August 25, 2022
Bank of Japan
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Fukuoka
NAKAMURA Toyoaki
Member of the Policy Board
I. Economic and Price Developments at Home and Abroad
A. Recent Developments and Outlook for Economic Activity and Prices
I will begin my speech by talking about recent developments in economic activity and prices.
Overseas economies have recovered on the whole, albeit with some weakness seen in part
(Chart 1). The U.S. and European economies continue to recover, particularly for services
consumption, although some weakness has been seen in several sectors. The Chinese
economy has started to pick up, led mainly by exports and production, with the impact of
lockdowns and other public health measures waning. Emerging and commodity-exporting
economies other than China have generally picked up with the resumption of economic
activity becoming full-fledged.
Against this background, Japan's economy has also picked up with the impact of the novel
coronavirus (COVID-19) waning, despite being affected by factors such as rises in the price
of commodities, including grain. In the corporate sector, exports have increased as a trend,
although they have been under strong downward pressure due to supply-side constraints.
Business fixed investment has picked up, albeit with effects of supply-side constraints. In the
household sector, private consumption has increased moderately, particularly for services
consumption, with the impact of COVID-19 waning and also with support from the
materialization of pent-up demand. Meanwhile, the consumer price index (CPI) for all items
less fresh food, or core CPI, has increased to 2.4 percent on a year-on-year basis, mainly due
to rises in energy and food prices (Chart 2).
Japan's economy is likely to recover as the impact of COVID-19 and the effects of supply-
side constraints gradually wane. The year-on-year rate of change in core CPI is likely to
increase toward the end of 2022 due to rises in the price of such items as energy, food, and
durable goods. Thereafter, the rate of increase is expected to decelerate as the positive
contribution of the rise in energy prices to the CPI wanes.
B. Risk Factors for Economic Activity and Prices
This outlook is subject to a number of uncertainties; specifically, I am particularly attentive
to the following factors.
The first is how COVID-19 at home and abroad will affect Japan's economy. If vigilance
against COVID-19 becomes elevated again in Japan due to a rapid resurgence of the disease,
the positive contribution of pent-up demand could weaken by more than expected,
particularly in services consumption; this could pose the risk of a downward deviation in
private consumption from the baseline scenario and of a delayed pick-up in inbound tourism
consumption due mainly to entry restriction measures. In the meantime, if pandemic-related
restrictions become stricter again in China while the global semiconductor shortage continues,
supply-side constraints could become prolonged and amplified through, for example, supply-
chain disruptions. This could then exert downward pressure on Japan's exports and production,
goods consumption, and business fixed investment.
The second factor is developments in the situation surrounding Ukraine and in the price of
commodities, including grain. As investment in natural resource development has been
constrained in response to global efforts toward addressing climate change, there have been
growing uncertainties over geopolitical factors, particularly the situation surrounding Ukraine.
Under these circumstances, there is a risk that the price of commodities, including grain, will
rise or remain high for a prolonged period, which could cause further downward pressure on
the global economy, especially the euro area. In particular, Germany, which has been leading
the euro area economy for many years, is expected to pay a large price for having to break
away from a value chain that is mainly dependent on Russia. Thus, I am carefully monitoring
developments regarding this matter, including its effects on Europe as a whole.
The third factor I am particularly attentive to is developments in overseas economic activity
and prices and in global financial and capital markets. Amid a continued rise in inflation,
mainly in advanced economies, central banks have been raising policy rates significantly.
Central banks in the United States and Europe seem to be prioritizing the containment of
inflation even at the risk of some degree of economic slowdown. However, there is concern
in global financial and capital markets over whether it is possible to contain inflation and
avoid a recession simultaneously. If such concern grows substantially, there is a risk that
financial conditions will tighten further globally through adjustments in asset prices and
foreign exchange rates, and through capital outflows from emerging economies. There is also
a risk that this will lead to a significant slowdown in overseas economies. I am therefore
paying due attention to developments in financial and foreign exchange markets and their
impact on economic activity, prices, and wages in Japan.
II. Conduct of Monetary Policy
Let me now turn to my basic view on the conduct of monetary policy for the immediate future,
based on the economic and price developments I have just described. In view of Japan's
present economic conditions, I consider it necessary for the Bank of Japan to persistently
continue with the current powerful monetary easing. Here are three major reasons.
