A constitutional monarchy, with an emperor as ceremonial head of state, Japan is located off the east Asian coast in the north Pacific. It comprises four principal islands and more than 3000 smaller islands. Sovereignty over the most southerly islands in the Kurile chain is disputed with the Russian Federation. The terrain is mostly mountainous, with fertile coastal plains; over two-thirds is woodland. The Pacific coast is vulnerable to tsunamis – tidal waves triggered by submarine earthquakes. Most cities are located by the sea; Tokyo, Kawasaki, and Yokohama together constitute the most populous and heavily industrialized area. Hokkaido is the most rural of the main islands. Japan's power in the global economy, with annual trade surpluses exceeding $100 billion and massive overseas investments, has been shaken since the early 1990s by a series of bad debt crises, bankruptcies in the financial sector, and two recessions.

Japan is racially one of the most homogeneous societies in the world. Its sense of order is reflected in the tradition of the lifetime employer. Many Japanese men define themselves by the company they work for rather than their job. An employer's influence stretches into employees' social time, and even to encouraging and approving marriages.

Traditionally women run the home and supervise the all-important education of their children. Many pursue careers until marriage, then continue to work part-time. However, trends are changing and some women are beginning to take on long-term careers, particularly in the medical and legal professions. Takako Doi became the country's first female political party leader in 1991.

Social form remains extremely important in Japanese society. Respect for elders and for social and business superiors is strongly ingrained. There is little tradition of generation rebellion, but the youth market is powerful and current fashions are geared toward teenagers. Many may still follow their parents' lifestyles, but established attitudes are under challenge. Working for the same company for life, and giving up evenings and weekends to entertain company clients, became harder to justify in the economically turbulent 1990s.

Strengths

Established market leader in high-tech products and cars. Commitment to long-term research. Talent for capitalizing on imported ideas. Manufacturing plants already established in the West. Domestic economy heavily protected from outside competition. Weak yen has promoted exports.

Weaknesses

Recent recession. Dependence on oil imports. Secretive and debt-ridden financial system. Falling industrial production, high-profile bankruptcies, and record unemployment levels. Trade surplus damages international relations.

Profile

Once among the world's strongest performing economies, Japan's strengths have been overshadowed for the last decade by its growing weaknesses. The country entered a brief recession for the second time in five years in 2001.

The 1990 crash of the Tokyo stock market was the end of a period of remarkable growth. The government managed to spend its way out of disaster, effectively delaying the full impact of the downturn.

In an attempt to appease Western discontent over Japan's huge trade surplus, the government encouraged a move away from Japan's dependence on export revenues through stimulation of the domestic economy. However, the contracting trade balance remains above $100 billion a year. Elsewhere the Koizumi government has attempted to promote greater flows of bilateral trade by steering Japan into its first free trade agreement: with Singapore from April 2002.

However, the domestic situation remains critical. The financial sector is in desperate need of reform. The prominent corporate collapses of 1997 were repeated in 2001, with record losses reported across the high-tech industries in particular. Koizumi has promised radical change, rejecting the standard increase in government spending in favor of basic structural reform. Banks' bad loans have been cleared and the system of privileged "special public institutions" has been overhauled.

Nonetheless, critics have slated Koizumi's plans as overcautious, and have pointed to the increasing pressure from traditional economic power brokers which has put a brake on the pace of change.

Japan is a multiparty democracy. The Emperor has a purely ceremonial role.

Profile

Morihiro Hosokawa, becoming the first non-LDP prime minister in 1993, was helped by the fact that he was not associated with the tainted world of Tokyo politics. Four LDP prime ministers had resigned because they were implicated in scandals, or had failed to stamp out corruption. Hosokawa too, however, was accused of financial irregularities, and resigned in 1994. His government, a fragile coalition, nevertheless laid the basis for electoral reform, apologized for Japan's war crimes, and began the process of institutional deregulation.

