Grammar JLPT Level N5 - Lesson 1

Just like これ, それ is considered to be a pronoun in Japanese (more accurately it is a substitute noun). それ translates roughly to 'that' and highlights something that is closer to the listener (physically or emotionally) than the speaker.

• それだ！
  It is that! (That's it!)
• それは大変(たいへん)だ。
  That's tough.

In these sentences, we can see それ highlighting things that the speaker is identifying as being closer to the listener, or about the listener.
それ is also used to point back to things that have been mentioned previously in the conversation. This can be something that was said earlier within the same sentence, or something that someone else said.

• それも高(たか)い？
  Is that expensive too? (About something mentioned earlier)
• それは。。。
  That's hmmm.... (About something mentioned earlier)