International Economics Trade, Theory and Policy

Internal Assignment No. 1

Prepared By:

7114. Mithra S. Kumar

7115. Sara Sabreen
7116. Priyanka Aditya Dash
7117. Anjali Jivanlal Nakum
7118. Malavika P. Ranjith
7119. Jain Pullampallil Thomas

Under The Guidance Of:

Prof. (Dr.) Neelofar Raina

Head, Department of Banking

August 21,2024

Symbiosis College of Arts and Commerce

Senapati Bapat Road
Pune- 411004
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Table of Contents
i. Introduction - Key Facts and Figures of the Economy (2023-24) 3
ii. Direction and Composition of Trade 5
iii. Exchange Rate Regime in the Country 9
iv. Trading Arrangements/Agreements Signed by the Country 11
v. Tariff and Non-Tariff Barriers 12
vi. Sustainable Development and Climate Change 15
vii. Sectors Contributing to the Growth of the Economy 16
viii. Conclusion 20
ix. Citations and Bibliography 21
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Introduction - Key Facts and Figures of the Japan Economy for the financial year 2023-24

Being one of the largest economies in the world, Japan has demonstrated a complex mix of resilience
and difficulties throughout 2023–2024. These challenges are in contrast to the nation's persistent
strengths.
In 2023–2024, Japan's economy endured fundamental difficulties, inflationary pressures, and sluggish
growth. The three main focuses of government policy were preserving economic stability, resolving
demographic challenges, and encouraging innovation. Japan had a lot of obstacles to overcome, but
its strategic efforts in green energy and technology provides a route forward for sustainable economic
growth.

 The Economic growth:

The country has experienced a slight
economic expansion, with its GDP growing at
a moderate rate. Japan’s GDP grew about
1.4% in 2023 as a result of a consistent
increase in exports and a rise in consumer
expenditure. However, this growth rate is low
in comparison to other developed
economies, which is a result of the economy's
structural issues and the COVID-19
pandemic's aftereffects.

 Inflation and the Monetary Policy:

For a country observed for having low inflation
rates and even deflationary periods, Japan’s
inflation was a significant concern during this
period. In 2023, the rate of inflation increased
to approximately 3.2% due to factors such as
the weakening of the yen, interruptions in the
global supply chain, and rising energy
expenses. The ultra-loose monetary policy
stance of the Bank of Japan (BoJ) was
maintained, with interest rates staying
negative at -0.1%. Although it is still difficult to
accomplish, the BoJ has set goals to boost
economic growth and maintain a 2% inflation rate.
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 Employment and Wages:

Japan's labour market began to tighten, with
presently the country's unemployment rate still
very low at 2.7%. Despite this, the rate of increase
in average salaries has been slow, growing by only
1.5% in 2023. The issue of wage stagnation, which
has an impact on domestic consumption and the
overall condition of the economy as a whole,
presents difficulties for both the government and
enterprises.

 Trade and Industry:

Changes in currency exchange rates and the state
of the global economy had a bearing on Japan's
trade balance. Exports increased by about 2.5% in
2023, mostly due to the United States and China's
robust demand for machinery and cars. On the
other hand, imports rose by roughly 3.8% due to
rising energy and raw material prices. These
trends are reflected in the trade deficit, which
increased to over ¥2.8 trillion.

 Public Debt and the Fiscal Policy:

Japan's public debt, that accounted for almost 260%
of GDP in 2023, continues to rank among the highest
in developed economies. The current government is
still faced with the challenge of striking a balance
between the need for fiscal restraint and fiscal
stimulation to boost the economy. The government
enacted a variety of investment initiatives in the
fiscal year 2023–2024 with the goal of advancing
green technologies, infrastructure development,
and digital transformation.

