RIETI Report August 21, 2026

Japan’s productivity transformation: From within-firm stagnation to market-driven reallocation

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Dear Readers,

Welcome to RIETI Report. This bi-weekly newsletter will keep you updated with the recent columns, event information and research results by RIETI fellows and other leading economists in Japan and around the world.

In this edition, we feature topics related to the shift in sources of productivity growth. In their latest column, RIETI Chairman Kyoji Fukao and his co-authors show that Japan's productivity gains are increasingly driven not by improvements within firms, but by the reallocation of resources toward more productive ones. They explore what this shift means for both the future of growth and competitiveness and for the role of government policy.

We hope you will enjoy it. If you have any feedback, we would love to hear from you (news-info@rieti.go.jp).
Editors of RIETI Report (Facebook: @en.RIETI / X: @RIETIenglish / URL: https://www.rieti.go.jp/en/)

This month's featured article

Japan’s productivity transformation: From within-firm stagnation to market-driven reallocation

FUKAO KyojiChairman, RIETI

KIM YoungGakProfessor, School of Economics Senshu University

KWON Hyeog UgFaculty Fellow, RIETI

Discussions on Japan’s ‘lost decades’ have long focused on sluggish demand and the survival of ‘zombie’ firms. However, new evidence from microdata suggests a fundamental shift. This column argues that Japan’s productivity dynamics are moving from internal firm improvements to market-driven reallocation and reveals that the country’s unique ‘negative exit effect’ is largely driven by the mergers and acquisitions activity of high-productivity firms.

>>>To read the full article:
https://www.rieti.go.jp/en/columns/v01_0241.html

Related Papers

Sources of Productivity Growth by Firm Size and Causes of the Negative Exit Effect
FUKAO Kyoji (Chairman, RIETI) / KIM YoungGak (Senshu University) / KWON Hyeog Ug (Faculty Fellow, RIETI)
https://www.rieti.go.jp/en/publications/summary/26010011.html

Synergy or Anergy? Foreign acquisition and firm productivity in Japan
TANAKA Kiyoyasu (JETRO)
https://www.rieti.go.jp/en/publications/summary/25090008.html

Impact of the Closure of Large Establishments on Regional Productivity
ADACHI Yusuke (Ritsumeikan University) / OGAWA Hikaru (University of Tokyo) / TSUBUKU Masafumi (Senshu University)
https://www.rieti.go.jp/en/publications/summary/25040012.html

Related Articles

80 Years after the End of WWII: Lost efforts to improve productivity
FUKAO Kyoji (Chairman, RIETI)
https://www.rieti.go.jp/en/papers/contribution/fukao/13.html

The Future of AI-related Social Science
MANAGI Shunsuke (Faculty Fellow, RIETI)
https://www.rieti.go.jp/en/columns/a01_0789.html

How Much Does AI Raise Productivity?
MORIKAWA Masayuki (Distinguished Senior Fellow (specially appointed), RIETI)
https://www.rieti.go.jp/en/papers/contribution/morikawa/34.html

Related Events

Quantifying the Effect of AI Invention on Productivity
Speaker: Lee G. BRANSTETTER (James M. Walton Professor of Economics and Public Policy, Carnegie Mellon University)
https://www.rieti.go.jp/en/events/bbl/26060101.html

Are Pro-productivity Policies Fit for Purpose?
Speaker: Bart VAN ARK (Non-Resident Fellow, RIETI / Professor of Productivity Studies & Managing Director of The Productivity Institute, Alliance Manchester Business School (AMBS) at the University of Manchester
https://www.rieti.go.jp/en/events/bbl/25032601.html

Our Latest Discussion Papers

Urban Planning and Vertical Urbanization
KONDO Keisuke (Senior Fellow, RIETI) / OKUBO Toshihiro (Faculty Fellow, RIETI)
https://www.rieti.go.jp/en/publications/summary/26080006.html

RIETI Research Papers List

[Discussion Papers]
https://www.rieti.go.jp/en/publications/act_dp.html

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