Comprised of over 3,000 mostly volcanic and mountainous islands that are home to a population of 128 million, Japan depends on other countries for the bulk of its raw materials.
Japanese cities are noted for their high population densities. With over 30 million residents, the Greater Tokyo Area is the largest metropolitan area in the world.
Japanese people have an average life expectancy of over 81 years, higher than most other nations. The flip side to this longevity is the fact that some 20% of Japan's population is over age 65, which lends itself to a declining workforce and increasing costs of social security benefits like the public pension plan.
The Land of the Rising Sun is famous for top global brands that represent some of today's fastest-growing companies. Among Japan's world-leading brands are Toyota, Honda, Sony and Canon.
These brands propel Japan's principal exports, namely transport equipment, motor vehicles, electronics and electrical machinery. Japan is also a force in chemical exports.
Below is a list of Japan's top 15 export customers, based on WTO statistics for 2005. Total Japanese exports for 2005 amounted to US$595 billion. The top 5 countries in the list account for some two-thirds of total Japanese exports.
Top 15 Countries for Japanese Exports in 2005
- United States ... US$135.9 billion (22.9% of total Japanese exports)
- European Union ... $87.6 billion (14.7%)
- China ... $80.1 billion (13.5%)
- South Korea ... $46.6 billion (7.8%)
- Chinese Taipei ... $43.6 billion (7.3%)
- Hong Kong ... $36 billion (6%)
- Thailand ... $22.5 billion (3.8%)
- Singapore ... $18.4 billion (3.1%)
- Malaysia ... $12.5 billion (2.1%)
- Australia ... $12.4 billion (2.1%)
- Indonesia ... $9.2 billion (1.5%)
- Philippines ... $9.1 billion (1.5%)
- Canada ... $8.8 billion (1.5%)
- Panama ... $7.4 billion (1.2%)
- Mexico ... $6.9 billion (1.2%)
In addition to raw materials for its industries, Japan's main imports are machinery and equipment, fossil fuels, chemicals, textiles and foodstuffs (notably beef). Note that about half of Japan's exports go to other Asian countries.
Japan imported $515 billion worth of goods from its trading partners in 2005. The 15 countries listed below were responsible for over 85% of goods imported into Japan.
Top 15 Countries Japan Imported From in 2005
- China ... US$108.5 billion (21.1% of total Japanese imports)
- United States ... $65.3 billion (12.7%)
- European Union ... $58.6 billion (11.4%)
- Saudi Arabia ... $28.7 billion (5.6%)
- United Arab Emirates ... $25.3 billion (4.9%)
- Australia ... $24.5 billion (4.8%)
- South Korea ... $24.4 billion (4.7%)
- Indonesia ... $20.8 billion (4%)
- Chinese Taipai ... $18.1 billion (3.5%)
- Thailand ... $15.6 billion (3%)
- Malaysia ... $14.7 billion (2.8%)
- Qatar ... $10.7 billion (2.1%)
- Iran ... $10.3 billion (2%)
- Canada ... $8.9 billion (1.7%)
- Philippines ... $7.7 billion (1.5%)
By adding the statistics from the above two lists by country, we can see that Japan maintains close economic relations with its key ally the United States. This is also true of military relations; Japan contributed non-combatant troops to bolster American efforts in the Iraq war.
We can also see from the lists that Japan's second-largest overall trading partner is China.
And The Winners Are ...
In October 2006, at the 11th Sino-Japanese Economic Symposium in East China's Zhejiang Province, China's Ministry of Commerce spokesman Chong Quan said that Chinese-Japanese trade had experienced slower growth in recent years due to political tension between the two countries. As a result of that slowdown, the European Union replaced Japan as China's biggest trading partner in 2004.
The good news is that China expects bilateral trade with Japan to experience renewed growth in 2007 after rising about 12% in 2006.
Today some 80% of Japan's investments in China are in the manufacturing industry.
Also at the symposium in East China, the two nations agreed that they should enjoy further future trade possibilities, particularly in the fields of environmental protection and saving energy - two key components of China's 11th Five-Year Plan. According to the plan, China will invest around 3.8 trillion yuan (US$475 billion) in this field in a bid to build itself into an energy-saving and more environmentally friendly society.
Japan brings to the table ample management experience and technological advantages in such areas as burning rubbish, processing sewage and the development of renewable energy.
Japan's economy has come out of a long-term restructuring and is now on a sustained growth path. Corporate profits are strong, with other Asian countries following China's exemplary 10% growth rate. Yet the Japanese stock market has lagged Japan's performance in world trade, even though foreign investors are buying into a Japanese comeback. Ironically, many Japanese are timid about investing in their own economy partly due to long-standing political issues and to how long the restructuring program has lasted.
Prudent investors who agree that the evolving world trade superpower is undervalued might consider a modest investment in a Japanese Exchange Traded Fund (ETF). One example is iShares Japan ETF (EWJ on NYSE).
Sources
This analysis is based on latest statistics from the US Census Bureau - Foreign Trade Statistics and CIA World Factbook as of the date of article publication.
WTO statistics, China Daily article 'Sino-Japanese trade volume to rise' October 10, 2006 edition.
Daniel Workman - A senior business and finance writer who also does French translations, notably international trade and insurance materials.
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