 Demographics and Structural Challenges:

Japan still faces many long-term problems due to its elderly population and low birth rate. The
percentage of the population 65 and older is more than 28%, which puts strain on the labour market
and social security structures. Raising productivity through technological innovation and programs to
increase labour force participation among women and older workers are two ways that these concerns
were addressed.
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Direction and Composition of Trade in Japan

Japan's trade strategy focuses on high-value industrial exports and meeting resource needs through
imports. The geographical distribution and composition of its trade offer key insights into its economic
priorities and global relationships.

 Major Export Partners

Japan's exports are primarily directed toward major global markets with a high demand for industrial
products:

a) United States (20% or $145B): The U.S. is Japan’s largest export destination, particularly for
motor vehicles, machinery, and electronics, underpinned by robust demand for Japanese
technology.
b) China (17.6% or $126B): China is Japan’s second-largest export partner, importing a variety of
products, including machinery and vehicles.
c) South Korea (6.51% or $46B): Proximity and industrial synergy make South Korea a key
destination for Japanese machinery and vehicles.
d) Other Asia (5.96% or $42B): Regional trading hubs that import a wide range of Japanese
products, especially electronics and machinery.
e) Hong Kong (4.53% or $32B): A significant re-export
hub, particularly for electronics and machinery.
f) Thailand (4.07% or $29B): Demand for Japanese
vehicles and electronics drives exports to Thailand’s
growing manufacturing sector.
g) Germany (2.69% or $19.3B): Japan exports high-
tech machinery and automotive products to
Germany, one of its key European partners.
h) Singapore (2.6% or $18.7B): Singapore acts as a
regional hub for electronics and machinery,
strengthening Japan’s trade presence in Southeast Asia.
i) Vietnam (2.39% or $17.2B): Vietnam’s growing electronics and manufacturing industries rely
increasingly on Japanese imports.
j) Australia (2.33% or $16.7B): Australia imports Japanese vehicles and machinery,
complementing its natural resource exports to Japan.

 Major Import Partners

Japan imports essential raw materials, energy resources, and advanced technological components
from key trading partners:

a) China (22% or $168B): Japan’s largest supplier, China provides electronics, machinery, textiles,
and other crucial goods for Japan’s manufacturing sector.
b) United States (10.1% or $76B): The U.S. supplies a diverse array of products, from machinery
to medical instruments and agricultural goods.
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c) Australia (8.58% or $64B): Australia’s

exports of coal, LNG, and iron ore are
vital for Japan’s energy needs and
industrial production.
d) United Arab Emirates (4.91% or $36B):
The UAE primarily exports petroleum
products to Japan, essential for its
energy security.
e) Saudi Arabia (4.61% or $34B): Another
key supplier of crude oil, critical for
Japan’s energy sector.
f) Other Asia (4.6% or $34B): This region
supplies Japan with manufactured goods and raw materials.
g) South Korea (4.02% or $30B): South Korea provides machinery, electronics, and petrochemical
products, reflecting strong industrial linkages.
h) Vietnam (3.37% or $25B): An emerging supplier of electronic components and machinery for
Japan’s industrial sector.
i) Thailand (3.23% or $24B): Thailand supplies vehicles and electronics, supporting Japan’s
manufacturing base.
j) Indonesia (3.2% or $24B): Indonesia’s energy resources are vital to Japan’s economic stability.

 Major Export Commodities

Japan’s export composition highlights its strength in high-tech manufacturing and the automotive
sector:

a) Motor Vehicles (15.4% or $110B): Japan is a global leader in automotive manufacturing, with
well-known brands like Toyota and Honda driving export demand.
b) Electronic Circuits (4.29% or $30B): These components are essential for various electronic
devices, showcasing Japan’s leadership in high-tech manufacturing.
c) Vehicle Parts (3.78% or $27B): Japan’s automotive industry supports a global supply chain for
parts and accessories essential for vehicle production.
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d) Semiconductor Machinery (3.5% or $25B): Japan supplies specialized machinery for

semiconductor manufacturing, a key component in modern electronics.
e) Construction Machinery (1.88% or $13.5B): High-quality machinery for construction and
infrastructure projects is in demand worldwide.
f) Gold (1.73% or $12.4B): Japan exports gold in various forms, supporting its role in the global
precious metals market.
g) Petroleum Oils (1.43% or $10.2B): Non-crude petroleum products are important for industrial
uses.
h) Iron/Steel Products (1.4% or $10B): Japan exports flat-rolled iron and steel products, essential
for construction and manufacturing.
i) Ships and Boats (1.33% or $9.59B): Japan’s shipbuilding industry remains a key player in global
maritime transportation.