In 1996, the LDP returned to power in a coalition including the SDPJ, with Ryutaro Hashimoto as prime minister. Elections later that year were principally a contest for the center-right vote. The LDP emerged as the largest party ahead of Shinshinto, formed two years earlier by Ichiro Ozawa as a merger of opposition groups. Hashimoto formed a minority LDP government, but was replaced as LDP leader in mid-1998 by Keizo Obuchi. His coalition was shattered in April 2000 when Ozawa withdrew his repeatedly sidelined Liberal Party, and Obuchi himself fell into a coma and died. His successor as prime minister and LDP leader, Yoshiro Mori, led a lack-luster campaign in a general election in June 2000, from which the LDP emerged with a reduced representation but still as the largest party and the main force in government. Mori's unpopularity finally led to his replacement as LDP leader (and prime minister) in April 2001 by charismatic newcomer Junichiro Koizumi.

Main Political Issues

LDP strength and opposition weakness

Japanese postwar politics was dominated by a system of patronage, linking big business, the bureaucracy, and the ruling LDP, until the 1993 elections. Numerous scandals and public disaffection with the LDP then saw the party briefly ousted from government. Far-reaching electoral reforms adopted in 1994 abolished multimember constituencies. This weakened the system of LDP factions (although these later returned), striking at the "money politics" by which they were financed. The creation of the short-lived Shinshinto alliance promised a realignment toward a two-party system. Adroit maneuvering, however, restored the LDP's position, which was bolstered by its hold on the centralized bureaucracy.

The military issue

The Japanese constitution enshrines pacifism. This prohibition of the use of force is a matter of hot debate within the country; critics argue that its economic power should be better reflected in foreign policy and the defense arena. Japan's role in the US-led "war on terrorism" brought it a step closer to this aim.

Japan has few exploitable resources. High production costs have made it the world's largest coal importer. In an attempt to reduce dependence on imported fuels, Japan has developed alternative energy sources. It is now the world's fourth-biggest generator of nuclear power. However, environmentalists strongly oppose any expansion of this sector. Nuclear safety became a priority issue after a serious accident at the Tokaimura plant in 1999.

Japan's health care system, which is ranked by WHO as the best in the world, delivers some of the highest longevity and lowest infant mortality rates. The poorest in society receive free treatment; expensive high-tech hospital facilities can also offer the latest techniques. Contributory national health insurance is based on earnings-related premiums, and the cost of medical care for the elderly and the self-employed is subsidized, though the rapidly aging population presents a major future funding challenge.

The Japanese education system is highly pressurized and competitive. One of the key dividing lines is between university graduates, who get the most coveted white-collar jobs, and nongraduates, who have difficulty reaching management level.

Competition for university places is intense, and starts with the choice of kindergarten, which the Japanese attend from the age of four. Academic pressure diminishes once at university. Graduates from Tokyo, Kyoto, Waseda, and Keio, which are the most prestigious universities, have access to top civil service and business jobs. The system succeeds in producing a uniformly well-educated workforce. However, it has also been criticized for not fostering individual responsibility, flexibility, or entrepreneurship.

Measured in consumer goods, the Japanese are wealthy; car ownership is only low because city parking is so restricted. Most households have substantial savings, enabling them to withstand economic recession.

The country's wealthiest men remain extremely wealthy; the fortunes of the top ten averaged $7 billion in 2000. The richest, software king Masayoshi Son, tripled his fortune in one year, to $19.4 billion. Tokyo living costs are high and most who work there live outside the city center, facing a long, cramped commuter journey. Girls and young women still living in their parents' homes are one group with high disposable income.

Japan's tendency to limit its contacts with the outside world ended in 1853, when a US naval squadron coerced trading concessions from the last of the Tokugawa shoguns.

