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Japan - Industry
Domestic Trade and Services
The nation's service industries are the major contributor to GNP, generating about 59 percent of the national totals in 1991. Moreover, services were the fastest growing sector, outperforming manufacturing in the 1980s. The service sector covers many, diverse activities. Wholesale and retail trade was dominant, but advertising, data processing, publishing, tourism, leisure industries, entertainment, and other industries grew rapidly in the 1980s. Most service industries were small and labor intensive but became more technologically sophisticated as computer and electronic products were incorporated by management.
The operation of wholesale and retail trades has often been denigrated by other nations as a barrier to foreign participation in the Japanese market, as well as being called antiquated and inefficient. Small retailers and "mom-and-pop" stores predominated- -in 1985 there were 1.6 million retail outlets in Japan, slightly more than the total number of retail outlets in the United States (1.5 million in 1982), even though Japan has only half the population of the United States and is smaller in size than California.
There were several changes in wholesaling and retailing in the 1980s. Japan's distribution system was becoming more efficient. Retail outlets and wholesale establishments both peaked in number in 1982 and then went down 5.4 percent and 3.7 percent, respectively, in 1985. The main casualties were sole proprietorships, especially mom-and-pop stores and wholesale locations with fewer than ten employees. Almost 96,000 of the 1,036,000 mom-and-pop stores in operation in 1982 were out of business three years later. Government estimates for the late 1980s show additional consolidation in both wholesale and retail sectors including a continued sharp decline in mom-and-pop store operations. A further decline in mom-and-pop stores is expected as a result of the Large-Scale Retail Store Law of 1990, which greatly reduced the power of small retailers to block the establishment of large retail stores. Soaring land prices are a major cause of the decline of mom-and-pop stores, but an even more important reason is the growth of convenience and discount stores. Discount stores are not much bigger than the traditional small shops, but their distribution networks gives them a big pricing edge.
In the 1980s, Japanese consumers were discovering the advantages of catalog shopping, which offered not only convenience but also greater selection and lower prices. According to a Nikkei survey, the mail-order business expanded 13 percent between April 1987 and March 1988 to more than US$8.9 billion in annual sales. Specialty chains, particularly those handling men's and women's clothing, shoes, and consumer electronics, were also doing better than the overall industry. Department stores, supermarkets, and superstores (hybrid supermarket-discount stores) and other big retail operations were gaining business at the expense of small retailers, although their progress was quite slow. Between 1980 and 1988, department stores increased their share of total retail sales by only 1 percentage point to 8.4 percent. Supermarkets and superstores increased in market share from 6.5 to 7.3 percent. Between 1980 and 1988, the number of department stores grew from 325 to just 371, and other big self-service stores only increased in number by 62 units between 1984 and 1988.
Among service industries, the restaurant, advertising, real estate, hotel and leisure business, and data-processing industries grew rapidly in the 1980s. The fast-food industry has been profitable for both foreign and domestic companies. By 1989 family restaurants and fast-food chains had grown into a US$138 billion business per year. Overall growth declined in the late 1980s because of the sharp rise of rents and a proliferation of restaurants in many areas. The number of hotel and guest rooms grew from 189,654 in 1981 to 342,695 in 1988.
Because much of the sales competition in Japan is of the nonprice variety, advertising is extremely important. Consumers have to see the suitability of products and services for their lifestyles. The intense competition for the domestic market spurs the growth of the world's largest advertising agency, Dentsu, as well as other advertisers.
Japan's major export industries includes automobiles, consumer electronics, computers, semiconductors, and iron and steel. Additionally, key industries in Japan's economy are mining, nonferrous metals, petrochemicals, pharmaceuticals, bioindustry, shipbuilding, aerospace, textiles, and processed foods.
As the coal-mining industry declined, so did the general importance of domestic mining in the whole economy. Only 0.2 percent of the labor force was engaged in mining operations in 1988, and the value added from mining was about 0.3 percent of the total for all mining and manufacturing. Domestic production contributed most to the supply of such nonmetals as silica sand, pyrophyllite clay, dolomite, and limestone. Domestic mines were contributing declining shares of the requirements for the metals zinc, copper, and gold. Almost all of the ores used in the nation's sophisticated processing industries are imported.
The nonferrous metals industry fared very well in the late 1980s, as domestic demand for these metals reached record levels. Japan's consumption of the main nonferrous metals, such as copper, lead, zinc, and aluminum, was the second highest in the noncommunist world after the United States. In 1989 sales of copper products exceeded 1.5 million tons for the first time. Production of electric wire and cable, which accounted for 70 percent of Japan's copper demand, and brass mills, which used the other 30 percent, experienced sharp growth, as did the demand for aluminum.
The petrochemical industry experienced moderate growth in the late 1980s because of steady economic expansion. The highest growth came in the production of plastics, polystyrene, and polypropylene. Prices for petrochemicals remained high because of increased demand in the newly developing economies of Asia, but the construction of factory complexes to make ethylene-based products in the Republic of Korea (South Korea) and Thailand by 1990 was expected to increase supplies and reduce prices. In the long term, the Japanese petrochemical industry is likely to face intensifying competition as a result of the integration of domestic and international markets and the efforts made by other Asian countries to catch up with Japan.