 Major Import Commodities

Japan’s imports focus on energy resources, raw materials, and components vital to its manufacturing
sector:

a) Mineral Fuels (25% or $194B): Japan imports large quantities of petroleum, natural gas, and
coal to meet its energy requirements.
b) Electrical Machinery (15.3% or $115B): These imports support Japan’s electronics industry and
advanced manufacturing sector.
c) Machinery (9.22% or $69B): Industrial machinery imports are crucial for maintaining Japan’s
manufacturing competitiveness.
d) Pharmaceuticals (4.1% or $30B): Japan’s healthcare sector depends on imported
pharmaceutical products.
e) Ores and Ash (3.5% or $26B): These raw materials are essential for Japan’s metal and
manufacturing industries.
f) Vehicles (3.31% or $24B): Japan imports specific vehicles and parts to complement its
domestic production.
g) Plastics (2.13% or $16B): Plastics are key materials for various industries in Japan.
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h) Organic Chemicals (2.04% or $15.3B): These chemicals are vital for Japan’s pharmaceutical and
chemical industries.
i) Precious Metals (1.98% or $14.9B): Japan imports precious metals for its manufacturing and
jewellery sectors.
j) Miscellaneous Commodities (1.74% or $13B): These imports span a wide range of industries,
supporting Japan’s complex economy.

Trade Balance and Trends

Japan traditionally experiences a trade surplus due to its high-value exports, but its trade balance is
sensitive to global economic conditions and fluctuations in commodity prices. For instance, in June
2024, Japan recorded a trade surplus of ¥224.04 billion. This surplus reflects the strong performance
of Japan’s export sector, despite earlier deficits driven by high energy import costs.
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Exchange Rate Regime of Japan

To understand this, we need to see how Japan has managed its currency since the 2nd World War.
Currently, Japan follows a floating (or “managed float”) exchange rate system. Simply put, this means
that the value of the yen (JPY) is determined in large part by market forces and other times it falls into
forceful hands. This system is playing a role we can see it, and through looking at the episode also
understand how its effect on Japan will influence global economy.

 Historical Background

Following the 2nd World War Japan was a signatory to Bretton Woods which stabilized international
exchange rates. In 1949, the yen was put at ¥360 per US$1. This heart made for a lasting post-war
recovery and subsequently economic boom in Japan, at least until the early 1970s.

The Bretton Woods system had started to collapse in the late 1960s because of economic problems
that were widespread. The demise of a fixed exchange rate regime occurred when the US went off the
gold standard in 1971. Japan adopted a floating exchange rate system, as many other countries did
eventually, and the yen appreciated against the dollar because of Japan's increased might in
industrial exports.

 Shift to a Managed Floating Regime

Since the early 1970s, Japan has used a managed floating exchange rate system. In this system, the
yen’s value is influenced by trade balances, capital flows, and investor sentiment. The BOJ and the
government can intervene to stabilize the yen when needed.

For instance, in the 1980s, Japan’s trade surplus with the US caused the yen to rise sharply. The 1985
Plaza Accord was an agreement among major economies to weaken the US dollar and strengthen the
yen. During this time, the BOJ actively managed the yen’s value.

 Current Exchange Rate Policy

Japan still uses a managed floating
system. The BOJ sometimes steps in to
prevent large fluctuations in the yen’s
value. The yen’s value is affected by
Japan’s trade balance, interest rates
compared to other major economies,
and global financial trends.
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Recently, the BOJ has used unconventional methods like quantitative easing and negative interest rates
to tackle long-term economic stagnation and deflation. Quantitative Easing involves buying large
amounts of government bonds and other
assets to lower long-term interest rates
and increase the money supply, which has
weakened the yen. The negative interest
rate policy, introduced in 2016, charges
banks for holding excess reserves, further
weakening the yen by encouraging capital
outflows.

