Press "Enter" to skip to content

Trends in Japan’s Economic Productivity

Japan, over the past 5 years, has experienced spikes and declines in GDP growth rate, but has remained relatively stable. However, the overall productivity of the Japanese economy has been in decline for the past decade. Overall, Japan’s economy grew at half of the pace of America’s between the time period of 2001 to 2010. Economists point to Japan’s rising average population age as a factor in the declining national productivity. According to the 2010 Japanese Census, over 50% of the Japanese population is over the age of 45. With the rising age of the average working citizen as well as the increasing number of retired seniors, Japan is having trouble competing in the international economy. Interestingly, Japan is outperforming the United States in GDP per capita. However, the overall stagnation of the Japanese economy is reason for caution and can potentially forecast the potential results of a global decline in population. Nonetheless, Japan still has the world’s largest electronics market and the world’s third largest automobile industry. Where Japan lacks, is in the service and agricultural sectors. This has also contributed to part of Japan’s decline in productivity over the past decade.
Screen Shot 2015-01-29 at 9.18.08 PM

One Comment

  1. As noted in class, label what the units are for your productivity measure. This is clearly an index, but what is the base? The previous month? or some base year? It would be unusual for a modern economy to go for years without any improvement, so I suspect this is the change relative to the previous month. Even so, something looks odd. The data appears to be drawn from the Japan Productivity Center (your source is unclear). Go to their web site! Rule of thumb: whenever possible go to the source to check the details, even if the graph you grab is nicer that what you find at the JPC (the 日本生産性本部 goes back to the US Occupation era, sponsoring study tours to the US for manufacturers such as Toyota and bringing consultants over to teach quality control such as Deming & Juran – though I’ve not checked whether those particular examples were the JPC).

    Anyway, for the Solow Model framework, what we would like is Total Factor Productivity, which accounts [however crudely] for both capital and labor inputs. On the other hand, if you are in a firm thinking about personnel, or more generally thinking about employment issues, or a central bank thinking about inflation, then output per hour – “labor productivity” – may be the metric you want.

Comments are closed.