Productivity Trends in Japan - Reviewing Recent Facts and the Prospects for the Post-COVID-19 Era -

Tomoyuki Yagi, Kakuho Furukawa and Jouchi Nakajima
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Tomoyuki Yagi: Bank of Japan
Kakuho Furukawa: Bank of Japan
Jouchi Nakajima: Bank of Japan

No 22-E-10, Bank of Japan Working Paper Series from Bank of Japan

Abstract: Labor productivity is the source of economic growth. This paper shows that the growth rate of labor productivity in Japan has remained low since the collapse of the bubble economy in the early 1990s. We summarize the background and the issues involved in improving productivity based on previous research and additional analyses provided in this paper. We also analyze developments in labor productivity during the novel coronavirus infection (COVID-19) pandemic and discuss the issues involved in achieving sustainable growth in the post-COVID-19 era. Based on our literature review, the background to the recent stagnation in labor productivity can be summarized as follows. First, the pace of capital accumulation has generally slowed. Second, there are issues involved with the utilization of capital stock. While investment in research and development (R&D) has been increasing, it has not led to improvements in productivity. Third, Japan has issues with resource reallocation. By analyzing data on individual firms, we find that production resources are not being allocated efficiently as low-productivity firms remain in the market for a long time. These long-standing issues which Japan has faced became apparent once again under the pandemic. Specifically, the pace of capital accumulation is further reduced, and the efficiency of resource allocation has not improved. Meanwhile, increased utilization of IT capital, such as the expansion of working from home and online consumption, is a progress in improving productivity; however, such progress has been limited in comparison to that of other countries. To improve its labor productivity and attain sustainable economic growth in the future, it will be needed for Japan to further accelerate such progress and steadily resolve the various issues which it faces.

Keywords: Productivity; Intangible assets; Efficiency of utilization; Reallocation; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: E20 E22 J24 O47 (search for similar items in EconPapers)
Date: 2022-07-28
New Economics Papers: this item is included in nep-eff and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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