 Impact on the Japanese Economy

A weaker yen benefits Japan’s export driven economy by making Japanese goods cheaper and more
competitive abroad, thereby boosting profits for industries like electronics and cars. However, it also
raises the cost of imports, especially energy and raw materials, which Japan relies on heavily. This has
increased costs for consumers and businesses, reducing some of the benefits of a weaker yen.

Additionally, while the BOJ’s policies have prevented deflation, they haven’t led to long-term
economic growth. Japan continues to face challenges, like aging population and high public debt.
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Trading Arrangements/Agreements Signed by the Country

In October 2019, the United States and Japan signed two significant trade agreements: the U.S.-Japan
Trade Agreement and the U.S.-Japan Digital Trade Agreement. These agreements took effect on
January 1, 2020. The U.S.-Japan Trade Agreement aims to reduce or eliminate tariffs on approximately
$7.2 billion in U.S. agricultural exports to Japan. The U.S.-Japan Digital Trade Agreement establishes
high standards for digital trade, including provisions for unrestricted data transfer across borders,
consumer privacy protections, cybersecurity principles, and effective use of encryption technologies.

In March 2022, the U.S. and Japan agreed on changes related to beef safeguards, leading Japan to plan
a bill for revising the Trade Agreement, expected to be submitted in the fall of 2022.

Japan has a broad network of trade agreements, including the EU-Japan EPA, effective February 2019,
and participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership
(CPTPP) with eight ratifying countries and two signatories. Additionally, Japan is part of the Regional
Comprehensive Economic Partnership (RCEP), effective January 2022. It holds 16 bilateral economic
partnership agreements (EPAs) and is a full member of the World Trade Organization (WTO). For
detailed sector-specific agreements between the U.S. and Japan, consult the Department of
Commerce’s TANC website.

The EU-Japan Economic Partnership Agreement aims to reduce trade barriers and enhance market
access for both EU and Japanese businesses. It removes tariffs, facilitates easier import and export
processes, and opens service markets, including financial services and telecommunications. The
agreement ensures non-discriminatory treatment in public procurement, improves intellectual
property rights protection, and safeguards high-quality European agricultural products through
geographical indications. It also helps save time and money in trade and provides additional support
to smaller firms facing trade barriers.
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Tariff and Non-Tariff Barriers

Japan, as one of the world's most developed

economies, works inside a mind-boggling
system of exchange strategies that impact
its global monetary communications. These
approaches incorporate both levy and non-
duty obstructions, which shape the scene of
worldwide exchange. Understanding these
hindrances is significant for organizations,
policymakers, and business analysts who
draw in with the Japanese market. This
exposition investigates the critical parts of
duty and non-levy obstructions in Japan,
their suggestions, and their effect on global
exchange.

 Tariff Barriers

1. Definition and Structure: Levies are charges forced on imported labor and products. They are
intended to shield homegrown businesses from unfamiliar rivalry and to create income for the public
authority. In Japan, duty obstructions are generally moderate contrasted with a few different nations,
attributable to Japan's obligation to deregulation standards and its participation in different worldwide
economic deals.
2. Tariff Rates: Japan's typical duty rate is low contrasted with worldwide norms. As of late information,
Japan's typical applied tax rate is around 2.7%. Be that as it may, the tax rate differs by item class. For
instance:

a) Agricultural Products: These frequently face higher duties. Japan safeguards its rural area
through duties on items like rice (with levies around 338% for rice imports), meat, and dairy.
These high rates are planned to defend homegrown makers.
b) Industrial Goods: Taxes on modern items are for the most part low, mirroring Japan's obligation
to exchange progression. Numerous modern products are likely to taxes of 0-5%.

