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Energy and Electricity Report Japan
The Economist Intelligence Unit, February 2011, Pages: 20
Initial conditions: Japan's economic performance was disappointing during the 1990s, largely reflecting the prolonged deflationary adjustment that took place following the bursting of the economic bubble in 1990-91. Productivity also deteriorated during the period, reflecting labour market rigidities and the lingering impact of overinvestment in the late 1980s. As a result of this poor performance, Japan's relative economic importance has diminished. Measured in purchasing power parity terms, Japan's economy was the world's second-largest after that of the US in 1990, but by 2007 it had slipped to third-largest, well behind the US and China. Although growth picked up sharply in 2003-07, mainly owing to strong demand for Japanese goods from China and other emerging markets, the country's adverse demographic trends and strong social resistance to large-scale immigration suggest a subdued long-term outlook, despite Japan's strengths in information technology (IT) and telecommunications and its highly skilled workforce.
Demographic trends: Japan has one of the world's most rapidly ageing populations. According to the country's National Institute of Population and Social Security Research (NIPSSR), 31.8% of the population will be 65 or over by 2030, compared with around 22% at present. Japan's demographic problems are also complicated by a quickly declining birth rate: in 2007 the birth rate stood at 1.3, well below the rate of 2.1 needed to maintain the current population. NIPSSR reckons that the number of those aged 16 and under will decline from just under 18% of the population at present to 13.3% by 2030. As a result, the Economist Intelligence Unit expects the labour force to shrink from 66.2m in 2009 to 55.7m in 2030. Assuming that hostility towards large-scale immigration persists in the forecast period, we expect the government to make further efforts to raise workforce participation in the years to 2030, bringing the rate to 83%. There is only limited scope for raising the participation rate among the over-65s, given that, at around 20%, it is already high by the standards of many developed countries. The main thrust of government policy in this area will therefore be to increase the number of women in the labour force, which, at just under 50% at present, is low compared with other OECD countries.
External conditions: Japan faces a number of external challenges in the long term, most of which are related to the rising importance of China and the associated threat to Japan's political and economic position in Asia. One means by which the government is seeking to address this is by concluding free-trade agreements with major trading partners, and particularly with strategically important countries, such as South Korea. Notwithstanding China's growing importance in world trade, Japan will remain an important exporter in its own right. Japanese skills in high-technology industries suggest that the country will continue to enjoy an advantage in the production of high value added goods, while leaving lower value added production to lower-cost countries, such as China and members of the Association of South-East Asian Nations (ASEAN).
Industry List: Energy, Electricity, Pharmaceuticals & bio-tech, Healthcare, Telecoms and Technology, Retailing, Pharma & biotech, Generics, Disease trends, Oil and gas, Coal, Nuclear, Alternatives
Industry Codes (NAIC): 22;3254;62;517
Industry Codes (SIC): 49;2834;80;48
Energy and Electricity Report Japan
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