Productivity Improvement and Productivity Measures in Japan

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					The Productivity Improvement and Development
      of Productivity Measures in Japan

      Presented at the Coordination Meeting and Launching
     Ceremony of Special APO 50th Anniversary Publication on
                        September 7, 2011
                   Tsutomu Miyagawa
                 (Gakushuin University)
                 Contents

1. An Overview of Productivity Improvement
   in Japan
2. The Development of Productivity Measures
   in Japan
3. The Role of Productivity Measures on
   Economic Policies
  1. An Overview of Productivity Improvement in Japan


• As Young (1992) and Krugman (1994)
  pointed out, the high economic growth in
  the emerging economies were attained by
  the accumulation in production factors.
• In contrast to their findings in the 1990s, in
  the high economic growth era (the late 50s
  and the 60s) in Japan, the contribution of
  TFP growth to economic growth was about
  60% (Kosai and Ogino (1980)).
  1. An Overview of Productivity Improvement in Japan


• However, the TFP growth in the 70s
  declined drastically due to the oil shocks.
• Although the TFP growth recovered in the
  80s, the low TFP growth continued after the
  collapse of the bubble economy.
 %            Growth Accounting in Japan
6

5

4
                                           TFP
3                                          Non-IT capital
                                           IT capital
2
                                           Labor

1                                          Output


0

-1

-2
     (Source) APO Productivity Databook
   1. An Overview of Productivity Improvement in Japan

• The productivity growth in the manufacturing
  sector was a main driver of the whole Japanese
  productivity growth. →However, due to the two
  major shocks (Leaman shock and the 3.11
  Earthquake), the international competitiveness in
  the Japanese manufacturing sector may lose.
• The productivity growth in the non-
  manufacturing sector is slower than that in the
  manufacturing sector. Due to the slow growth of
  domestic demand, firms in the service sector tried
  to increase productivity through restructuring.

                                                         6
   2. The Development of Productivity Measures in Japan


• After WWII, Japanese economic leaders believed that
   productivity improvement would lead to economic
   prosperity.
• They founded Japan Productivity Council (JPC) in 1955.
• The role of JPC
(1)Learning management methods to improve productivity in
   the US and other advanced countries and transmitting
   them to Japanese firms
(2)Issuing productivity measures
A brief history of the Japanese economy and the prodctivity measurement

       1955   Japan Productivity Council (JPC) was established.
       1958   JPC started to issue the productivity measure
       1961   Asia Prodcutivity Organization (APO) was established.
       1973   The flexible exchange rate system started.
              The first oils shock
       1979   The second oil shock
       1985   Plaza Accord
       1990   The collapse of the bubble economy -starting the slow growth era.
       1996   Keio Economic Observatory published KEO database.
       1997   Asian currency crisis
              Financial crisis in Japan
              Professor Fukao and others published Japan Industry Productivity
       2003
              (JIP) database.
       2008 Leaman shock
            The East Japan Earthquake and severe accident of Fukushima
       2011
            nuclear powerplant
  2. The Development of Productivity Measures in Japan


• The high growth era (the 60s): Policy makers and
  economists focused on the capital deepening effect
  on the economic growth. Therefore, they
  developed policies which enhanced capital
  accumulation.
• The 70s and 80s:Due to the two oil shocks,
  economists studied the effects of energy price on
  productivity growth.
  2. The Development of Productivity Measures in Japan


• The 90s and the 2000s: Due to the long-term
  stagnation of the Japanese economy, policy
  makers and economists reconfirmed that
  productivity growth is a key driver of
  economic growth.
• At the same time, productivity measures
  and productivity studies based on
  productivity database at the industry level
  were developed.
Growth strategies after 2000

                                      Month and      Prime     Forecasting
                                      year issued   Minister     period

Mid-term forecast of structural
reform, economy, and the              Jan. 2002     Koizumi    2002-2006
governmant budget in Japan



The vision in the 21 century          April, 2005   Koizumi     to 2030



Economic growth strategy              July, 2006    Koizumi     to 2016



The forecast and strategies in the
                                      Jan. 2007       Abe      2007-2011
Japanese economy

The forecast and strategies in the
economic and fiscal policies in the   Jan. 2009       Aso      2009-2018
next 10years


New growth strategy                   June, 2010     Kan        to 2016
  2. The Development of Productivity Measures in Japan

• Two major productivity database in Japan
(1)KEO database: KEO database is
  constructed by the Research Institute of
  Industries in Keio University which has led
  the productivity analysis in Japan. This
  database is used in the APO Productivity
  Databook.
  2. The Development of Productivity Measures in Japan


(2) JIP database: Japan Industry Productivity (JIP)
database is constructed by Professor Fukao of
Hitotsubashi University and others and first
published in 2003. This database is extended almost
every year and published at the website of Research
Institute of Economy, Trade, and Industry (RIETI),
http://www.rieti.go.jp/jp/database/JIP2010/index.ht
ml. The productivity data in JIP is provided to
OECD STAN database and EUKLEMS database.
The database is also comparable to productivity
database at the industry level in China and Korea.
Productivity database in Japan

                                 JIP 2011 database           KEO database

                          108 industries(including
                                                     43 industries(including 22
Industry classification   52 manufacturing
                                                     manufacturing industries)
                          industries)

Estimation period         1970-2008                  1960-
Price                     2000 constant price        2000 constant price

Labor account             gender:2                   gender:2

                          age:15classifications      age:11classifications

                          employment status:         employment status:
                          3clasiifications           3clasiifications

                          education:4 classifications education:4 classifications

Capital account           aaaset classification:37   aaaset classification:42
                                                     depricaition rate:
                          depreciation rate:
                                                     estimating depreciation
                          following BEA's
                                                     rate from National Wealth
                          depreciation rate
                                                     Survey
 3. The Role of Productivity Measures on Economic Policies


• The development of productivity database has
  contributed to the better understanding of long-
  term economic slowdown of the Japanese economy.
• An example: Slow productivity growth in the
  service sector→The productivity improvement in
  the service sector is one of key economic
  policies→JPC supported activities of Service
  Productivity & Innovation for Growth (SPRING)
  in the late 2000s.
 3. The Role of Productivity Measures on Economic Policies


• The Japanese government plans to issue
  official productivity measures.
• Staff members of KEO database and JIP
  database help to construct better official
  productivity measures.
Thank you for your attention

				
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