3. Import Duties and Trade Agreements: Japan is an individual from the World Exchange Association
(WTO) and has various international alliances (FTAs) and financial organization arrangements (EPAs)
that impact its levy structure. These arrangements frequently lead to decreased or disposed of levies
for part nations. For example, the Japan-EU Monetary Organization Understanding (JEFTA) and the Far
reaching and Moderate Arrangement for Transoceanic Association (CPTPP) have assisted with
lessening duties and work with exchange among Japan and its accomplices.

 Non-Tariff Barriers

1. Definition and Scope: Non-tariff barriers (NTBs) are exchange limitations that don't include duties
yet at the same time confine imports. These hindrances can incorporate quantities, sponsorships,
import authorizing, norms, and guidelines. Japan utilizes a few NTBs to direct and control imports,
frequently zeroing in on guaranteeing item wellbeing and quality.
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2. Quotas: Japan utilizes shares to

control the volume of specific imports.
While more uncommon today, quantities
are as yet utilized for explicit areas, like
materials and farming items. For
example, there are amounts on imports
of specific sorts of rural items to
safeguard homegrown ranchers from
being overpowered by less expensive
unfamiliar items.

3. Import Licensing: Import permitting is

a huge NTB in Japan. It expects shippers
to get approval prior to carrying explicit
items into the country. The permitting system can be tedious and complex, including different
administrative methods. This is particularly significant for rural items and certain produced
merchandise.

4. Standard and Regulations: Japan is known for its thorough norms and guidelines, which can go about
as a huge boundary to exchange:

a) Product Standards: Japan has severe norms for item wellbeing, quality, and natural effect. For
example, the nation implements nitty gritty guidelines on sanitation, including testing for
pollutants and guaranteeing consistence with cleanliness norms. Imported items should
satisfy these guidelines, which can be really difficult for unfamiliar makers.
b) Technical Standards: Japan additionally has explicit specialized norms for some items. These
guidelines cover everything from electronic products to cars, and consistence can be
exorbitant and complex for unfamiliar makers. For instance, Japan has its own specialized
principles for gadgets, which contrast from worldwide standards and may require huge
changes by unfamiliar organizations.

5. Sanitary and Phytosanitary Measures: Sterile and phytosanitary measures are significant in Japan's
exchange strategy, especially for rural and food items. Japan forces severe wellbeing and security
norms to forestall the passage of infections and nuisances. These actions can incorporate point by
point investigation systems, affirmation necessities, and quarantine guidelines. While these actions are
expected to safeguard general wellbeing, they can likewise act as hindrances to exchange by making
extra obstacles for exporters.

6. Administrative Procedures: Japan's regulatory techniques for exchange can be complicated and
unwieldy. Merchants frequently face a large number of administrative prerequisites and
documentation processes. For instance, the traditions leeway process includes different advances,
including arrangement of products, valuation, and installment of obligations. This managerial weight
can be a critical hindrance, particularly for more modest organizations and those new to Japanese
methodology.

 Impact on International Trade

1. Trade Relations: Japan's duty and non-tax hindrances essentially influence its exchange relations
with different nations. While low duties on modern merchandise work with exchange, high taxes on
farming items and complex non-duty hindrances can restrict market access for unfamiliar makers. This
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unique impacts Japan's exchange organizations and talks, as the nation tries to offset homegrown
insurance with global participation.

2. Business Strategies: Unfamiliar organizations hoping to enter the Japanese market should explore
these hindrances successfully. This frequently includes adjusting items to fulfill Japanese guidelines,
acquiring the vital licenses and affirmations, and grasping the complex administrative climate.
Organizations that effectively address these difficulties can get to a rewarding business sector with
high buying power.

3. Economic and Strategic Implications: According to a monetary point of view, Japan's exchange
hindrances influence worldwide stock chains and exchange streams. The country's approaches can
influence the intensity of worldwide organizations and impact worldwide market elements. Decisively,
Japan's exchange approaches mirror its more extensive financial objectives, including safeguarding key
businesses and cultivating superior grade, inventive items.

