Industrial Structure

The share of primary industries in the Japanese economy steadily declined after World War II and dropped to a mere 1.4% of GDP in 2005. Secondary industries, particularly in the manufacturing sector, such as heavy and chemical industries, grew substantially during the high economic growth in the 1960s and peaked at 43.1% of GDP in 1970. Their share gradually declined thereafter, to 26.4% in 2005. Tertiary industries, which include wholesale and retail trade, services, banking and insurance, and real estate, significantly increased their share to 72.2% in 2005. In that year, the share of service industries reached a record high of 20.7%, surpassing that of manufacturing (20.2%).

Structural Reform
In June 2002 the Council on Economic and Fiscal Policy, a government panel headed by the prime minister, formulated a package of economic revitalization measures for the rejuvenation of industry and promotion of new industries and technologies. It proposed the creation of special zones in which regulations would be greatly eased to promote private-sector business activities on an experimental basis. As of March 2007, 943 plans proposed by local governments, private companies, and other bodies had been approved for implementation in these special zones.

As a follow-up to the structural reform programs announced earlier, the government in April 2003 established the Industrial Revitalization Corporation of Japan (IRCJ), a government-backed corporation designed to help turn around selected financially troubled companies. In March 2007, the IRCJ successfully closed its operation after assisting 41 ailing enterprises burdened with heavy debts, including supermarket giant Daiei, without passing on any costs to the taxpayer.

Agriculture, Forestry, and Fisheries

Agriculture
Japan's primary industries.agriculture, forestry, and fisheries.are rapidly declining in importance relative to the rest of the economy. In 1960 the primary sector still employed 32.6% of the Japanese working population, but this figure has continued to decrease as the Japanese economic and industrial structure has shifted into more advanced sectors. In 2006 its share of the workforce fell to 4.3%. Production of the primary industries as a percentage of GDP was 1.4% in 2005, a drop of 0.2% from the previous year.

The total number of farm households was 2.85 million as of February 2006, down 8.7% from 2000. The aging of the farming population further advanced, and the ratio of those aged 65 years or older reached 31.6% of the total in 2005.

The government long maintained its policy of promoting self-sufficiency in rice, the staple food, and rice imports were allowed only to offset shortages in domestic production. In April 1999 the ban on the import of rice was removed, however, allowing foreign rice to be sold freely in Japan, albeit after paying a prohibitively high import duty.

In December 2002 the government announced a major change in its rice policy featuring the abolishment of the 30-year-old government control of the rice output by fiscal 2008 and reforms to subsidy programs for rice farmers. This change is intended to introduce market mechanisms into rice production.

Japan's imports of farm products have continued to increase, and in 2005 they amounted to \4.79 trillion, up 4.8% over the previous year. Agricultural exports in the same year were valued at \216.8 billion, up 6.4% from the previous year.

BSE
In September 2001 Japan's first case of mad cow disease (BSE: bovine spongiform encephalopathy) was confirmed, followed by the discovery of several other cases elsewhere in the country. In response to the growing concern, the government in July 2002 established a special law that provides for, among other things, a strict testing regime to investigate the cause of death in cows and a ban on the use of all livestock feed containing meat and bone meal. Following a report in December 2003 that a US cow had been found suspected of having BSE, the Japanese government banned the import of US beef, which accounted for 45% of all Japan's beef imports. Although the import ban was once lifted in December 2005, it was reinstated the following month after a shipment of American beef was found to contain cattle spinal cord, a high-risk body part that must be removed under the agreement between Japan and the United States. Although the ban was lifted again in July 2006, US beef is yet to regain the nfidence of Japanese consumers.

Forestry
Japan's forests accounted for about two-thirds of the national land area and contained about 4.0 billion cubic meters of wood in 2002. The number of people employed in forestry has declined each year, from 110,000 in 1990 to 60,000 in 2006. Recently, however, there has been a new trend in the employment structure with a slight increase in the number of workers in their twenties who have moved from other sectors in urban areas.

Japan was self-sufficient in lumber supply until about 1960, but during the highgrowth years of the early 1960s there was a rapid expansion in the demand for house-building materials, paper, and pulp. While annual lumber demand in 2005 was 85.9 million cubic meters, the domestic supply of lumber was only 17.2 million cubic meters, for a self-sufficiency ratio of 20.0%. In June 2001 the government adopted the New Basic Law on Forest and Forestry for the purpose of promoting sustainable management and conservation of forests, the multifunctional role of forests, and the sound development of forestry.

Fisheries
Japan's fishing industry, like agriculture, has been declining in recent decades. In 1960 fishing employed 1.5% of the working population; in 2006 the figure was only 0.3%. The total fishing catch peaked at 12.8 million tons in 1984 and dipped to 5.7 million tons in 2005. The catch from deep-sea fishing peaked much earlier, in 1973 at 3.4 million tons, and it had fallen to 0.5 million tons by 2005. This drop reflects the move by many countries to strictly enforce their 200-nautical-mile economic zones.

The volume of fish imports in 2004 was 3.2 million tons, worth \1.71 trillion, in 2005, up 2.3% over the previous year. The dependence of Japan's domestic seafood consumption on imports has expanded, and the estimated seafood self-sufficiency ratio in fiscal 2005 was 50%.

In June 2001 the government enacted the Basic Fishery Law designed to secure stable supplies of fishery products and to promote sound development of the fishing industry, and in March 2007 it formulated the New Fishery Basic Plan, which sets a target of 65% for the seafood self-sufficiency ratio by 2017.

Manufacturing

The prolonged, deep economic slump from the early 1990s caused a great number of Japanese manufacturing enterprises to suffer from shrinking demand, coupled with surplus production capacity and workforce. They carried out large-scale restructuring and reorganization, consolidation, and tie-ups and mergers with other companies. From the mid-1990s a growing number of manufacturing companies relocated their production facilities to China, lured by low production costs and fast-expanding domestic markets in that country.

Reflecting the recovery of the Japanese economy, however, the manufacturing sector started showing bright signs in its business activities in the latter part of 2003. According to a survey released by the Finance Ministry in September 2006, combined sales and pretax profits of manufacturers in fiscal 2005 rose 6.2% and 11.9%, respectively, over a year earlier. The data also revealed that capital spending by manufacturing companies jumped 10.5%. Recently, there are clear signs that Japanese manufacturers have been refocusing domestic investment and turning their production facilities in Japan into a supply base of high-end products for the domestic and world markets.

In 2005 the share of the manufacturing industries in Japan's GDP was 22.5% (in real terms), up 0.2 percentage points over the previous year. According to a survey conducted by the Ministry of Economy, Trade and Industry in December 2005, the number of manufacturing companies with at least 10 employees decreased 5.4% from a year earlier to 133,455, while the number of employees shrank 0.7% to 7.29 million, decreasing for the fourteenth straight year. Conversely, total shipment rose 3.7% from the previous year to \286 trillion.

Courtesy of Foreign Press Center Japan

TAG Introduction to Japan