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Total Government Expenditures |
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Economic Freedom Rating |
As a Percent of GDP |
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 |
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Part 1: The Economic Freedom Ratings for the Components and Various Area and |
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Summary Indexes: 1975, 1980, 1985, 1990 and 1995. |
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(The numbers in parentheses indicate the actual values for the components.) |
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Components of Economic Freedom |
1975 |
1980 |
1985 |
1990 |
1995 |
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I. Money and Inflation |
3.9 |
7.6 |
8.0 |
10.0 |
10.0 |
15.7 |
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(a) Annual Money Growth (last 5 yrs.) |
2 |
(17.6) |
9 |
(6.4) |
9 |
(4.6) |
10 |
(3.9) |
10 |
(3.3) |
1 |
||||
(b) Inflation Variablity (last 5 yrs.) |
4 |
(5.6) |
9 |
(1.7) |
10 |
(0.8) |
10 |
(0.9) |
10 |
(0.7) |
1 |
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(c) Ownership of Foreign Currency |
10 |
10 |
10 |
10 |
10 |
1 |
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(d) Maint. of Bank Account Abroad |
0 |
0 |
0 |
10 |
10 |
1 |
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II. Government Operation |
6.8 |
8.0 |
8.4 |
7.7 |
7.4 |
34.6 |
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(a) Gov't Consump. (% of Total Consump.) |
7 |
(14.9) |
7 |
(14.3) |
8 |
(14.0) |
8 |
(13.7) |
8 |
(13.9) |
1 |
||||
(b) Government Enterprises |
8 |
8 |
8 |
8 |
8 |
1 |
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(c) Price Controls |
- |
- |
- |
6 |
5 |
1 |
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(d) Entry Into Business |
- |
- |
- |
- |
7.5 |
1 |
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(e) Legal System |
- |
- |
- |
- |
7.5 |
1 |
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(f) Avoidance of Neg. Interest Rates |
4 |
10 |
10 |
10 |
10 |
1 |
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III. Takings |
3.8 |
2.9 |
3.4 |
3.9 |
3.5 |
27.2 |
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(a) Transfers and Subsidies (% of GDP) |
5 |
(6.7) |
4 |
(9.2) |
4 |
(10.9) |
4 |
(11.5) |
3 |
(12.2) |
1 |
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(b) Marginal Tax Rates (Top Rate) |
1 |
(68) |
0 |
(75) |
1 |
(70) |
2 |
(65) |
2 |
(65) |
1 |
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(c) Conscription |
10 |
10 |
10 |
10 |
10 |
1 |
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IV. International Sector |
6.5 |
6.5 |
7.2 |
7.7 |
7.2 |
22.5 |
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(a) Taxes on International Trade (Avg.) |
9 |
(1.3) |
9 |
(0.9) |
9 |
(0.8) |
9 |
(0.9) |
8 |
(1.6) |
1 |
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(b) Black Market Exchange Rates (Prem.) |
10 |
(0) |
10 |
(0) |
10 |
(0) |
10 |
(0) |
10 |
(0) |
1 |
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(c) Size of Trade Sector (% of GDP) |
3 |
(12.8) |
3 |
(14.1) |
3 |
(12.8) |
1 |
(10.5) |
0 |
(8.7) |
1 |
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(d) Capital Transactions with Foreigners |
2 |
2 |
5 |
8 |
8 |
1 |
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Economic Freedom Rating |
5.1 |
5.8 |
6.3 |
6.9 |
6.7 |
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Ranking of Country |
22 |
16 |
9 |
8 |
18 |
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Part 2: Recent Economic Indicators: |
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Population 1996: |
125.5 |
Real Per Capita GDP |
: |
1996= |
$22,149 |
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(in millions) |
(in 1995 U.S. dollars) |
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Annual Rate of Change (1985-96): |
0.4% |
Avg. Growth Rate: |
1980-90= |
3.5% |
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1990-96= |
1.8% |
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Economic Indicators:* |
1988 |
1989 |
1990 |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
|
Change in Real GDP: Aggregate |
6.2 |
4.8 |
4.8 |
4.3 |
1.4 |
0.1 |
0.5 |
0.9 |
3.2 |
|
: Per Capita |
5.8 |
4.4 |
4.4 |
3.9 |
1.0 |
-0.3 |
0.1 |
0.5 |
2.8 |
|
Inflation Rate (CPI) |
0.7 |
2.3 |
3.1 |
3.3 |
1.7 |
1.3 |
0.7 |
-0.1 |
0.6 |
|
Change in Money Supply: (M1) |
8.6 |
2.4 |
4.5 |
9.5 |
3.9 |
7.0 |
4.2 |
13.1 |
10.3 |
|
: (M2) |
9.8 |
11.8 |
8.2 |
2.5 |
-0.1 |
2.2 |
3.1 |
2.8 |
3.2 |
|
Investment/GDP Ratio |
30.6 |
31.8 |
32.8 |
32.5 |
31.1 |
29.9 |
28.9 |
29.5 |
30.4 |
|
Size of Trade Sector (% of GDP) |
9.0 |
10.0 |
10.5 |
9.5 |
9.0 |
8.3 |
8.4 |
8.7 |
9.0 |
|
Total/Gov't Exp./GDP Ratio |
32.2 |
31.5 |
32.3 |
32.0 |
32.9 |
34.9 |
35.6 |
36.7 |
37.5 |
p |
General Government Budget |
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Deficit (-) or Surplus (+) |
||||||||||
As a Percent of GDP |
+1.5 |
+2.5 |
+2.9 |
+2.9 |
+1.4 |
-1.6 |
-2.1 |
-3.3 |
-4.1 |
|
Unemployment Rate |
2.5 |
2.3 |
2.1 |
2.1 |
2.2 |
2.5 |
2.9 |
3.1 |
3.4 |
a |
* The figures in this table are in percent form. |
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a October, 1996. |
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p Preliminary. |
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Our index indicates that the economic freedom of Japan increased steadily during 1975-1990, before receding slightly during the last five years. Its 1995 rating places it 18th (out of 115), down from an 8th place ranking in 1990.
Japan’s greatest strength is in the Money and Inflation area. It earned a "perfect ten" in this area in both 1990 and 1995, compared to 3.9 in 1975. For the last ten to fifteen years, Japan has been a model of monetary stability. For a high-income industrial country, Japan’s government consumption expenditures are relatively small. Its rating in this area is the highest among the industrial nations. Its major weaknesses are high marginal tax rates (its top marginal rate of 65% is now one of the highest in the world) and non-tariff trade restraints (note how the size of the trade sector is much smaller than would be expected for a country of this size and location).
In contrast with the mid-1970s, Japan is no longer a small government economy. Pushed along by the growth of the transfer sector, government expenditures have steadily risen from 27% of GDP in 1975 to 36.7% in 1995. Japanese government expenditures as a share of the economy are now approximately the same size as those of the United States. The Japanese economy has struggled in the 1990s. This may well reflect that as government becomes larger, adjustments to change are increasingly difficult.
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| Last Modified: Wednesday, October 20, 1999. |