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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

The Parts/Materials Industry, Backbone of Japanese Economy

The Parts/Materials Industry, Backbone of Japanese Economy

KOO Bon-Kwan

Nov. 2, 2009

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Originally released on September 29, 2009

1. The Japanese Economy and the Parts and Material Industry

Since its property bubble burst in 1990, the Japanese economy has shown virtually no growth - averaging just 1.1% growth from 1992 to 2008, nominal GDP has remained stuck at 500 trillion yen. Even in US dollars, GDP is currently US$4.9 trillion, similar to the 1994 level. Having stopped just short of the US$5 trillion barrier, Japan can only watch while the gap between itself and major countries in Europe and the US continues to widen. Worse still, even China is now threatening to overtake the once great economy.

The expansion of exports has been one of the main sustaining factors of the Japanese economy. Japan's exports grew 0.5% annually while nominal domestic demand declined 0.7% every year for 12 years to 420 trillion yen in 2009. Exports played a decisive role in pushing up real GDP growth from negative to positive territory in the second quarter of 2009. The contribution of net exports to real GDP growth (2.3%) in the second quarter of 2009 was 6.5% points (exports: 3.3% points, imports: 3.2 % points) while the contribution of domestic demand was -4.2% points.

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