Japan's exchange strategies, enveloping both levy and non-tax obstructions, assume a vital part in
molding its financial scene and worldwide exchange relations. While Japan keeps up with moderately
low levies on numerous items, its non-tax boundaries, including severe principles and complex
authoritative systems, present critical difficulties for unfamiliar merchants. Understanding these
obstructions is fundamental for exploring the Japanese market and connecting successfully with one
of the world's driving economies. As worldwide exchange elements keep on developing, Japan's way
to deal with levies and non-duty boundaries will stay a vital calculate molding global monetary
connections.
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Sustainable Development and Climate Change

In the face of escalating climate change and growing global challenges, the Paris Agreement and the
Sustainable Development Goals (SDGs) provide a unified vision for a sustainable future. Adopted in
2015, the Paris Agreement aims to curb global temperature rise and phase out fossil fuel reliance,
targeting net zero emissions by mid-century.

Complementing this, the SDGs, with their 17 goals, advocate for comprehensive approaches to ending
poverty, reducing inequality, and safeguarding the environment, ensuring that no one is left behind.
Together, these frameworks call for urgent action and investment in clean energy and sustainable
development. As a leading international economy, Japan is positioned to spearhead this critical
transition towards a more sustainable and equitable world.
Japan has actively participated in international climate change efforts since the 1997 Kyoto Protocol
and is known for its advanced energy-efficient technologies. However, Japan's climate performance
was lacking up to 2013, particularly after the 2011 Great East Japan Earthquake, which led to increased
reliance on coal and a rise in greenhouse gas emissions.

Since peaking in FY2013, Japan has successfully reduced CO2 emissions by over 10% by FY2018, thanks
to improved energy-saving practices and a significant increase in renewable energy, particularly solar
power. The government’s Plan for Global Warming Countermeasures, approved in 2016, aims for a
26% reduction in greenhouse gases by FY2030 and an 80% reduction by 2050.

The Long-Term Strategy, established in 2019, envisions achieving a decarbonized society by the latter
half of this century through business innovation and international leadership.
However, the strategy faces challenges: its targets are considered modest, and Japan's ongoing
reliance on coal-fired power plants—both domestically and internationally—contrasts with global
climate goals. The Fifth Strategic Energy Plan sets 2030 energy targets that include 26% coal power,
which is criticized for not aligning with the urgent needs of climate action.
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Japan's Long-Term Strategy emphasizes renewable energy sources like solar and wind but still
maintains policies supporting new coal-fired power plants, which contradicts the Paris Agreement’s
goals. Post-Fukushima, Japan announced new coal power projects to replace lost nuclear capacity,
totalling around 21,000 MW.
While some projects have been cancelled or switched to other energy sources, over 11,000 MW of
new coal projects are still planned. Despite advanced technology, coal power plants are less profitable
due to decreasing electricity demand, lower renewable energy costs, and stricter climate regulations.
Even with advanced technology, coal plants emit about twice the CO2 of natural gas plants, posing
significant future investment risks.

 Japan’s Long-Term Strategy

It focuses on both technological innovation and practical applications to achieve a zero-carbon society.
The strategy highlights the need to integrate existing technologies with innovative approaches across
economic, social, and lifestyle sectors. Key elements include:

a) Innovation Action Plan: Targets advancements in renewable energy, digital power networks,
low-cost hydrogen supply chains, and green mobility.
b) Acceleration Plan: Outlines research and investment measures for achieving these
innovations.
c) Zero Emissions Initiatives: Aims to co-create global solutions for carbon neutrality by 2050.

The strategy envisions significant societal changes, including a shift to functional over ownership
values, increased recycling, and enhanced digitalization. It also anticipates transformations in urban
planning, transportation, and infrastructure to align with a net-zero future.