The first reason is that Japan's economy is still on its way to recovery from the downturn
caused by COVID-19. Although exports and private consumption in particular have been
picking up, Japan's real GDP has not yet recovered to the pre-pandemic 2019 average level,
unlike in the United States and the euro area (Chart 3). The output gap, which captures the
utilization of labor and capital, has been consistently negative since the April-June quarter of
2020 (Chart 4). As demand remains insufficient compared with supply capacity, a shift in the
direction of monetary policy toward tightening would likely drag down the economy and put
significant downward pressure on the economic activity of firms and households.
The second reason is that the current price rises in Japan and those in the United States and
Europe differ considerably in terms of degree and the number of items. Comparing price
developments in Japan with those abroad shows a significant difference: the year-on-year rate
of change in consumer prices for all items exceeds 8 percent in the United States and Europe,
while the rate of change in core CPI in Japan is 2.4 percent (Chart 5). The breakdown of price
change distributions by item indicates that in the United States and Europe, where the
economies recovered from the downturn caused by COVID-19 earlier than Japan, prices have
risen significantly for a wide range of items, including services. In Japan on the other hand,
a limited number of items such as energy and food are the main contributors to price rises,
and the rate of increase in the price of many items, including services, remains low, suggesting
that the country is experiencing only imported inflation (Chart 6). This difference is likely
due to the disparity in wage inflation. In the United States and Europe, economic recovery
from the downturn caused by the pandemic was accompanied by significant upward pressure
on wages. In Japan, however, wage inflation remains low because the level of economic
activity is still on its way to recovery and wage increases have been suppressed by structural
challenges that I will discuss later. In the current situation, where cost-push factors from
imported goods have resulted in significant price rises for only certain items, I believe that
targeted policy action is more effective than monetary policy aimed at reducing aggregate
demand.
The third reason I consider it necessary for the Bank to persistently continue with the current
powerful monetary easing is that the 2 percent price stability target needs to be achieved in a
sustainable and stable manner. The year-on-year rate of change in core CPI is likely to
increase toward the end of 2022 due to rises in the price of such items as energy, food, and
durable goods. However, the positive contribution of the rise in energy prices to the CPI is
likely to dissipate thereafter. Thus, my current assessment is that it is difficult for the price
stability target to be achieved in a sustainable and stable manner. Specifically, the year-on-
year rate of increase in core CPI is projected to decline to the 1.0-1.5 percent range from fiscal
2023 onward, according to the median of the Policy Board members' forecasts presented in
the July 2022 Outlook for Economic Activity and Prices (Outlook Report) (Chart 7). As the 2
percent price stability target is a key performance indicator whose progress should be
monitored continuously to realize the sound development of the national economy, I would
like to emphasize the importance of core CPI becoming 2 percent in a stable manner,
accompanied by a sustainable rise in wages; it is not enough for core CPI to reach 2 percent
temporarily due to such factors as a rise in energy prices. Even if the higher price of some
items pushes up the overall price level to 2 percent, unless household disposable income
increases, spending on products and services will decline due to budget constraints. This will
lead to a vicious cycle in which rises in overall prices will be restrained and economic activity
will be sluggish, thereby putting downward pressure on wages. Thus, Japan's economy is only
halfway to achieving the price stability target.
Taking these three points into particular account, I consider that the Bank should continue
with the current monetary easing at this point. At the same time, as inflation progresses
globally, I have a feeling that there has been a change in the entrenched views and practices
in Japan that are based on the assumption that prices will not increase. Inflation is a common
economic phenomenon in the world, and nominal wages should grow faster than inflation
when labor productivity improves. However, prices in Japan have barely increased over the
past 30 years. Thus, even if firms could not raise wages, employees did not typically leave to
take another job, as I will elaborate later (Chart 8). Meanwhile, there is now less room to
increase the labor force participation of the elderly and women, and labor shortages have
become more severe (Chart 9). In this situation, wage growth becomes increasingly important
for firms to secure their workforce, forcing them to face the strategic challenges of increasing
productivity and thereby raising labor compensation. To address these challenges, both small
and medium-sized firms and large firms are expected to operate a virtuous cycle in which
they increase the value added and competitiveness of their products and services and raise
their prices, thereby securing resources for wage growth.
