The Economy of Japan in 2023 - Industry & Market Trends

Last Updated: October 30, 2023



126 million


4.24 trillion

GDP Growth Rate

1 %

GDP Per Capita

33854 USD

Land Size

364500 km²


1.4 Child

Unemployment Rate

2.6 %

Inflation Rate

2.5 %

What is The Overall Outlook in Japan ?

Japan’s economic performance during the 1990s was disappointing due to the prolonged deflationary adjustment that occurred after the economic bubble burst in 1990-91. Productivity suffered during this time, reflecting labor market rigidities and over-investment in the late 1980s. Though growth surged from 2003-07 thanks to demand from China and other emerging markets, the global financial crisis of 2008-09 and the 2011 earthquake and tsunami dealt a significant blow. Japan’s status as an economic power waned, slipping to third place globally by 2011, where it has since remained. Adverse demographic trends and resistance to immigration suggest a subdued long-term outlook, despite strengths in innovation, information technology, telecommunications, and a highly skilled workforce.

Japan’s rapidly aging population is a major concern. The projected decline of about 20 million in the total population from 2022 to 2050 is alarming, with the proportion of people aged 65 and over expected to rise to 37.7% by 2050. Compounding this problem is a low birth rate; annual births fell to a record low in 2021. The working-age population will also shrink significantly by 2050. Though the government will try to raise the labor-force participation rate, especially among women, large-scale immigration will remain politically unviable. There may be a modest increase in “guest workers” from abroad, particularly post-COVID-19.

Externally, Japan faces challenges related to China’s rise, increasing frictions with Russia, and the associated threat to its political and economic position in Asia. Territorial disputes with both powers intensify Japan’s concerns over its ability to protect its interests. These geopolitical tensions will accelerate efforts in Japan to redefine its right to self defense, maintain its alliance with the US (potentially hosting US nuclear weapons), and develop cooperation with allies such as Australia. Should China attempt to annex Taiwan, Japan would likely be involved in any US effort to support Taiwan’s defense.

Development Trends & Outlook

The country is actively leveraging international agreements to its advantage, such as the Economic Partnership Agreement (EPA) with the EU, in effect since 2019, and the Regional Comprehensive Economic Partnership (RCEP), effective from 2022. It is also seeking closer economic cooperation with key ASEAN and European countries, and regional powers such as India and Australia, both bilaterally and through the Quad. Japan’s prowess in high-technology industries indicates that it will continue to dominate the production of higher-value-added goods while ceding lower-value-added production to lower-cost countries, like ASEAN member states.

Policymaking in Japan is projected to remain centralized in the coming decades, focusing on structural reform. Prime Minister Kishida Fumio’s “new form of capitalism” initiative, aimed at addressing income inequality and promoting faster wage growth, will guide this direction. The current Liberal Democratic Party (LDP) government, as well as future administrations, will work to increase labor market flexibility and contain labor costs while addressing disparities in the labor market. Challenges include significant disparities between regular and non-regular staff, a gender wage gap, and entrenched corporate issues such as chronic overworking and “karoshi” (“death by overwork”). Alongside these challenges, there will be an increasing focus on tax policy to ameliorate Japan’s precarious fiscal position, likely leading to a rise in indirect taxes and possibly lowered thresholds for income tax.

Japan’s economic growth is expected to be relatively lackluster through 2050, averaging below 1% per year. However, with the population contracting faster than GDP, this growth will represent an impressive performance on a per-head basis. This outlook is based on assumptions including a series of economic reforms to increase competition; higher participation rates among women and the elderly; and technological innovation boosting productivity. The use of capital-intensive methods will sustain labor productivity growth at an average of 0.8% annually from 2022-50, albeit at a moderate decline from current levels. Nonetheless, these growth rates will not prevent Japan from slipping in the global rankings, and long-term risks such as geopolitical tensions involving the US, China, and threats from North Korea could further impact Japan’s economic trajectory.

