Effects of Demographic Changes on Medium- to Long-Term Business Fixed Investment

Kyosuke Chikamatsu, Shuichiro Ikeda and Tomoyuki Yagi
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Kyosuke Chikamatsu: Bank of Japan
Shuichiro Ikeda: Bank of Japan
Tomoyuki Yagi: Bank of Japan

No 24-E-7, Bank of Japan Review Series from Bank of Japan

Abstract: In Japan, labor input is unlikely to increase significantly, based on the outlook for demographic changes. This paper analyzes effects of demographic changes on firms' fixed investment using microdata from the Tankan. The analysis shows that firms facing labor shortages tend to be active in making business fixed investment and replace labor with capital (machines). Given that labor market conditions are highly likely to remain tight, potential demand for labor-saving investment to address labor shortages appears to be large. For potential demand to materialize as actual investment, the following factors would be important: firms' medium- to long-term growth expectations being held up; training up highly skilled personnel with sufficient skills to develop and use labor-saving software; and human capital being allocated appropriately through increased mobility in the labor market.

Keywords: Labor shortage; Business fixed investment; Growth expectation (search for similar items in EconPapers)
JEL-codes: D22 E30 E32 (search for similar items in EconPapers)
Date: 2024-07-26
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Citations: View citations in EconPapers (1)

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