This chapter will measure the Japanese economy. The chapter will examine data on GDP, prices and productivity in the first section, the foreign sector such as trade (exports and imports) and FDI in the second section, and the public sector such as government expenditures and revenues, taxes, government deficits and public debts in the third section. In the final section, the chapter will analyze the welfare state in terms of social welfare services, including state pension provision, healthcare, elderly (long-term) care and unemployment insurance, and the socioeconomic situation in Japan related to welfare services such as inequality, poverty and an aging population. Other population-related issues such as fertility rates and regional disparities in population will be examined in Chapter 5.

GDP, PRICES AND PRODUCTIVITY

Japan's gross domestic product (GDP) was around $4.971 trillion as of 2018 according to the World Bank data and is the third largest in the world (after the United States and China). Since the collapse of the bubble economy in the early 1990s, Japan's GDP growth has been stagnant. Its GDP in Japanese Yen was around \533 trillion in 1997 just before the outbreak of the Asian financial crisis and its own subsequent financial crisis. Since then, Japan's GDP fell below the level of 1997 and it was only in 2015 that it recovered to the level of 1997. After the global financial crisis in 2007–08, Japan's GDP dropped below \500 trillion. Negative growth can be seen in several years, including in 1998 (-1.1%) and 1999 (-0.3%) soon after the Asian financial crisis, and in 2008 (-1.1%) and 2009 (-5.4%) after the global financial crisis (see Figure 3.1).

Although the size of Japan's GDP was about eight times as large as China's in the 1990s (see Figure 3.2), the difference shrank to around four times in 2000 and around twice in 2005. China's GDP surpassed Japan's in 2010, growing to more than twice the size by 2015. Compared to the GDP of the US, Japan's was around one-third or half before 1995, when the gap shrank to about 50 per cent. However, this was at least partly due to the highly appreciated Japanese yen against the US dollar.