A survey by the Japanese Trade Union Confederation, or Rengo, shows that the average rate
of increase in wages, i.e., increases in base pay and regular salaries combined, for fiscal 2022
is 2.07 percent, suggesting that wage growth both at large firms and at small and medium-
sized firms exceeds that of the previous fiscal year. Earlier this month, a labor ministry
advisory panel put forward a proposal to raise the nation's average hourly minimum wage for
the current fiscal year by 31 yen, or 3.3 percent, which would be a record increase. Meanwhile,
a survey targeting large firms conducted by the Japan Business Federation, or Keidanren,
indicates that summer bonuses have increased by more than 8 percent. All these demonstrate
that wage increases have started to be widely observed, reflecting the pick-up in overall
economic activity while labor shortages continue.
It is essential that such wage inflation be realized not only this year but also from next year
onward in a sustainable manner. Thus, the key is how bonuses for this winter and wage
revisions for the next fiscal year will turn out. To realize wage growth, it is necessary to strike
a balance between the protection of public health and the reopening of economic activity at
the earliest possible time, thereby enabling the economy to recover from the downturn caused
by COVID-19. Meanwhile, Japanese firms need to reform their business lines to fit the
business environment that has changed dramatically due to the pandemic. The Bank is
committed to continuing to support firms' initiatives through the current monetary easing.
III. Toward Achieving Sustainable Growth of Japan's Economy
Achieving the 2 percent price stability target calls for a sustainable and stable increase in
household disposable income, mainly by means of higher wages. This gives rise to a virtuous
cycle: Higher disposable income underpins greater household spending, which represents
final demand, which then feeds into an expansion in corporate sales and profits. Firms draw
on the funds generated by greater sales and profits and on leverage arising from such means
as cash borrowing for investments aimed at enhancing their added value. Firms that increase
the value of their products, services, and labor reflect this in selling prices, and then grow by
acquiring the resources needed for further wage increases and investments (Chart 10 gives a
simplified representation).
However, international comparisons show that, since the first half of the 1990s, household
disposable income has more than tripled in the United States and about doubled in Germany,
but it has hardly increased in Japan (Chart 11). I would like to share my views on the three
dynamisms necessary to break out of this stagnation in disposable income, based on my own
experience at a private firm.
A. Dynamism of Japanese Firms
My first point is about the dynamism of firms. Many Japanese firms long wrestled with
declining profitability and a deterioration in business performance. This stems from several
factors, including the yen's sharp appreciation following the 1985 Plaza Accord and the
bursting of the bubble economy in the early 1990s, coupled with the higher price of imported
raw materials brought about by overseas economic growth and with the inflow of low-priced
goods from developing economies. At the same time, firms faced strong social pressure in
Japan to maintain employment. They responded by overhauling their cost structure, cutting
fixed expenses, such as personnel expenses -- including wages and "investment in people" --
and research and development (R&D) expenses, all the while maintaining their existing
business portfolios. This gave rise to excessive competition among firms in Japan and waning
profitability and growth potential. Meanwhile, from 2008, firms' entry rates were in the range
of 4-6 percent and exit rates were almost constantly below 4 percent. Thus, both entry and
exit rates remained low vis-à-vis international levels (Chart 12). This situation points to
limited corporate metabolism, in terms of the redistribution of resources through the entry
into and exit from businesses.
This dearth of corporate dynamism, coupled with the onset of deflation in the latter half of
the 1990s, seems to have precipitated sluggish growth in productivity and wages stemming
from a lack of innovation and investment. In other words, in a deflationary environment
where prices continue to fall, firms find it more difficult to make aggressive investment that
carries risks because the expected rate of return on investment declines. Firms therefore put
priority on securing profits and cash flow by cutting costs. Meanwhile, under slow corporate
metabolism and the traditional practice of lifetime employment, if a firm were to go bankrupt
and employees lost their jobs, their biggest worry is finding a new job. As a result, employees
seek stability of employment over higher wages. This situation makes it possible to prioritize
the survival of a business in the short term, but as the global competition becomes more
intense, overseas economies are growing in tandem with firms' efforts to increase the added
value of their products and services, with wages and prices following suit. Unless firms in
Japan increase the added value of their products and services as well, both firms' and their
employees' capacity to generate earnings will gradually weaken.
