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Japan’s Manufacturing Sector in Numbers

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The numbers on Manufacturing’s share of the Japanese economy show the sector holding steady at about 19% of GDP, 16.9% of the work force, and a value-added per employee of about $97K/year, placing Japan between the US and Germany on all three metrics, and far from China. The numbers are consistent with Japan’s manufacturing sector paying high wages for high productivity and using advanced technology.

On this tour, we will be visiting exceptional Japanese companies, not the average reflected in the sector’s overall performance. The numbers quoted here are still a background against which these outstanding companies operate. We will need to zoom in again further in the next post.

The World Bank provides figures for GDP through 2012 and manufacturing’s share of GDP through 2010 for China and Germany, and through 2011 for Japan and the US. Unlike the CIA World Factbook data that are in Purchasing Power Parity (PPP), the World Bank GDPs are converted into US$ at official exchange rates. The work force data are from the US Bureau of Labor Statistics (BLS).  2010 is the last year for which data is available on all four countries on all metrics.

The following charts trace the evolution of the GDP and Manufacturing’s share since 2000. The financial crisis caused a marked dip in Manufacturing’s share in Germany and Japan, a smaller dip in the US, and none in China. The main lesson of this chart for Japan is that its manufacturing sector is holding steady at close to 20% of GDP. The charts below show Manufacturing GDP in absolute terms and the fraction of total employment in Industry, which, besides Manufacturing, also includes Mining, Construction, and Utilities. I would have preferred numbers for Manufacturing, but could not find them. As a share of the work force, manufacturing employment is on a slow decline everywhere except China.

GDP-and-Mfg-share-2000-2010

The picture that emerges is of manufacturing as a steady component of Japan’s economy with a slowly declining work force. Zooming in on 2010, we can compile the following table:

Work-force-and-industry-GDP

We have to be cautious in reading this table. The GDP is far from a perfect gauge, but it has the merit of being available. It is the aggregation of the value added of all businesses in a country, region, or sector of activity of a region.The main we can draw is that the manufacturing sectors of Japan, Germany and the US are similar to one another and all different from China’s. This numbers for Japan, the US, and Germany reflect high wages, high productivity, and advanced technology; China’s numbers, a lingering reliance on low wages, low skills, and manual processes.