Lessons from Japan's Secular Stagnation

Author Name FUKAO Kyoji  (Faculty Fellow, RIETI) /IKEUCHI Kenta  (National Institute of Science and Technology Policy) /KWON Hyeog Ug  (Faculty Fellow, RIETI) /YoungGak KIM  (Senshu University) /MAKINO Tatsuji (Hitotsubashi University)/TAKIZAWA Miho (Toyo University)
Creation Date/NO. November 2015 15-E-124
Research Project East Asian Industrial Productivity
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Although Japan had largely resolved the problem of non-performing loans by the early 2000s, economic growth hardly accelerated, resulting in the "two lost decades." This paper examines the underlying reasons from a long-term and structural perspective using a KLEMS-type database and micro-level data. Major issues examined include the chronic lack of domestic demand since the mid-1970s caused by the long-run decline in capital formation through the slowdown in the growth of the working age population as well as the resulting current account surplus and yen appreciation, and supply-side issues such as slow total factor productivity (TFP) growth due to Japan's low information and communications technology (ICT) investment.