The bold monetary easing and flexible fiscal policy pursued since 2013 have served to arrest
the deflationary trend. Firms have also begun realigning their business portfolios in an effort
to identify and concentrate on their core competencies. For example, firms have consolidated
less productive businesses under their best owners (companies that are expected to maximize
the value of the business over the medium to long term) through merger and acquisition
(M&A) activities. However, just as recovery was getting under way, COVID-19 broke out
and Japan's economy once again registered negative growth. Now that the economy is
recovering from the worst of the pandemic, global inflationary pressures have increased.
While firms in the United States and Europe have made headway in passing on costs to prices
and increasing wages, those in Japan have made relatively limited progress in passing on
costs (Chart 13). Sluggish growth potential and wage inflation have thus materialized (Charts
1 and 11). This has given rise to a growing awareness among management or business owners
that an increase in the added value of products and services and investment in people for that
purpose, including raising wages, are critical strategic challenges for business growth. My
hope is that, alongside the growth of startups that create and foster innovation, these recent
developments will revive the dynamism of Japanese firms and lead to the sustainable growth
of Japan's economy.
B. Dynamism of Employment
My second point concerns the dynamism of employment. Many analyses have shown that in
the United States and Europe, the redistribution of resources, including labor mobility
between industries and firms, has moved ahead since the outbreak of COVID-19, and that
this has contributed to greater labor productivity.1 By contrast, it seems that Japan to date has
not shown similar signs of a full-fledged resource redistribution. According to an analysis by
the Bank's staff,2 resource redistribution between industries has made only a very slight
contribution to boosting real labor productivity, even after the onset of the pandemic (Chart
14). Moreover, the proportion of people changing jobs versus all employed persons is around
4 percent, and that of people changing jobs between regular employment versus all employed
persons is only around 1 percent (Chart 15). In contrast, the proportion of people changing
jobs in the United States and Europe ranges between around 10 to 20 percent (Chart 16).
Differences in the extent of resource redistribution through such job changes and other
avenues, and in the ensuing pace of improvement in labor productivity, could also be
engendering differences in wage inflation. In the United States, the wages of people who have
not changed jobs have been rising together with the wages of those who have (Chart 17).
Even in the United States and Europe, although people who change jobs in pursuit of higher
wages represent only a part of total employees, in my view, the fear that employees might
migrate to other firms has spurred management or business owners to work to boost
productivity and improve employee pay and benefits. Also, under job-based employment
contracts that tie wages to the evaluation of individual ability, the stronger capabilities of
workers themselves may be pushing labor productivity upward. I suspect this is having a
spillover effect even on the wages of people who have not changed jobs.
To bring about a more active redistribution of resources by means of job changes and other
avenues, economic recovery from the downturn caused by the pandemic will be vital, as well
as business growth driven by the revival of corporate dynamism. At the same time, I believe
institutional improvements are needed, including developing a social safety net that
encourages a positive approach to taking on challenges and a social security system that is
sustainable and does not disadvantage those who change jobs.
I believe that, in Japan, "investment in people" used to be considered a labor cost rather than
an investment in the intangible asset of human capital. To build momentum in which wages
continue to rise year after year, revitalizing such investment will be crucial, though it is an
area where Japan falls far behind the United States and Europe (Chart 18). As dynamism in
employment emerges and firms turn to more active investment in human capital, I expect this
to strengthen the added-value output of individuals, and in turn that of firms, thus accelerating
the virtuous cycle of income and prices.
C. Dynamism of Household Financial Assets
The third point necessary to increase household disposable income is the dynamism of
household financial assets. Although household financial assets in Japan have grown to more
than 2,000 trillion yen, a breakdown of those assets shows that growth in equity and
investment trusts has been lackluster. As of the end of March 1992, after the bursting of the
bubble economy, Japan's share of holdings of equity and investment trusts within overall
household financial assets was 15 percent, and in the United States it was 37 percent.
