Japan Industry Sectors

June 4, 2013Japanby EW World Economy Team

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The Japanese economy was one of the earliest in Asia to industrialise. During the Meiji restoration period in the mid 19th century, the Japanese government actively pursued Western-style reforms and development – hiring more than 3,000 Westerners to teach modern science, mathematics and technology to Japan. The government at that time also led the way in industries, by equipping the public sector with strong infrastructural changes in order to spur the private sector to grow. In short, the government was to be the guide and business was the producer.

Although World War II devastated most of Japan’s industries, the 1960s to the 1980s has been described as an economic miracle for Japan. The Ministry of International Trade and Industry (MITI), established in 1949, was instrumental in Japan’s post-war economic recovery, as it had implemented numerous policies that led to heavy industrial growth in Japan. MITI has been described by many scholars to have had the greatest impact on the economy of a nation than any other governmental regulation or organisation in the world. According to prominent political scientist Chalmers Johnson, who wrote the book MITI and the Japanese Miracle, “MITI formalized cooperation between the Japanese government and private industry. The extent of the policy was such that if MITI wished to “double steel production, the neo-zaibatsu (keiretsu) already has the capital, the construction assets, the makers of production machinery, and most of the other necessary factors already available in-house”.

Japan’s Industry Sectors

Today, despite an overall stagnation on the economy for nearly two decades, Japan’s industries are still among the most highly advanced and innovative in the world. Japanese manufacturing products, particularly in electronics and automobiles, are the world leaders in both production and technological advancements in their respective fields.

In 2012, Industry was responsible for 27.5 percent of Japan's GDP. Major industries in Japan include motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles, and processed foods.

Japan’s automobile industry produces the second largest amount of vehicles in the world behind China. However, Japanese automobile companies remain among the most valuable and technologically advanced in the world. Japan is home to six of the top twenty largest vehicle manufacturers in the world – Toyota (1st), Renault-Nissan (4th), Honda (8th), Suzuki (10th), Mazda (14th), Mitsubishi (16th). The automobile industry also managed to register a massive 10.5 percent growth in 2009, in spite of the global financial crisis.

Japan is also the world’s largest electronics manufacturer with prominent companies such as Sony, Casio, Mitsubishi Electric, Panasonic, Canon, Fujitsu, Nikon, Yamaha etc. Japanese electronic products are renowned for their innovation and quality. However the turmoil from the 2011 tsunami/earthquake disaster greatly affected its industries, dropping Japan from the 8th highest industrial production growth rate in the world in 2010 to the 8th worst in 2011.

Despite the historical significance of Japanese manufacturing, Services are the dominant component of the economy – contributing to 71.4 percent of the GDP in 2012. Major services in Japan include banking, insurance, retailing, transportation and telecommunications.

The Tokyo Stock Exchange is the third largest stock exchange in the world by market capitalisation – with a total market capitalization of US$3.3 trillion as of December 2011. Japan is also home to 326 companies from the Forbes Global 2000.

Agriculture’s contribution to Japan’s economy is fairly small when compared to Industry and Services. In 2012, Agriculture made up only 1.2 percent of the nation’s GDP. Although its contribution appears minute, agriculture is still a highly important component of Japan’s economy and society.

Japan’s agricultural economy is highly subsidised and protected. Only 15 percent of Japanese land is suitable for agriculture, though any available land is highly cultivated. As such, Japan has one of the highest per hectare crops yields in the world. Though it has a small agriculture sector, Japan is self-sufficient in the production of rice and fish, but relies heavily on food imports such as wheat, corn, sorghum and soybeans from the US. This makes US the third largest market for Japan's agricultural imports.

The 2011 earthquake and tsunami were catastrophic for many of Japan’s industries. Services shrunk by 6 percent as a result dampened consumer confidence and interruptions to the economy to blame for its relatively poor performance. The five major industries the most affected by the crisis were the natural gas industry, the automobile industry, the semiconductor industry, the oil industry and the tourism industry.

Read more about Japan's economy, including industry information, featured analysis and trade statistics below.

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