 Specific initiatives
a) Zero-Emission Buildings (ZEB) and Homes (ZEH): Focus on energy-neutral construction.
b) Electric Vehicles and MaaS: Development of efficient transport and smart mobility solutions.
c) Renewable Energy Expansion: Use of unused land for solar farms and adaptation of agriculture
technologies.
d) Net-Zero Lifestyle: Changes in consumption patterns, work styles, and transportation to reduce
carbon footprints.
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Industries are also expected to adapt:

a) Steel: Shift to electric furnaces and hydrogen reduction methods.

b) Cement: Use of alternative materials and renewable energy.
c) Petrochemicals: Electrification, recycled materials, and hydrogen use.
d) Glass and Paper: Adoption of clean energy and increased use of sustainable materials.

To lead in global climate change efforts, Japan must adopt ambitious greenhouse gas (GHG) reduction
targets, such as a 40-50% reduction by 2030 and net-zero emissions by 2050. This includes reforming
its coal-fired power policy, halting new coal plant construction, ending financial support for
international coal projects, and implementing comprehensive carbon pricing.
The Energy Basic Plan should be revised to significantly increase the share of renewable energy and
decrease reliance on coal and nuclear power. Japan's transition to a zero-carbon society should focus
on widespread electrification, energy efficiency, and the use of hydrogen in industry.

This would lead to reduced fossil fuel use, lower fossil fuel imports, and minimal reliance on carbon
capture and storage (CCS). Achieving this requires a national strategy involving all stakeholders and
long-term planning for infrastructure and technology. If successful, Japan could play a pivotal role in
advancing global sustainability.

Overall, Japan aims to drive a comprehensive and innovative transition to a zero-carbon society while
addressing both environmental and social challenges.
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Sectors Contributing to the Growth of Japan’s Economy

Japan's economy is incredibly intricate and varied, with a number of key industries propelling its
growth. Let's take a closer look at the major sectors that are driving Japan's economic progress:

 Technology and Innovation

Electronics and Semiconductors: Japan leads the world in manufacturing electronics and
semiconductors, thanks to companies like Sony, Panasonic, and Toshiba. This sector benefits from
constant innovation and strong demand for advanced technology at home and abroad.

Automotive Industry: Japan is well-known for its automotive giants, including Toyota, Honda, and
Nissan. This sector focuses on both traditional vehicles and cutting-edge technologies like electric and
autonomous vehicles.

 Manufacturing and Industrial Production

Precision Machinery: Japan excels in producing high-precision machinery and equipment, which are
crucial for industries like aerospace and robotics.

Steel and Chemicals: Japan has a robust steel industry that supports construction and manufacturing,
as well as a well-established chemicals industry producing everything from basic chemicals to specialty
products.

 Services Sector

Financial Services: Major players like Mitsubishi UFJ Financial Group and Nomura Holdings make
Japan's financial sector a significant contributor to its economy. Tokyo is a major financial hub in Asia.

Tourism: Though it faced challenges during the COVID-19 pandemic, Japan's tourism sector remains
an important growth area, driven by its rich cultural heritage and attractions.

 Exports and Trade

International Trade: Japan is one of the world's

largest exporters, with a strong focus on high-
tech goods, automobiles, and industrial
machinery. Its trade relationships with
countries like the U.S., China, and South Korea
are crucial for its economic performance.

 Research and Development (R&D)

Innovation and Technology: Japan invests heavily in R&D across various fields, including robotics,
biotechnology, and environmental technologies, which helps to drive long-term economic growth and
competitiveness.
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 Energy Sector

Renewable Energy: Japan is increasing its investments in renewable energy sources, such as solar and
wind power, to diversify its energy mix and address energy security concerns.

 Agriculture and Food Production

High-Quality Products: Japan's agriculture sector is known for producing high-quality products, such
as rice, seafood, and vegetables, contributing to both domestic consumption and export markets.