Japan - Real GDP Growth
Note: Real GDP Growth (%) | Forecast After 2023 (IMF)

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Economic Structure

The latest GDP update was in October 2023, updating the data on the contribution of GDP output in various sectors for the year 2022, as a proportion of the total GDP. The data is sourced from the World Bank, IMF, and local government statistics. Predictions on the sources of GDP contribution are from the EIU.

Private Consumption
Gov Expenditure
Capital Formation
Economic Growth(By Type)
Note: Real GDP Growth (%) | Forecast After 2023 (EIU)

Overall Economic Outlook in Japan?

In the past decade or so, Japan’s private consumption performance has not been as expected. Among OECD or similar economies, Japan’s private consumption as a percentage of total GDP has been at the bottom group of the OECD. But this is also the case in many advanced industrial markets that rely on exports, such as South Korea, Germany and Taiwan.

But unlike many have assumed, the biggest factor behind Japan’s private consumption slump is not the savings rate. According to data recently released by the Cabinet Office of Japan, before the pandemic, Japan’s savings rate is very low, almost below 3%.

Over the years, policymakers have attempted to address this issue through various initiatives, with one of the most prominent being the Maekawa Report in 1980. The report aimed to boost domestic demand by reducing income tax to increase disposable income and reduce work hours in the public sector, encourage domestic retail consumption and real estate investment through tax incentives, increase investment in public organizations, and promote the development of domestic service industries, foreign investment and agricultural exports. Additionally, the report aimed to open up the market by removing norms and restrictions.

The most representative ones in 2010 are the three arrows proposed by Shinzo Abe: they are the monetary policy to reduce the borrowing costs of consumers and enterprises through the implementation of quantitative easing, the government investment in infrastructure construction, and the provision of Fiscal policies such as corporate tax cuts/tax exemptions, as well as structural reform policies to increase labor force participation and increase productivity.

However, regardless of the positive/negative effects of these two major policies, the degree of visible impact is not obvious for the private consumption sector. Therefore, under the circumstances that the savings rate is extremely low, but private consumption continues to stagnate, the real problem is that the growth of the overall per capita disposable income of the Japanese people is far less than expected, and the average disposable income (Net Adjusted Disposable Income Per Capita) Only 28,872 US dollars, lower than the average of OECD countries: 30,490.

The two factors that limit the growth of Japanese nationals’ disposable income are salary and the return on investment of assets. According to the data compiled by the OECD, wages have hardly increased in the past two decades. For example, in the 1990s, the average wages in the UK and Japan were almost the same, falling in the range of 35,000 to 38,000. However, the UK has grown to more than 47,000 a year in 2020. During the same period, South Korea increased from more than 21,000 to 42,000.

Among them, the vast majority of analysts and researchers believe that the main core reason for this phenomenon is still a vicious circle created by deflationary mentality/expectations. That is to say, companies are afraid that price increases will scare away price-sensitive consumers, which will lead to the inability to increase revenue, which means that employee salaries cannot be increased. Furthermore, due to the protection of full-time employees by Japanese government laws and corporate culture, many companies are more inclined to hire part-time and contract employees. In the past two decades, this ratio has also changed from less than 20%. Up to now as much as 36.7%, which has lowered the average salary in Japan as a whole.


126 million

Land Size

364500 km²


4.24 trillion

GDP Per Capita

33854 USD


2.6 %


2.5 %


91.7 %


1.4 Child

GDP Per Capita
Note: Real Growth (%) | Forecast After 2023 (IMF)
GDP Per Capita (PPP)
Note: Real Growth (%) | Forecast After 2023 (IMF)
Unemployment Rate
Note: %
Inflation Rate
Note: %

Other Economies

Industry Structure

The latest GDP update was in October 2023, updating the data on the contribution of GDP output in various sectors for the year 2022, as a proportion of the total GDP. The data is sourced from the World Bank, IMF, and local government statistics. Predictions on the sources of GDP contribution are from the EIU.

Economic Growth(By Sector)
Note: Real GDP Growth (%) | Forecast After 2023 (EIU)

Demographics Overview

Japan has one of the highest life expectancy in the world, yet the nation’s population has been shrinking since 2010 due to falling birth rates, and the rate of decline has accelerated in recent years. Each of the past 10 years has broken its own record, with the nation’s population falling from 128 million in 2008 to 125 million in early 2023, according to Statistics Japan estimates .