The pharmaceutical industry and bioindustry experienced strong growth in the late 1980s. Pharmaceuticals production grew an estimated 8 percent in 1989 because of increased expenditures by Japan's rapidly aging population. Leading producers actively developed new drugs, such as those for degenerative and geriatric diseases, and also internationaled operations. Pharmaceutical companies were establishing tripolar networks connecting Japan, the United States, and Western Europe to coordinate product development. They also increased merger and acquisition activity overseas. Biotechnology research and development was progressing steadily, including the launching of marine biotechnology projects, with full-scale commercialization expected to take place in the 1990s. Biotechnology research covered a wide variety of fields: agriculture, animal husbandry, pharmaceuticals, chemicals, food processing, and fermentation. Human hormones and proteins for pharmaceutical products were sought through genetic recombination using bacteria.
Biotechnology also is used to enhance bacterial enzyme properties to further improve amino-acid fermentation technology, a field in which Japan is the world leader. The government cautions Japanese producers, however, against overoptimism regarding biotechnology and bioindustry. The research race both in Japan and abroad intensified in the 1980s, leading to patent disputes and forcing some companies to abandon research. Also, researchers began to realize that such drug development continually showed new complexities, requiring more technical breakthroughs than first imagined. Yet despite these problems, research and development, especially in leading companies, was still expected to be successful and to end in product commercialization in the mid-term.
Japan dominated world shipbuilding in the late 1980s, filling more than half of all orders worldwide. Its closest competitors were South Korea and Spain, with 9 percent and 5.2 percent of the market, respectively. Japan's shipyards replaced their West European competitors as world leaders in production through advanced design, fast delivery, and low production costs. The Japanese shipbuilding industry was hit by a lengthy recession from the late 1970s through most of the 1980s, which resulted in a drastic cutback in the use of facilities and in the work force, but there was a sharp revival in 1989. The industry was helped by a sudden rise in demand from other countries that needed to replace their aging fleets and from a sudden decline in the South Korean shipping industry. In 1988 Japanese shipbuilding firms received orders for 4.8 million gross tons of ships, but this figure grew to 7.1 million gross tons in 1989.
The aerospace industry received a major boost in 1969 with the establishment of the National Space Development Agency, which was charged with the development of satellites and launch vehicles. Japan's aircraft industry was only one-twentieth the size of that of the United States and one-twelfth that of Western Europe, and its technological level lagged as well. However, in the late 1980s Japan began to participate in new international aircraft development projects as its technical capabilities developed. The Asuka fanjet-powered short takeoff and landing (STOL) aircraft made a successful test flight in 1985. In 1988 Japan signed an accord with the United States to cooperate in building Japan's next-generation fighter aircraft, the FSX.
The textile industry showed a strong revival in the late 1980s because of increased domestic demand from the construction, automobile, housing, and civil engineering industries for various synthetic fibers. The clothing industry also fared well in the late 1980s, thanks to the expansion of consumer demand, especially in the area of women's apparel. Production of high value-added fashionable clothes became the mainstay of this industry.
The production value of the food industry ranked third among manufacturing industries after electric and transport machinery. It produced a great variety of products, ranging from traditional Japanese items, such as soybean paste (miso) and soy sauce, to beer and meat. The industry as a whole experienced mild growth in the 1980s, primarily from the development of such new products as "dry beer" and precooked food, which was increasingly used because of the tendency of family members to dine separately, the trend toward smaller families, and convenience. A common feature of all sectors of the food industry was their internationalization. As domestic raw materials lost their price competitiveness following the liberalization of imports, food makers more often produced foodstuffs overseas, promoted tie-ups with overseas firms, and purchased overseas firms.
The nation's industrial activities (including mining, manufacturing, and power, gas, and water utilities) contributed 46.6 of total domestic industrial production in 1989, up slightly from 45.8 percent in 1975. This steady performance of the industrial sector in the 1970s and 1980s was a result of the growth of high-technology industries. During this period, some of the older heavy industries, such as steel and shipbuilding, either declined or simply held stable. Together with the construction industry, those older heavy industries employed 34.9 of the work force in 1989 (relatively unchanged from 34.8 percent in 1980). The service industry sector grew the fastest in the 1980s in terms of GNP, while the greatest losses occurred in agriculture, forestry, mining, and transportation. Most industry catered to the domestic market, but exports were important for several key commodities. In general, industries relatively geared toward exports over imports in 1988 were transportation equipment (with a 24.8 percent ratio of exports over imports), motor vehicles (54 percent), electrical machinery (23.4 percent), general machinery (21.2 percent), and metal and metal products (8.2 percent).
Industry is concentrated in several regions, in the following order of importance: the Kanto region surrounding Tokyo, especially the prefectures of Chiba, Kanagawa, Saitama and Tokyo (the Keihin industrial region); the Nagoya metropolitan area, including Aichi, Gifu, Mie, and Shizuoka prefectures (the Chukyo-Tokai industrial region); Kinki (the Keihanshin industrial region); the southwestern part of Honshu and northern Shikoku around the Inland Sea (the Setouchi industrial region); and the northern part of Kyushu (Kitakyushu). In addition, a long narrow belt of industrial centers is found between Tokyo and Hiroshima, established by particular industries, that havw developed as mill towns. These include Toyota City, near Nagoya, the home of the automobile manufacturer.
The fields in which Japan enjoys relatively high technological development include semiconductor manufacturing, optical fibers, optoelectronics, video discs and videotex, facsimile and copy machines, industrial robots, and fermentation processes. Japan lags slightly in such fields as satellites, rockets, and large aircraft, where advanced engineering capabilities are required, and in such fields as computer-aided design and computer-aided manufacturing (CAD/CAM), databases, and natural resources exploitation, where basic software capabilities are required.
You can read more regarding this subject on the following websites:
Manufacturing in Japan - Wikipedia
Japan Country Studies index
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