Japan Economy 2025 Update | Application Data for A-Level Economics

1. 💵 Living Standards: High But Slowing
📊 Japan’s GDP per capita was around $38,000 in 2024, among the world’s highest.
📉 But long-term growth is sluggish due to weak productivity and a shrinking workforce.
📌 Application: Growth vs development, diminishing returns, output gaps.

2. 🧓 Demographics: The Original Super-Aged Society
👴 Over 29% of Japan’s population is aged 65 or older — the highest share globally.
📉 Fertility is just 1.26 births per woman — well below replacement.
📌 Application: Dependency ratios, ageing and pensions, labour supply shortages.

3. 🏭 Industrial Strength: High-Tech & Precision
🔧 Japan excels in robotics, automotive, and precision engineering — think Toyota, Sony, and Mitsubishi.
🌐 But manufacturing has declined as production shifted overseas.
📌 Application: Comparative advantage, deindustrialisation, global value chains.

4. 📉 Deflation & Monetary Policy
💴 Japan has battled deflation for decades. In 2024, inflation briefly rose above target due to energy prices.
🏦 The Bank of Japan maintains ultra-low interest rates and yield curve control.
📌 Application: Monetary policy tools, liquidity trap, deflationary spiral.

5. 💱 Exchange Rate: Yen as Safe Haven
🔁 The Japanese yen operates under a floating exchange rate.
📈 During crises, investors flock to the yen, causing appreciation — hurting exports.
📌 Application: Currency fluctuations, safe-haven assets, impact on trade balance.

6. 🎯 Human Development: High, But Uneven
📚 Japan’s HDI is 0.925, reflecting high life expectancy, literacy, and income.
🏙️ Yet rural depopulation and urban overcrowding reveal internal disparities.
📌 Application: HDI vs GDP, spatial inequality, ageing and development.