Is Japan Socialist or Capitalist? (With Examples)

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Japan is more capitalist than socialist. Only certain areas of the economy are publicly owned.

This suggests that while socialism has some effect in Japan, it is not as significant as capitalism. Japan follows collective capitalism and is the only practical example of the system in the world.

Japan is a country heavily influenced by capitalist ideology and is ranked as the 18th most free economy in the world by the Economic Freedom World Index, beaten only by capitalist nations like Switzerland.

Socialism vs Capitalism

Both capitalism and socialism are used to describe different types of political and economic structures.

Both of these phrases also refer to certain schools of economic thought on a theoretical level. The degree of government interference in an economy is one of the most important distinctions between capitalism and socialism.

The capitalist economic system depends on the existence of open markets to generate prosperity.

The general market’s supply and demand govern how commodities and services are produced. A market economy is the name given to this type of economic system.

In a socialist economic system, the government either entirely or partially regulates the production of commodities and services.

Central planning occurs under socialism, and the resulting economic system is referred to as a planned economy or a command economy (see: socialism model’s pros and cons).

Is Japan Socialist? (Socialism in Japan)

Japan has a lot of socialist policies in place. Below are four of the most prominent examples:

1. Healthcare

SHI, or Social Health Insurance, is the name of Japan’s universal healthcare program. Everyone who works a full-time job for a medium-sized or big business is covered by SHI.

SHI is paid for by withholding about 5% of earnings, and employers contribute the same amount.

The Japan National Health Insurance (NHI) programme provides coverage to everyone who does not meet the requirements for SHI. Expatriates and digital nomads who are self-employed are eligible for the NHI plan. It encompasses those who work for small enterprises as well as the unemployed. Based on your salary, you contribute a certain amount to the NHI.

Typically, the government foots 70% of the bill for doctor visits, hospital stays, and even prescription drugs. The remaining 30% of healthcare expenses are covered by patients. Nevertheless, depending on the patient’s income level, this ratio can shift in their favour.

2. Police

Under the direction of the National Police Agency, prefectural police departments in Japan are primarily responsible for maintaining the law.

Because the National Public Safety Commission oversees the National Police Agency, Japan’s police are guaranteed to be an apolitical entity that is not directly under the executive power of the central government. A free and vigorous press keeps an eye on them, and they are subject to independent judicial oversight.

Police services are paid for using tax revenue. This implies that any Japanese will always have access to police protection and be able to report crimes or request protection.

This is a prime example of socialism in Japan because there is no market competition among police units. The sector is under the control of a single police agency. The Police are therefore exempt from having to turn a profit or compete with other services to provide the most affordable or efficient services.

3. Education

Japan has historically valued education and teachers, and it takes pride in being a very equitable society.

Japan has advocated for an “all middle-class society” since the end of World War II, where access to opportunities is based on merit and effort, which are decided by academic accomplishment.

Universal basic education has been available in Japan since the early 20th century, but until the 1940s, admission to higher education remained very limited.

Following World War II, the educational system underwent further democratization, with the length of compulsory schooling increased to nine years (six years for elementary school plus three years for lower secondary school) and the number of universities added to approximately 150.

Japan’s public schools are supported by the federal, prefectural, and municipal levels of government. Prefectures cover two-thirds of teachers’ wages in public compulsory education while the federal government covers the remaining one-third.

Public primary and lower secondary schools are tuition-free, and for families earning below a certain annual income threshold, public upper secondary schools are essentially free thanks to government funding for tuition. Families who make more than this amount must pay for upper secondary tuition.

4. Immigration Regulation

There have been debates about whether capitalism represents greater immigration freedom while socialism represents greater state control over resources and anti-immigrant sentiments.

Japan presents a very anti-immigration stance. Foreigners have a tough time settling in Japan because of this. Some people are forced to consider whether they should stay in Japan for more than ten years due to the complicated tax structures that have been implemented, such as a high inheritance tax that is applicable to even short-term foreign residents.

Therefore, this is an example of socialism in Japan where they do not want to open the country to other nationals

Is Japan Capitalist? (Capitalism in Japan)

Japan has various instances of capitalism. The following illustrations show how significant portions of the Japanese economy are governed by free market forces.

1. People Can Launch Businesses

Starting a business is legal for everyone in Japan, regardless of citizenship.

Toyota Motors ($14.3 billion in yearly revenue) and SoftBank ($14.9 billion in annual revenue) are some of the biggest companies in Japan. Toyota Motor, the second-largest automaker in the world (Germany’s Volkswagen produces more), is one of Japan’s most well-known success stories.

It was the first business to create more than 10 million automobiles in a calendar year. Along with being the owner of the premium car manufacturer Lexus, it is also the global leader in hybrid electric vehicles.

Japan was placed 39th in the ease of doing business by the World Bank, thanks in large part to its pro-business laws and regulations. For instance, there are no limits on residency or citizenship requirements and anyone can open a business in Japan.

2. Homes Can Be Bought And Sold By People

Japan, unlike communist nations, has a thriving private real estate sector.

The homeownership rate in Japan is at 61.2%, which is higher than the average for the world and higher than many other countries. In Japan, there are no restrictions on foreigners buying homes, and the real estate industry is well-established.

The Japanese real estate market serves as an example of capitalism because private individuals, not the government, are the owners of real estate assets. Additionally, market forces dictate how much houses cost across the country.

3. Banking System

The interconnection of the central bank (which is autonomous), commercial banks, and industry has long been a defining feature of the Japanese financial system.

Manufacturers have historically relied heavily on banks to meet their borrowing needs, and even while the importance of the manufacturers’ own capital has grown, a sizable portion of the total borrowed still comes from private and public financial institutions.

Commercial banks have a significant impact on the businesses they serve because they are in charge of a large portion of the loans provided to industry.

Since Japan does not have a state-owned banking system and private players have to compete with each other in the market, this is one of the prominent displays of capitalist policies in Japan.

4. Privatization of Railways

Along with other publicly traded corporations, the government decided to privatize Japan Airlines in 1987. The government completely sold off its airline stock.

Following its privatization, Japan Airlines is now subject to market pressures and must maintain a low operating cost in order to compete with other airlines that fly into and out of Japan.

Major Japanese and foreign airlines including All Nippon Airways, Cathay Pacific, Singapore Airlines, and Etihad are among Japan Airlines’ main rivals.

Socialist Political Parties in Japan

  • The Japanese Communist Party is one of the leading socialist parties in Japan. The party supports democracy and peace.

Capitalist Political Parties in Japan

  • The Liberal Democratic Party is a conservative and Japanese nationalist party supporting free markets and enterprise and tax reform.


Different facets of the Japanese economy are being influenced by market and non-market factors. Despite the fact that many critical services like education and healthcare are publicly owned, a sizable portion of the economy is privately owned (and so exhibit the characteristics of socialist systems).

The Japanese government promotes the private sector, as evidenced by the few rules that apply to domestic and international business owners. Additionally, this encourages economic growth because it creates jobs for communities. Thoughts persist that capitalism will exacerbate inequality in an already ageing Japanese society.

Japan is a capitalist society overall, although the nation has democratically chosen to maintain public control of numerous economic sectors.

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Dr. Chris Drew is the founder of the Helpful Professor. He holds a PhD in education and has published over 20 articles in scholarly journals. He is the former editor of the Journal of Learning Development in Higher Education. [Image Descriptor: Photo of Chris]

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