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

Author

Listed:
  • Tomoyuki Yagi

    (Bank of Japan)

  • Kakuho Furukawa

    (Bank of Japan)

  • Jouchi Nakajima

    (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.

Suggested Citation

  • Tomoyuki Yagi & Kakuho Furukawa & Jouchi Nakajima, 2022. "Productivity Trends in Japan - Reviewing Recent Facts and the Prospects for the Post-COVID-19 Era -," Bank of Japan Working Paper Series 22-E-10, Bank of Japan.
    • Handle: RePEc:boj:bojwps:wp22e10
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    Cited by:

    1. Kotone Yamada & Yukio Minoura & Jouchi Nakajima & Tomoyuki Yagi, 2023. "Corporate Finance Facility and Resource Allocation: Research Trends and Developments during the Spread of COVID-19," Bank of Japan Working Paper Series 23-E-1, Bank of Japan.
    2. Jouchi Nakajima & Masato Takahashi & Tomoyuki Yagi, "undated". "An Assessment of Online Consumption Trends in Japan during the COVID-19 Pandemic," Bank of Japan Working Paper Series 22-E-11, Bank of Japan.
    3. Yoshiyuki Kurachi & Hajime Morishima & Hiroshi Kawata & Ryo Shibata & Kazuma Bunya & Jin Moteki, 2022. "Challenges for Japan's Economy in the Decarbonization Process," Bank of Japan Research Papers 22-06-09, Bank of Japan.
    4. Kosuke Aoki & Jouchi Nakajima & Masato Takahashi & Tomoyuki Yagi & Kotone Yamada, "undated". "Energy Efficiency in Japan: Developments in the Business and Household Sectors, and Implications for Carbon Neutrality," Bank of Japan Working Paper Series 23-E-10, Bank of Japan.
    5. Ichiro Fukunaga & Kakuho Furukawa & Shunsuke Haba & Yoshihiko Hogen & Yosuke Kido & Tomohiro Okubo & Kotaro Suita & Kosuke Takatomi, 2023. "Wage Developments in Japan: Four Key Issues for the Post-COVID-19 Wage Growth," Bank of Japan Working Paper Series 23-E-4, Bank of Japan.

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    More about this item

    Keywords

    Productivity; Intangible assets; Efficiency of utilization; Reallocation; COVID-19 pandemic;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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