Is Japan a Capitalist Country?

The question of if Japan is a capitalist country is dependent on the type of economic system it practices.

For a country like Japan, which appears to be democratic and operates a multi-party/unitary parliamentary constitutional monarchy, it will be hard to think that it operates a system like capitalism. However, Japan is a capitalist country with perks and traits of socialism.

It is not out of place that many find their system of practice a little odd since it differs from the typical business in the west – a pure capitalist system. Although on paper Japan is said to practice a capitalist economy, Japan is not purely a capitalist country.

It mixes social safety nets and capitalist ventures to achieve the goal of creating a safe and stable society by providing for citizens and avoiding a crumbling economy.

What is a capitalist country?

To identify a capitalist country, you must first understand the concept of capitalism. Capitalism is an economic system where private individuals or businesses own capital goods.

Here, the production of goods and services is based on supply and demand in the market economy rather than through central planning known as a command economy. That being said, capitalism is greatly characterized by a free-market policy.

So what is a capitalist country? A capitalist country operates an economic system dominated by the free market. In this system, prices and production are dictated by corporations as well as private companies that compete with one another.

It is the opposite of a socialist country. In a purely socialist country, both social and economic structures are socially owned. This system nationalizes all means of production including landed properties.

In a socialist economy, lands are corporately owned. For instance, all lands belong to the people who work on them but they have no right to sell. It is a system that gives the government the autonomous right to make decisions regarding production as well as distribution of goods and services.

A capitalist country, on the other hand, places a heavy focus on economic growth, private property, and freedom of choice with little intervention by the government. If your country practices capitalism, it means that the impact on you as a citizen depends on whether you are a boss or a worker.

There are examples of countries that have successfully practiced a capitalist system. Some of them include the United Kingdom, Hong Kong, Singapore, Canada, and Australia amongst others.


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History of Capitalism in Japan

In the 1800s, particularly after the Meiji restoration period, Japan’s economy was abnormal. At this time, Japan was emerging from a failed feudalism. Since they had now been exposed to western capitalism, the country began experiencing both social and economic growth

Japan’s capitalist economy met with some serious obstruction at that time. Because they had experienced centuries of dictatorial feudalism, they encountered several limitations. This made adapting capitalism in its fullest form a problem.

Japan’s capitalism became more of an imitation. When citizens were to encounter risks and adventure, they turned to the government to take the lead.

After the restoration, Japan’s economic life underwent major development. It was in the Taisho era that it reached its climax in 1912. At this time, Japan’s capitalism had begun to experience contradictions. Some factors like corruption and other vices.

What’s more, the economy was also affected by the Cold war. It was after this period, mostly around the 1900s that Japan’s capitalism began to come into contact with some aspects of socialism. That is to say, the country was confronted with eastern socialism. Shaping different aspects of the already existing capitalist economy.

It is for this reason that many believe that Japan operates a system that infuses aspects of capitalism and socialism. In today’s Japan, a new form of capitalism, known as collective capitalism is practiced.

Workers in modern Japan have become more involved in the firms where they work. In return for hard work and loyalty, these workers expect more reassurance from their employers. Their expectations often include the following; job security, pensions, and social protection.

Japan’s transition to socialism from capitalism

After a failed feudal system, Japan adapted the western capitalism and experienced great economic growth and development, which turned Japan’s economy from the great depression to a massive recovery.

At this time, Japan was operating with an imitation of the capitalist system which they adapted instead of the pure capitalism practiced in Europe and other western countries. This however was not long-stated due to the Cold War, which affected their economy, reducing their status of the world’s largest economy to the second largest.

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Currently, Japan has the third-largest economy by purchasing power and the second-largest by market exchange rates.

When Japan was introduced to socialism in 1982, it took on reformative policies. However, these policies were not strictly adhered to, leading the country into a mid-point between capitalism and socialism.

What form of capitalism does Japan Practice?

Many think that a country’s socio-economic status should be one of two extreme systems; socialism or capitalism. However, Japan’s case is different. It has adopted both systems in different aspects of its socio-economic growth.

Interestingly, Japan’s form of capitalism works. Though it is a blend of socialism and capitalism, it keeps its economy stable by being fair in its distribution of spoils, balancing growth and distributions.

The form of capitalism practiced in Japan is known as collective capitalism. Collective capitalism which was advanced by G. Means relies on cooperation as opposed to private individuals and businesses which is an example of capitalism.

Collective capitalism which is only truly practiced in Japan is a system of cooperation. Here, companies own shares in other companies. This helps them have the spirit of cooperation. Since these companies have interlocking shares, it means they share similar interests and will work towards a collective goal.

Capitalist features present in Japan’s form of capitalism

  • Privatization of businesses and institutions
  • Cooperative bodies known as cabals decide on the market economic policies

Socialist features present in Japan’s collective capitalism

The following are features of socialism present in Japan’s socio-economic system

  • There is social welfare for older citizens
  • Free education up to senior high schools
  • Pregnant women are given 9 months of maternity leave
  • The Healthcare system is nationalized
  • Unemployment benefits
  • Single mothers’ allowance

From these features listed above, it is evident that Japan’s economic policy creates a safety net for its citizens. These policies help reduce their struggles. It employs several measures to establish and carry out social justice and economic equality.

Principles of Japan’s capitalism

The principles of Japan’s capitalism have both socialist and capitalist features. Seeing that it has been successful over the years, we have decided to list a few of these features

  • Capitalism in Japan does not deny nationalization nor does it completely exclude socialism in any way. Instead, it thrives within these systems
  • With capitalism, there’s room for bureaucrats in every industry. These bureaucrats have a unique influence on the market economy. They also contribute greatly to the market.
  • Policies have been set in place to protect businesses that can’t stand on their own. By doing so, the administration implements rules to limit new and existing competition. This way, businesses are regulated.
  • Employee-centered companies are the life force of the country’s financial sector. They provide several benefits to their workers. Japan has many employee-centered companies and they are run with socialist principles.
  • The ministry of finance strictly supervises and regulates all financial affairs in the country.
  • Market economic policies are handled by cooperation.
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How successful is Japan’s collective capitalism?

Japan may not be the country with the largest economy, but it has done a great job with its economic policies. Obviously, the country’s capitalist practice is different from other countries. Regardless, it has not deterred the stable economic growth and distribution which it experiences today.

With this said, Japan’s economic style deserves much attention. Their system of capitalism is strikingly different from that of Europe and the United States. In that, the percentage of citizens below the poverty level is relatively few.

Japan’s wealth distribution is fair and its economic growth is reliant on the spoils distributed equitably. A review by Tokyo-based economist Jesper Poll showed that households in Japan had financial assets of about $96, 000 as of 2018.

These assets did not in any way include liabilities. He also added that although about 2 percent of households are indeed wealthy in Japan as opposed to the US, their system is good at raising those at the bottom of the income pyramid up, generating exceptional inclusion for all in financial wealth creation.

Unlike the United States which has a high percentage of wealthy people, Japan has been known to balance its growth and distribution.


Japan’s economy deserves much attention. The type of capitalism the country practices is one that works and should be studied. They practice a form of capitalism that is alien to many. Though some policies are socialism-inspired, both policies work together for the benefit of Japan’s economic stability.

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