The Bureau of Statistics also estimates that by 2060, Japan’s total population is expected to decrease by 40 million people. The combination of population decline and extremely high life expectancy has made Japan one of the fastest aging societies in the world. People aged 65 and over account for more than a quarter of the total population, and this proportion is expected to continue to rise in the future At present, the whole country is facing the dual pressure of declining birth rate and aging population.

The main reason for Japan’s rapid population decline is the persistently low birth rate. Japan’s fertility rate has been declining since the mid-1970s, falling to about 1.3 children per woman by the early 2000s, and has remained at about 1.3 in recent years, but unlike East Asian countries such as South Korea and Taiwan, The economy’s TFR in 2021 is still relatively high compared to 0.8 and 1.1 respectively.

In Japan, the extramarital birth rate is very low, accounting for only 2-3% of all births since the 1950s (the EU and OECD countries average more than 40%). Therefore, the main reason for the decline in Japan’s fertility rate is that the number of young women marrying has decreased. In recent years, the proportion of unmarried women aged 25-34 in the childbearing peak period has been increasing, especially the proportion of single women aged 25-29, which has increased significantly from 21% in 1975 to 66% in 2020 . The proportion of single women aged 30-34 in the same age group also increased from 8% to 39%.

Young Japanese women are increasingly reluctant to marry and have children, partly because of rapidly expanding employment opportunities for them. The number of women attending four-year college degrees began to rise rapidly in the late 1980s and has risen from 15 percent to 51 percent in 2020 . The employment rate of young women has also increased significantly, especially the labor force participation rate of women aged 25-29, which has nearly tripled from 45% in 1970 to 87% in 2020.

Another reason for Japan’s declining marriage rate is the existence of traditional family gender roles. The number of marriages is falling, falling to 514,000 in 2021, according to the government’s white paper on gender equality. According to the survey, a quarter of single people in their 30s do not want to get married. For them, handling housework and childcare poses a significant burden, while Japanese men’s contribution to housework is still low, and the gender imbalance in housework is still significant, which makes it difficult for married women to balance work and family, thus reducing attractiveness of marriage.

The government has been trying its best to increase the fertility rate over the years. Although the fertility rate has not increased, it still restrains the further decline of the fertility rate. The Japanese government’s incentive policy to encourage childbirth is one of the most generous countries in the world. In addition to cash incentives, the score for paternity leave is the highest in the world. The UNICEF report shows Japan’s 30.4 weeks of paid leave is ahead of South Korea’s 17.2 weeks and Portugal’s 12.5 weeks. Now, Prime Minister Fumio Kishida also made a promise in early 2023 that he will take urgent measures to solve the problem of declining fertility rates, submit a plan to double the budget for child-related policies by June, and establish a new government policy in April. Supervision by the Children and Families Government Agency.

A shrinking population will lead to future labor shortages, further slowing economic growth and shutting down some services and possibly less industrial development. According to the estimation of the PERSOL Research Institute of Japan , the labor demand of 70.73 million people nationwide in 2030 is expected to provide only 64.29 million people, resulting in a labor gap of 6.44 million people, of which nearly 6 million people will be short of services and medical care. In addition to the impact on the labor market, the dependency ratio will also increase over time, causing young people to pay higher taxes to support the elderly population.

Population +

-653 k people


815 k people


1568 k people

Net Migration

100 k people

Japan - Population Growth Drivers
Note: % | forecast after 2023
Japan - Age Structure - Historical & Forecast
Note: % | forecast after 2023

Natural Growth

-6.1 ‰

Net Migration

0.8 ‰

Young Dependency

20.8 %

Old Dependency

48.6 %

Japan - Median Age
Note: Age
Japan - Demographic Structure
Source: UN Population; OOSGA Analytics

Political Overveiw

In the recent 2021 and 2022 elections, the Liberal Democratic Party and the Komeito Party, which has been allied since 1999, have continued to obtain a majority of seats in the National Assembly, and have obtained a significant gap in both the House of Representatives and the Senate. There will not be too many obstacles on the road to the constitution, especially the peaceful constitutional reform that the late Prime Minister Shinzo Abe has continued to promote (although some party members of the Japanese Liberal Democratic Party and the public are not enthusiastic about promoting the bill) .

