Economy of Japan

The economy of Japan is a highly developed/advanced social market economy, often referred to as an East Asian model. It is the 4th-largest economy in the world by nominal GDP behind the United States, China, and Germany and the 4th-largest by purchasing power parity (PPP).

According to the IMF, the country's per capita GDP (PPP) was at $54,184 (2024). Due to a volatile currency exchange rate, Japan's GDP as measured in dollars fluctuates sharply. The Japanese economy is forecast by the Quarterly Tankan survey of business sentiment conducted by the Bank of Japan. The Nikkei 225 presents the monthly report of top blue chip equities on the Japan Exchange Group, which is the world's fifth-largest stock exchange by market capitalisation. In 2018, Japan was the world's fourth-largest importer and the fourth-largest exporter. It has the world's second-largest foreign-exchange reserves, worth $1.4 trillion. It ranks 5th on the Global Competitiveness Report. It ranks first in the world in the Economic Complexity Index. Japan is also the world's fourth-largest consumer market.

Japan is the world's second-largest automobile manufacturing country. It is often ranked among the world's most innovative countries, leading several measures of global patent filings. Facing increasing competition from China and South Korea, manufacturing in Japan currently focuses primarily on high-tech and precision goods, such as integrated circuits, hybrid vehicles, and robotics. Besides the Kantō region, the Kansai region is one of the leading industrial clusters and manufacturing centers for the Japanese economy. Japan is the world's largest creditor nation. Japan generally runs an annual trade surplus and has a considerable net international investment surplus. Japan has the third-largest financial assets in the world, valued at $12 trillion, or 8.6% of the global GDP total as of 2020. As of 2022, 47 of the Fortune Global 500 companies are based in Japan. The country is the third-largest in the world by total wealth.

Japan had formerly the second-largest assets and wealth, behind only the United States in both categories, until it was surpassed by China in both assets and wealth. Japan also had the world's second-largest economy by nominal GDP behind the United States. In 2010, it was surpassed by China.

Japanese government asset price bubble collapse in 1991 led to a period of economic stagnation known as the "Lost Decade", sometimes extended to a "lost 20 years" or greater. The Plaza Accord of 1985 is considered a major factor in the collapse of the asset price bubble and the "Lost Decades". From 1995 to 2007, GDP fell from $5.33 trillion to $5.04 trillion in nominal terms. From the early 2000s, the Bank of Japan set out to encourage economic growth through a novel policy of quantitative easing. Debt levels in Japan continued to rise in response to the global financial crisis during the Great Recession in 2008, and as well as two national crises, including the triple disaster (earthquake, tsunami, and nuclear disaster etc.) in March 2011 and with COVID-19 pandemic and the subsequent recession in January 2020 and the end of September 2021 in both Heisei and Reiwa periods.

As of 2021, Japan has significantly higher levels of public debt than any other developed nation at approximately 260% of GDP. 45% of this debt is held by the Bank of Japan. The Japanese economy faces considerable challenges posed by an aging and declining population, which peaked at 128 million in 2010 and has fallen to 125.5 million as of 2022. Projections show the population will continue to fall, potentially to below 100 million by the middle of the 21st century.