• 1868 Meiji Restoration; overthrow of Tokugawa regime and restoration of imperial power.
• 1872 Modernization along Western lines. Japan's strong military tradition becomes state-directed.
• 1889 Constitution modeled on Bismarck's Germany adopted.
• 1894–1895 War with China; ends in Japanese victory.
• 1904–1905 War with Russia; ends in Japanese victory. Formosa (Taiwan) and Korea annexed.
• 1914 Joins World War I on Allied side. Sees limited naval action.
• 1919 Versailles peace conference gives Japan limited territorial gains in the Pacific.
• 1923 Yokohama earthquake kills 140,000.
• 1927 Japan enters period of radical nationalism, and introduces the notion of a "coprosperity sphere" in southeast Asia under Japanese control. Interpreted in the USA as a threat to its Pacific interests.
• 1931 Chinese Manchuria invaded and renamed Manchukuo.
• 1937 Japan launches full-scale invasion of China proper.
• 1938 All political parties placed under one common banner; Japan effectively ruled by militarists.
• 1939 Undeclared border war with Soviet Union; Japan defeated.
• 1940 Fall of France in Europe; Japan occupies French Indo-China.
• 1941 USA imposes total trade embargo, including oil, on Japan thereby threatening to stifle its military machine. Japan responds in December by launching attack on US fleet at Pearl Harbor and invading US, British, and Dutch possessions in the Pacific.
• 1942 Japan loses decisive naval battle of Midway.
• 1945 Huge US bombing campaign culminates in atomic bombing of Hiroshima and Nagasaki. Soviet Union declares war on Japan. Emperor Hirohito surrenders, gives up divine status. Japan placed under US military government with Gen. MacArthur installed in Japan as supreme commander of Allied Powers.
• 1947 New Japanese constitution: modeled on USA's, but retains emperor in ceremonial role.
• 1950 Korean War. US army contracts lead to quick expansion of Japanese economy.
• 1952 Treaty of San Francisco. Japan regains independence. Industrial production recovers to 15% above 1936 levels.
• 1955 Formation of LDP, which governs for next 38 years.
• 1964 Tokyo Olympics. Bullet train (Shinkansen) inaugurated. Japan admitted to OECD.
• 1973 Oil crisis. Economic growth cut. Government-led economic reassessment decides to concentrate on high-tech industries.
• 1976 LDP shaken by Lockheed bribery scandal; in subsequent election it remains in power but loses outright majority for first time.
• 1979 Second oil crisis. Growth continues at 6% per year.
• 1980 Elections: restoration of LDP overall majority.
• 1982 Honda establishes first car factory in USA.
• 1988 Japan becomes world's largest aid donor and overseas investor.
• 1989 Death of Emperor Hirohito. Recruit–Cosmos bribery scandal leads to resignation of Prime Minister Noburo Takeshita; replaced by Sosuke Uno, who is in turn forced to resign over sexual scandal.
• 1990 Tokyo stock market crash.
• 1991–1992 LDP torn by factional disputes, further financial scandals, and the issue of electoral reform.
• 1993 Reformists split from LDP and create new parties. Elections; LDP loses power. Morihiro Hosokawa becomes prime minister at head of seven-party coalition.
• 1994 Hosokawa resigns. Withdrawal of SDPJ causes collapse of coalition. New three-party coalition includes LDP and SDPJ. Opposition parties unified by creation of Shinshinto. Implementation of far-reaching political and electoral reforms designed to eradicate "money politics."
• 1995 Kobe earthquake kills more than 5000 people.
• 1996 Elections: LDP minority government. Copper trader Yasuo Yamanaka sentenced to eight years in prison for incurring losses of $2.6 billion while acting for the Sumitomo Corporation.
• 1997 Severe economic recession.
• 1998 Crisis over reform of banking and financial system.
• 2000 April, Prime Minister Keizo Obuchi falls into coma, replaced by Yoshiro Mori. June, LDP loses overall majority in general election.
• 2001 April, LDP turns to populist right-winger Junichiro Koizumi as prime minister; five women appointed to cabinet.