From 1868, the Meiji period launched economic expansion. Meiji rulers embraced the concept of a free market economy and adopted British and North American forms of free enterprise capitalism. Japanese went to study overseas and Western scholars were hired to teach in Japan. Many of today's enterprises were founded at the time. Japan emerged as the most developed nation in Asia.

From the 1960s to the 1980s, overall real economic growth has been called a "Japanese miracle": a 10% average in the 1960s, a 5% average in the 1970s and a 4% average in the 1980s. Growth slowed markedly in the 1990s, largely because of the after-effects of Japanese asset price bubble and domestic policies intended to wring speculative excesses from the stock and real estate markets. Government efforts to revive economic growth met with little success and were further hampered by the global slowdown in 2000. The economy showed strong signs of recovery after 2005. GDP growth for that year was 2.8%, with an annualized fourth quarter expansion of 5.5%, surpassing the growth rates of the US and European Union during the same period.

Japan is the second largest economy in the world, after the United States, at around US$5 trillion in terms of nominal GDP and third after the United States and China in terms of purchasing power parity. Banking, insurance, real estate, retailing, transportation, telecommunications and construction are all major industries. Japan has a large industrial capacity and is home to some of the largest, leading and most technologically advanced producers of motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles and processed foods. The service sector accounts for three quarters of the gross domestic product.

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