Although the coalition government formed by the Liberal Democratic Party and the Civic Party still won a large number of parliamentary seats and popular support, a series of recent events have also added some variables to the 2025 election. After the assassination, Prime Minister Kishida held a national funeral for Prime Minister Kishida without discussing with the Diet and other political parties, which was different from the national funeral when Prime Minister Yoshida passed away in 1967 (and this behavior was also interpreted as Kishida’s attempt to win the largest party in the Liberal Democratic Party. support from the Abe faction); coupled with the relationship between the Liberal Democratic Party and the Unification Church, the public’s support for the Liberal Democratic Party has also decreased. In a recent poll, Prime Minister Kishida also showed that the opposition rate was higher than the approval rate for the first time.

Policy Trends

Amid heightened geopolitical tensions, Japan has shifted its attention towards improving supply-chain resilience and energy security. The Kishida administration will focus on economic security by offering better protection for the country’s supply chains and encouraging the re0shoring of manufacturing, particularly in strategic industries such as microchips and green energy-related products. These efforts will intensify in the coming years. However, supply-chain diversification does not mean divestment from China, which remains a competitive manufacturing base and hosts an enormous consumer market; the Japanese government will seek to avoid straining bilateral relations.

Mr. Kishida’s proposed “new form of capitalism” initiative calls for a fairer distribution of income in favor of middle-class households and more investment in human capital. This is likely to be implemented in the form of increased minimum wages, targeted tax incentives, and subsidies to employers in order to improve in-work training and skills upgrade, rather than raising tax rates on corporate profits or increasing wealth taxes.

There is a greater willingness among employers in big companies to accommodate higher wage growth in negotiations, but small and medium-sized businesses may not be as financially able to follow suit, which will lead to more hiring of non-regular employees. We expect improvement on wage growth to be moderate and uneven, which will dilute the overall positive impact on household consumption.

The switch to renewable energy has gained urgency following Russia’s invasion of Ukraine. We expect the government to ease regulations on clean energy investment and international cooperation and to extend the feed-in tariff scheme for solar power and offshore wind farms. These measures will stimulate innovation and investment in renewable energy and carbon capture and storage technologies, as well as the use of green hydrogen and ammonia. The renewable sector’s share in the power mix will expand over the next decade, but the goal of carbon neutrality by 2050 is unlikely to be achieved without broader use of nuclear power. The government will build new-generation reactors and accelerate the restarting of existing nuclear reactors to strengthen energy self-sufficiency, despite strong local resistance.

Japan - Government Spending (% of GDP)
Note: (%)|2023後為預測(IMF)

Current Account Balance

90.62 Billion

Current Account Balance (% of GDP)

2.1 %

Gov Net Landing/Borrowing(% of GDP)

-6.9 %

Gov Gross Debt(% of GDP)

260.1 %

Japan - Current Account Balance
note: (% of GDP) | Forecast After 2023
Japan - Gross Debt
note: (% of GDP) | Forecast After 2023

Consumer Brief

We have consolidated data on Japan’s e-commerce, social media, and insights relate to how customers in Japan make decisions and spend.

Social Media Development, User Demographics, Platforms, and Trends in Japan

Social Media Development, User Demographics, Platforms, and Trends in Japan

  • Economic Data:OECD, World Bank, IMF、Government Statistics Bureau
  • Currency Exchange:Based on IMF data in 2023/1
  • GDP Growth Projection:OECD、IMF, OECD, EIU、Government Bureau
  • Demographics:UN Population Database
  • Race, Culture, and Languages:CIA Factbook
  • Unemployment Rate Projection:ILO, UNECE
  • Trade:UN Comtrade, UNCTD
  • ICT Infrastructure:ITU
  • Data Calculation & Regression:OOSGA.org
  • Analysis:OOSGA Analytics
Author: Economic Team, CR Team

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