Determinants of Total Factor Productivity and Japan's Potential Growth: An International Perspective

As Japan emerges from recession and its economy approaches cruising speed, the potential rate of growth of the Japanese economy is becoming an increasingly important factor in determining the path for restoring fiscal health and the timing for tightening up monetary policy.

In the meantime, it has been recognized that the main source of growth for Japan, which faces serious population decline in the coming years, is the increase in total factor productivity (TFP). Therefore it is urgent to recover Japanese TFP growth, which has been at a standstill since the 1990s. This stagnation in productivity growth and its increasing gap with the U.S. are not only recognized in Japan but also in Europe, which has led to a great deal of research in this area. With these issues in mind, the Ministry of Economy, Trade and Industry (METI) has compiled its "New Economic Growth Strategy" to show that "new growth" is possible even under an adverse environment of continuous population decrease, by strengthening international competitiveness and revitalizing regional economies.

This symposium will be based on the results of RIETI's projects on industry- and firm-level productivity and international comparison of productivity in the Pacific Rim countries, to discuss the following issues:

• Which sectors have been leading TFP growth in Japan?
• What are the determinants of the potential growth rate?
• To what extent can factors such as regulatory reform, focusing resources on the IT industry, usage of IT by user-industries, improving service sector productivity, and the accumulation of human capital be counted on to increase the potential growth rate of the Japanese economy?
• How much have the East Asian countries caught up with Japan in terms of productivity?
• Why did TFP growth in Europe stagnate?

To this end, distinguished overseas researchers on TFP have also been invited to contribute to this conference.

In the second part, participants will then deepen the debate through a panel discussion comprised of experts and policymakers from within and outside of Japan.

It is hoped that with the participation of a wide range of practitioners and researchers, the outcome of this symposium will provide many insights to the future strategy of Japan's economic growth and productivity.