-commerce market. However, as the range of products in the B2B market has begun to increase, the share of these two categories has declined. One reason for this has been the increasing use of information technology by small and medium-sized companies. Meanwhile, the business-to-consumer (B2C) market remains highly fragmented. Fast-growing segments include home electronics, travel, finance, books and music, healthcare, including medicines and cosmetics, and general services.

Japan does not have a value added tax. Instead, a 5% consumption tax is imposed on most sales and services, and on imports.

Normal shop hours are 10 am to 8 pm, seven days a week, although department stores shut their doors at 6 pm and are closed two or three weekdays a month; government offices are open 10 am to 5 pm, Monday through Friday, and from 10 am to noon on Saturdays. Banks are open from 9 am to 3 pm Monday through Friday, and occasionally on Saturday mornings.

Foreign Trade

Despite the fact that Japan's currency rose more than 20% from 2002-05, and 13% in 2005 alone, it remained the world's second-largest exporting nation, behind Germany. However, Japan exhibits a low degree of openness to foreign trade, and therefore maintains a significant trade surplus. For example, as a percentage of current-price GDP, the value of Japan's two-way foreign trade in 2003 was just above 18%, compared with 54% for Germany. The closed nature of Japan's economy is also comparable to other countries in Asia, such as China, which in 2003 saw foreign trade reach nearly 60% of current-price GDP. This phenomenon is due to official and unofficial restrictions on merchandise imports, which remain in place--despite pressure from the United States and other important trading partners--to protect the less efficient sectors of Japanese industry, such as textiles, food, and pulp and paper. This lack of openness to foreign trade has been named as one of the reasons for the poor productivity of companies in the nontradable sectors of the economy, for example, and for other structural economic problems.

Imports consist mostly of fuel, foodstuffs, industrial raw materials, and industrial machinery. Exports are varied, but manufactures now account for nearly all of the total. Cars represent a leading export product, with the United States, Canada, Australia, Germany, and the United Kingdom as the main markets. The export of office machinery, scientific and optical equipment is also important. South Korea, China, and Taiwan are among the main buyers of Japan's iron and steel, while plastic materials and fertilizers are shipped primarily to South Korea and the Southeast Asian countries, and woven fabrics are supplied to China, the United States, and Saudi Arabia. Only a small fraction of Japan's total exports consists of food items, mainly fish.

In light of growing overseas concern about Japan's continuing large trade surplus, the US and Japanese governments collaborated on the Structural Impediments Initiative of 1989. Steps taken in the wake of the initial report included a variety of import and direct foreign investment promotion measures, including deregulation, accelerated government spending on public infrastructure, and support services for foreign businesses. The Initiative as a framework for US-Japanese relations was ended in 1993.

Manufactured products make up most of Japan's commodity exports. Japan is the world's largest maker of machine tools, and is one of the world's most important iron and steel makers. The automobile is the country's most important industry, along with computers and electronic equipment. Japan makes more than 25% of the world's exported ships.

In percentage terms, Japan's main exports in 2004 were: electrical machinery (23.5% of all exports); transportation equipment (23.1%); nonelectrical machinery (20.6%); chemicals (8.5%); and metals (6.6%). Japan's main imports in 2004 were: machinery and equipment (31.3% of all imports); mineral fuels (21.7%); food (10.8%); chemicals (7.8%); and raw materials (6.2%). Japan's leading markets that year were: the United States (22.4% of total exports); China (13.1%); South Korea (7.8%); Taiwan (7.4%); and Hong Kong (6.3%). Leading suppliers in 2004 were: China (20.7% of all imports); the United States (13.7%); South Korea (4.8%); Indonesia (4.1%); and Taiwan (3.7%). Bilateral trade between China and Japan now exceeds trade between Japan and the United States.


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Multimedia Files
Current account, capital account and financial account statistics in US dollars.
Exports, imports, and trade balance for the principal trading partners.
The Sun-flag (Hi-no-Maru) consists of a red circle on a white background.
Japan, Seal of
location: 122°56 to 153°59e; 20°25 to 45°33 n. Total Coastline: 29,751 kilometers (18,486 miles). territorial sea limit: 12 miles.

Source Citation: "Japan." Worldmark Encyclopedia of the Nations. 12th ed. Detroit: Thomson Gale, 2007. Reproduced in History Resource Center. Farmington Hills, MI: Gale.


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