 Healthcare and Pharmaceuticals

Aging Population: Japan's aging population drives demand for healthcare services and
pharmaceuticals. The country leads in medical technology and pharmaceutical research, contributing
to economic growth through innovation and healthcare advancements.
All of these sectors work together to drive growth and help Japan maintain its position as one of the
world's leading economies.
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Conclusion

Japan's economy in 2023-2024 is a blend of both challenges and opportunities that are shaping its
current state and future direction. The nation has experienced only a modest economic expansion,
fuelled largely by an uptrend in exports and consumer spending. Still, this expansion is less rapid than
other advanced countries and long-standing weaknesses persist of prolonged repercussions from the
coronavirus crisis as well Japan’s aging population.

Pressure to fight deflation has increased inflation upward by 3.2% in Japan, where prices have
frequently been low. The depreciation of yen, global supply chain disruptions and the rise in energy
prices are disproportionately driving this increase. The BoJ has employed a very easy monetary policy,
including negative interest rates to generate economic growth and support an inflation rate of 2%. But
the effectiveness of these efforts is uncertain, with wage growth still tepid and feeding into subdued
domestic spending keeping a lid on activity in the broader economy.

Despite the recession and global economic pressures, Japan's trade and industrial sectors have been
stable as its exports gained on solid overseas demand in major markets like America and China. At the
same time, however, import prices—especially those for energy and raw materials—are rising as well,
creating a burgeoning trade deficit. It also underscores the tight rope Japan must continue to walk in
being an export-oriented economy and one that is very reliant on imported resources.
While public debt — 259% of GDP in by 2023, Japan's largest challenge just continues to grind on. The
challenge for government to promote greater fiscal discipline and simultaneously boost the economy
— notably around things like green technology, digital transformation amongst other areas of
particular importance. Moreover, demographic issues in Japan (labour population is dwindling and
labour market is getting older) drive the necessity of increasing productivity while pushing more
people to work — which can be assured with technological advancements driven by inclusive
labour policies.

And as for Japan, its managed floating exchange rate regime remains a linchpin of Japanese economic
stability. The interventions buy the central bank are in addition to easing deposes in which it aims on
grip long term interest rates around zero and a negative fascination rate, both deposits of BoJ
experiments designed at weaken yen volatility set off as bond purchases. The flip side is that such
policies jack import prices up, and the price for energy especially becomes more costly making it
harder on everyone-consumer or enterprise.

Japan’s trade policies play a crucial role in its global relationships, with relatively low tariffs on
industrial goods but high tariffs and complex barriers on agricultural products that can make it tough
for foreign businesses to access the market. Alongside these trade dynamics, Japan is also deeply
committed to sustainable development and fighting climate change, actively participating in
international agreements like the Paris Agreement. This commitment, combined with a focus on
innovation and trade, is vital as Japan navigates economic challenges like inflation, public debt, and an
aging population. By prioritizing these areas, Japan aims to build a stable and prosperous future,
ensuring it remains competitive and resilient in the global economy.
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Works Cited
1. Bank of Japan. (2023). Annual Report on Currency and Finance. Retrieved from [BoJ
website].
2. Bergsten, C. F., & Fujii, E. (2020). The Future of Japan's Exchange Rate Policy.
Peterson Institute for International Economics.
3. Ito, T., & Yabu, T. (2021). Exchange Rate Policy in Japan: Managed Float and Market
Intervention. Asian Economic Policy Review, 16(1), 45-63.
4. Yoshino, N., & Nakahara, M. (2022). Deflation and Monetary Policy in Japan:
Challenges and Strategies. Asian Economic Policy Review, 17(1), 19-34.

Sources of Information
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2. https://tradingeconomics.com/japan/balance-of-
trade#:~:text=Japan%20recorded%20a%20trade%20surplus,updated%20on%20August%20o
f%202024.

3. https://www.trade.gov/country-commercial-guides/japan-trade-agreements

4. https://spfusa.org/publications/japans-response-to-the-issue-of-climate-
change/#:~:text=For%20Japan%20to%20take%20the,current%20coal-
fired%20power%20policy%2C%205.

5. https://www.eu-japan.eu/eubusinessinjapan/sectors