Industrial Structure

The structure of Japan's industry has changed dramatically over the last few decades. The share of primary industries steadily declined after World War II and dropped to a mere 1.3 % of GDP in 2000. The share of secondary industries, particularly manufacturing industries, such as heavy and chemical industries, substantially increased during the era of high economic growth in the 1960s and peaked in 1970, accounting for 43.1% of GDP.

The sharp oil price hikes in the wake of the energy crises and the rising concern for the environment in the 1970s, however, forced the manufacturing sector to shift from energy-consuming heavy industry to assembling and high-tech industries with high added value but fewer workers. Thereafter, the share of secondary industries gradually declined, and in 2000 it fell to 27.9%, the lowest record since 1950, when the government started compiling statistics.

On the other hand, the share of tertiary industries, such as wholesale and retail trade, and service and information industries significantly increased in the 1980s. Induced by the spectacular technological innovation in such new fields as computer technology, biotechnology, and environment-related businesses, as well as by the rapid aging of the society, the share of various service industries has been steadily expanding, and in 2000 the tertiary industries accounted for 70.7% of GDP, the highest ever. Particularly remarkable is the sharp growth of the information and communications industry. From 1985 to 1999 its real domestic production increased at an average growth rate of 6.3%, higher than any other industry.

In August 1999 the government approved a program of Special Measures for the Promotion of Industrial Revitalization to stimulate corporate restructuring and renewal. The program incorporated a wide range of initiatives to: (1) help companies restructure their operations, (2) promote the development of start-ups and the growth of small and medium-sized enterprises, and (3) facilitate R&D and technological development.

Recognizing that the industrial structure has taken a new direction and information technology has emerged as one of the leading industries, the government in October 2000 adopted a new economic stimulus package totaling 11 trillion yen dubbed "New Development Measures for Japan." The package was designed to put the economy back on a self-sustained recovery track and further structural reform, including the promotion of information technology.

In the fiscal 2001 budget amounting to 82.65 trillion yen, the government allocated 250.4 billion yen to the information technology field from the 700 billion yen "Special Allocation Category for the Rebirth of Japan," allocated under the direction of the prime minister.

In the austere budget for fiscal 2002 totaling 81.23 trillion yen, approved by the Diet in March 2002, the government, while significantly cutting outlays for official development assistance and public works spending, made special allocations for seven priority sectors, including information technology.

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Agriculture, Forestry, and Fisheries

Japan's primary industries-agriculture, forestry, and fishing-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 2000 its share of the work force fell to 4.8%.

Agricultural production as a percentage of GDP has declined dramatically, from 9.0% in 1960 to 1.3% in 2000. The total number of farm households was 3,120,000, as of February 2000, 119,000 less (down 3.8%) than the previous year. Moreover, the aging of the farming population, about 52.9% of which is 65 years or older, has become a serious social problem.

The country's overall food self-sufficiency rate is low: only 40% in fiscal 2000. Government policy had long supported self-sufficiency in rice, and rice imports were allowed only to offset shortages in domestic production until they were partially liberalized in 1995 on the basis of the agricultural agreement reached in 1993 under the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). In April 1999 the ban on the import of rice was removed, allowing foreign rice to be sold freely in Japan after customs duties had been paid.

In July 1999 the government established the Basic Law on Food, Agriculture, and Rural Areas (the new Agricultural Basic Law) that incorporated four basic principles: "securing a stable food supply," "achieving multifunctionality of agriculture," "sustainable development of agriculture," and "promotion of rural areas." On the basis of the new Agricultural Basic Law, the government in March 2000 established the Basic Plan on Food, Agriculture, and Rural Areas that set a target of 45% for the total food self-sufficiency ratio (supplied calorie basis) by 2010.

Japan's imports of farm products have continued to increase, jumping 41-fold in value between 1960 and 1999, when they reached $36 billion. In 2000, however, they dropped to $35 billion, down 3.0% from a year before. Agricultural exports in the same year were valued at only $1.5 billion.

In response to rising complaints from domestic farmers against a sharp increase of imports mainly from China, the government, in accordance with World Trade Organization (WTO) rules, decided in April 2000 to invoke temporary import restrictions on three agricultural products: leeks, shiitake mushrooms, and tatami straw. In return, the Chinese government imposed retaliatory tariffs on Japanese manufactured products. The governments of the two countries then held negotiations, and in December they reached agreement to resolve the trade friction. Japan agreed not to formally invoke emergency restrictions on the three farm products, while China agreed to remove the retaliatory tariffs on Japanese industrial products.

In September 2001 Japan's first case of bovine spongiform encephalopathy (mad cow disease) was confirmed at a dairy farm in Chiba Prefecture. This was followed by the discovery of several other cases elsewhere in the country. The mad cow disease problem had serious effects on the production, distribution, and consumption of beef.

