Japan

LeeAnne VanHevel

Overall Score: 73.3

World Ranking: 20

Quickfacts About Japan/United States

Population: 127.3 Million/316.4 Million

GDP: $4.7 Trillion/$16.8 Trillion

GDP Growth %: 1.5%/1.9%

GDP Per Capita: $36,899/$53,101

Unemployment: 4.1%/7.5%

Inflation: 0.4%/1.5%

Foreign Direct Investment: $2.3 Billion/$187.5 Billion

Legal System

Japan's Property Rights Rate is at an 80.0 meaning the highest is 100.0. Their Private property is guaranteed by the government and the court system enforces contracts efficiently but with some delays. Also in their country the corruption is minimal, and expropriation is highly unlikely.

Competitive Market

A major source of economic progress is important because it gives a strong incentive to create better products and discover lower-cost methods of productions. Japan has developed in the competitive market because of the "Abenomics" plan by Prime Minister Shinzo Abe which has decreased defense spending over 13 years and pushed forward on collective self-defense.

Limits on Government Regulation

Japan has regulations that substitute political authority for laws and freedom which tend to weaken gains from trade. The regulations include the restriction of certain items such as narcotics, firearms, explosives, and others which have a negative effect on Japan's industry and economy. Under the ATA Carnet System, some items may bypass these regulations without having to pay extra.

An Efficient Capital Market

To have an efficient capital market, a country must have a system that turns capital into projects that produce wealth. The Financial Service Agency is in charge of operating Japan's capital market and in doing so has drastically changed. They have set forth to expand securities like stocks and bonds. They also host summits with investors all over the world to discuss product structure, pricing, and debt issues.

Monetary Stability

Monetary Stability is required to control inflation, investment, to maintain economic stability. In relation to the world average, Japan has a significantly higher freedom. Japan has a good functioning labor market but an urge for longer employment and rank based wages slow the development of greater flexibility. Prices are generally set by market forces, but the government subsidizes numerous industries and sectors.

Low Tax Rates

Although some may argue higher taxes bring more money to supply to government who is then, in return is able to put forth that money for projects and other helpful things, people suffer from high taxes and don't put forth as much effort if they aren't earning all they are working for. The top individual income tax rate it 40.8% (higher than the United States) and the top corporate tax rate is 25.5%. The government does also plan on increasing tax to 10% in 2015. So, Japan's economy may struggle due to high taxes.

Free Trade

Japan has a very free trade, similar to the United States, and higher than the world average. They have a 1.2% average tariff rate and import investments are low. The part of trade most controlled by the government is in the banking sector, which they hold 100% of. Although trade is free, high taxes cause foreign investors to struggle with trade.

Where is Japan's Economy Going?

The video above discusses the steady increase of Japan's economy due to the new "Abenomics" plan set forth by the Prime Minister. Although the economy is pulling itself out of the slump it was in, the raise in taxes may reverse this process.