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Japan Domestic Trade and Services
Sources: The Library of Congress Country Studies; CIA World Factbook
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    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.

    Data as of January 1994

    NOTE: The information regarding Japan on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Japan Domestic Trade and Services information contained here. All suggestions for corrections of any errors about Japan Domestic Trade and Services should be addressed to the Library of Congress and the CIA.

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Revised 10-Nov-04
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