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

Author

Listed:
  • Kyosuke Chikamatsu

    (Bank of Japan)

  • Shuichiro Ikeda

    (Bank of Japan)

  • Tomoyuki Yagi

    (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.

Suggested Citation

  • Kyosuke Chikamatsu & Shuichiro Ikeda & Tomoyuki Yagi, 2024. "Effects of Demographic Changes on Medium- to Long-Term Business Fixed Investment," Bank of Japan Review Series 24-E-7, Bank of Japan.
    • Handle: RePEc:boj:bojrev:rev24e07
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    More about this item

    Keywords

    Labor shortage; Business fixed investment; Growth expectation;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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