33 Japan

Smith

Once we correct for population aging by focusing on output growth rates per working-age adult, Japan appears as a surprisingly robust economy over the last 25 years, outperforming the other G7 countries and Spain.

But not so fast! Not all working-age adults actually work. Lyman Stone points out that if you look at GDP per worker instead of GDP per working-age population, Japan again looks very slow:

And when you look at output per hour, the story is the same:

Japan has been able to beat these other countries in terms of GDP per working-age population by putting in a lot more of its population to work.

This low productivity growth could also be due to aging, as there is a pretty robust empirical connection in the data. But the timing — a sudden flatlining of productivity growth after the Asian financial crisis of 1997, rather than after the bubble burst of 1990 — seems highly suspicious here.

Is it possible that the early and mid 90s weren’t actually a lost decade for Japan, but that the years since 1997 have been? This is a mystery that bears a lot more investigation, and I plan to write more about this soon.

Smith (2023) At least five things for your Thanksgiving weekend](https://www.noahpinion.blog/p/at-least-five-things-for-your-thanksgiving)