Japan's forests account for about two-thirds of the national land area and contain about 3.8 billion cubic meters of wood. However, the number of people employed in forestry has declined each year, from 110,000 in 1994 to 67,000 in 2000. The problem of the aging of the work force is also serious in this sector, with 24.7% of workers aged 65 years or over in 2000.

Japan was self-sufficient in lumber supply until about 1960, but during the high-growth years of the early 1960s there was a rapid expansion in the demand for housing, paper, and pulp. While annual lumber demand in 2000 was 99.3 million cubic meters, the domestic supply of lumber was only 18.0 million cubic meters, for a self-sufficiency ratio of 18.2%.

Japan's fishing industry, like agriculture, has been declining in recent decades. In 1960 fishing employed 1.5% of the working population; in 2000 the figure was only 0.4%. The total fishing catch peaked at 12.8 million tons in 1984 and dipped to 6.4 million tons in 2000. The catch from deep-sea fishing peaked much earlier, in 1970, at 3.4 million tons, and it had fallen to 0.9 million tons by 2000. This drop reflects the move by many countries to enforce 200-nautical-mile economic zones.

By contrast, fish imports have risen steadily, reaching 3.4 million tons worth $15.1 billion in 1999. Japan's supply of seafood in the future will depend heavily on imports, coastal fishing, and aquaculture.

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Manufacturing

Since the energy crises in the 1970s the structure of Japan's manufacturing industries has undergone a significant change. The share of the traditional heavy, chemical, and general machinery industries has diminished, and the manufacturing sector as a whole has shifted toward a higher degree of processing in such fields as electronics, automobiles and information technology.

The adverse effects of the severe economic situation since the early 1990s have caused a great number of manufacturing industries to suffer from shrinking demand and surplus production facilities and labor. They have been carrying out large-scale restructuring and promoting reorganization, consolidation, and tie-ups and mergers with other companies. The manufacturing industries also have been forced to adapt to the technological innovations brought about by the remarkable development of microelectronics and the onset of the IT revolution.

The sharp appreciation of the Japanese yen following the Plaza Accord in 1985 forced many export-dependent manufacturers to move out of Japan and relocate their production bases to other countries in Asia and elsewhere. Since the mid-1990s a growing number of manufacturing companies, particularly in consumer electronics, general machinery, ceramics and cement, and transport machinery, have relocated their production facilities to China because of low production costs and fast-expanding Chinese domestic markets.

According to a survey conducted by the Ministry of Economy, Trade and Industry in December 2000, the number of manufacturing companies with at least 10 employees fell 2.9% from a year earlier to 154,669, while the number of employees shrank 2.3% to 8.06 million. These figures were down about 20% from their peaks in 1991. Thus, there has been growing concern in Japan about the progression of hollowing-out in the manufacturing industries and decreasing employment opportunities.

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Commerce and Services

In 2001 the total sales of 297 nationwide department stores belonging to the Japan Department Stores Association was about 8.6 trillion yen, a 0.4% drop from the previous year. The total sales of 6,437 supermarkets belonging to the Japan Chain Stores Association fell 5.2% to 15.9 trillion yen, the biggest drop since the survey started in 1977. Convenience stores are playing a greater role in the everyday life of Japanese people. In 2001 the sales of 36,486 convenience stores across the country belonging to the Japan Franchise Association totaled about 6.7 trillion yen, a 2.9% increase over the previous year.

As household spending has been stagnant for the last several years and a deflationary trend has gained momentum, Japan has seen a series of failures of medium- and large-scale retailers. Following the bankruptcy of Yaohan Japan in 1997, the Nagasakiya supermarket chain went under with liabilities of over 300 billion yen in February 2000, and the long-established department store chain Sogo Co. went bankrupt in July 2000, the first failure of a major department store since World War II. In September 2001 the fourth largest supermarket chain, Mycal Corp., went bankrupt with liabilities of about 1.4 trillion yen. In January 2002 the long-troubled supermarket giant Daiei Inc. announced a three-year management reconstruction plan to push down its consolidated interest-bearing debts from 1.75 trillion yen to under 1 trillion yen.

In the field of services for business establishments, the credit card business is constantly growing, and its sales in 2001 amounted to 22.57 trillion yen, a 4.5% increase over 2000. Information services are also growing rapidly. Their sales in 2001 rose 10.0% over the previous year to 6.65 trillion yen.

In the service-to-individuals area, the sales of amusement parks and theme parks jumped 21.6% in 2001 to 363 billion yen, mainly because of the opening of two large-scale theme parks: Tokyo DisneySea in Chiba Prefecture and Universal Studios Japan in Osaka.

Courtesy of Foreign Press Center Japan
http://www.fpcj.jp/