Japan's industrialized, free market economy is the second-largest in the world. Its economy is highly efficient and competitive in areas linked to international trade, but productivity is far lower in areas such as agriculture, distribution, and services. After achieving one of the highest economic growth rates in the world from the 1960s through the 1980s, the Japanese economy slowed dramatically in the early 1990s, when the "bubble economy" collapsed.

Its reservoir of industrial leadership and technicians, well-educated and industrious work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade have produced a mature industrial economy. Japan has few natural resources, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy.

While Japan's long-term economic prospects are considered good, Japan is currently in its worst period of economic growth since World War II. Plummeting stock and real estate prices in the early 1990s marked the end of the "bubble economy" . The impact of the Asian financial crisis also was substantial. Real GDP in Japan grew at an average of roughly 1% yearly in the 1990s, compared to growth in the 1980s of about 4% per year. Real growth in 2003 is predicted to be around 2.0%.

Agriculture, Energy, and Minerals
Only 15% of Japan's land is suitable for cultivation. The agricultural economy is highly subsidized and protected. With per hectare crop yields among the highest in the world, Japan maintains an overall agricultural self-sufficiency rate of about 50% on fewer than 5.6 million cultivated hectares (14 million acres). Japan normally produces a slight surplus of rice but imports large quantities of wheat, sorghum, and soybeans, primarily from the United States. Japan is the largest market for U.S. agricultural exports.

Given its heavy dependence on imported energy, Japan has aimed to diversify its sources. Since the oil shocks of the 1970s, Japan has reduced dependence on petroleum as a source of energy from more than 75% in 1973 to about 57% at present. Other important energy sources are coal, liquefied natural gas, nuclear power, and hydropower.

Deposits of gold, magnesium, and silver meet current industrial demands, but Japan is dependent on foreign sources for many of the minerals essential to modern industry. Iron ore, coke, copper, and bauxite must be imported, as must many forest products.

Labor
Japan's labor force consists of some 64 million workers, 40% of whom are women. Labor union membership is about 12 million. The unemployment rate is currently 5.3%, still near the post-war high. In 1989, the predominantly public sector union confederation, SOHYO (General Council of Trade Unions of Japan), merged with RENGO (Japanese Private Sector Trade Union Confederation) to form the Japanese Trade Union Confederation.