Figure 1-2-8 Changes in International Competitiveness

(Note) For 1989 and 1992, the orders have been published separately for the member nations (22) of the OECD and other regions (15). Source) Developed by the MLIT from "World competitiveness report 1995" for 1989 to 1992, "The competitiveness yearbook 1997" for 1993 to 1997 and its "The world competitiveness yearbook 1999" for 1998 to 1999, "The world competitiveness yearbook 2001" for 2000 to 2001, "IMD world competitiveness yearbook 2006" for 2002 to 2006, "IMD world competitiveness yearbook 2011" for 2007 to 2011 and "IMD world competitiveness yearbook 2013" for 2012 to 2013, all compiled by IMD.

It is true that economic growths are driven in one way by population increases (growing labor population), but analyses of the nation’s long-term economic growth tell that the growth of its real GDP has by far outpaced the rate of population increases (Figure 1-2-9). This fact suggests that Japan’s economic growth has been intensely influenced by factors other than population increases $ ^{Note\ 9} $ .

Taking a closer look at Japan’s economic growth in the 1970s and after using a technique called “growth accounting $ ^{Note10} $ ,” increasing labor population has had a relatively small share of contribution to the nation’s economic growth, but it had its prime impetus derived more from increases in the capital stock and higher TFP up until 1990. In the 1990s in which the economic bubbles had burst, and after, the capital stock had a narrowing share of contribution to the nation’s economic growth, when compared with a negative share of contribution of TFP from 1990 to 1995 and a zero share from 2005 to 2010 (Figure 1-2-10).

Figure 1-2-9 Japan's Population and Real GDP (1875 = 100)

Source) Developed by the MLIT from Angus Madison's "Historical Statistics of the World Economy:1-2008 AD," a "National Census" and "Basic Tallies of Population, etc. from 2010 National Census" by the MIC and "Long-Term Time Analyses of Population Distributions in the Japanese Archipelago" (1974) by the National Land Agency.

Figure 1-2-10 Changes in Growth Accounting

Source) Developed by the MLIT from the “Japan Industrial Productivity (JIP) Database 2013” by The Research Institute of Economy, Trade and Industry (RIETI), an incorporated administrative agency.

## Note 9 Refer to “Deflation” by Hiroshi Yoshikawa (2013)

Note 10 Growth accounting is a technique by which the sources of an economic growth are broken down into an increased capital stock, increased labor population and higher TFP to determine quantitatively which of the three sources contributes most to the economic growth. Assuming a Cobb-Douglas production function based on Y: GDP, A: technology level, K: capital stock, L: labor quantity, $ \alpha $ : capital share and : $ 1-\alpha $ : labor share, GDP can be stated in an equation as $ Y = AK^{\alpha}L^{1-\alpha} $ . If logarithms of both sides of the equation are taken and differentiated with respect to time Y4, the following is derived:

$$ \frac{\dot{Y}}{Y}=\frac{\dot{A}}{A}+\alpha\frac{\dot{K}}{K}+(1-\alpha)\frac{\dot{L}}{L} $$

(where $ \dot{Y} $ , $ \dot{A} $ , $ \dot{K} $ , and $ \dot{L} $ are Y, A, K and L differentiated with reference to time, respectively.) Thus, the growth rate of GDP can be broken down into a technological advance, an increased capital stock, and an increased labor population.