However, as of the end of March 2021, a wider gap has formed, with the share at 15 percent
in Japan and 51 percent in the United States3 (Chart 19). Reflecting this trend, growth in
household dividend income in Japan has been more or less flat since the early 1990s. In the
United States and Germany, meanwhile, both employee income and dividend income are
contributing to an increase in disposable income (Chart 11).
Firms are not only places that provide employment and wages but also vehicles for creating
added value. Although employee income accounts for the bulk of household disposable
income in Japan, most people can only work for a single employer. Therefore, to reap the
benefits of the growth of many firms outside their own places of work, including that of listed
firms, people have to invest. If the trend of stable asset formation -- through the investment
of surplus funds in financial assets focusing on the long term, on risk diversification, and on
regular contributions -- gains traction, it will bring dynamism to household financial assets.
This development will give more depth to disposable income in Japan and as a result, Japan's
economy can expect more robust private consumption to help close the macroeconomic
output gap and further boost corporate activities. With institutional support already available,
such as the Nippon Individual Savings Account (NISA) and iDeCo pension plans, there is
growing interest in investment trusts, especially among young people. Moreover, the
Japanese government's Council of New Form of Capitalism Realization has announced its
intention to formulate a plan to double asset income in Japan. I look forward to these
developments gaining momentum.
As has been illustrated, I expect the virtuous cycle of income and prices to be reinforced as
the dynamism of firms and employment spurs corporate growth, while the dynamism of
employment and household financial assets stimulates a rise in household income. By
providing accommodative financial conditions to persistently support these developments, I
believe Japan's economy will approach the realization of the 2 percent price stability target,
which will in turn lead to its sound development.
Thank you.
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Fukuoka
August 25, 2022
NAKAMURA Toyoaki
Member of the Policy Board
Bank of Japan
Chart 1
IMF Projections in the
World Economic Outlook
(July 2022)
y/y % chg.
16
14
12
IMF projections
10
8
6
4
2
0
-2
-4
Japan United States Euro area
-6 China World output
-8
CY
80 85 90 95 00 05 10 15 20 23
Source: International Monetary Fund (IMF).
Chart 2
CPI (Less Fresh Food)
y/y % chg.
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
Mobile phone charges Effects of the "Go To Travel"
-2.0
campaign
Effects of the consumption tax hike and Energy
-2.5
free education policies
Excluding the above factors CPI (less fresh food)
-3.0
-3.5
CY
17 18 19 20 21 22
Notes: 1.Figures for energy are those for petroleum products, electricity, and manufactured and piped gas charges.
2. Figures for the "effects of the consumption tax hike and free education policies" from April 2020 onward are
Bank staff estimates and include the effects of measures such as free higher education introduced in April 2020.
Source: Ministry of Internal Affairs and Communications.
Chart 3
Real GDP
Japan United States Euro Area
s.a., CY 2019 = 100 s.a., CY 2019 = 100
s.a., CY 2019 = 100
105 105
105
100 100
100
95 95
95
90 90
90
85 85
85
CY 19 20 21 22 CY 19 20 21 22
CY 19 20 21 22
Sources: Cabinet Office; Haver.
Chart 4
Output Gap
Developments since
Long Time Series
the Outbreak of COVID-19
%
%
6
6
4 4
2
2
0 0
-2 -2
-4 -4
-6 -6
-8
-8
CY
85 90 95 00 05 10 15 20 22 19/Q4 21/Q1 21/Q1
Note: The output gap is estimated by the Bank's Research and Statistics Department.
Source: Bank of Japan.
Chart 5
Consumer Prices
Japan United States Euro Area
y/y % chg.
y/y % chg.
y/y % chg.
9 9 9
Temporary factors Energy <7%>
Energy <11%>
8 8 8
Energy <7%> Services <63%>
Services <42%>
7
7 7
Services <50%> Goods <30%>
Goods <47%>
Goods <40%>
CPI <100%>
6 6
6
HICP <100%>
CPI (less fresh food) <100%>
5 5 5
4 4 4
3 3 3
2 2 2
1 1 1
0 0 0
-1
-1 -1
-2
-2 -2
CY 16 17 18 19 20 21 22 CY 16 17 18 19 20 21 22 CY 16 17 18 19 20 21 22
Notes: 1. Figures for services include administered prices.
2. Figures for temporary factors for Japan are Bank staff estimates and consist of the effects of the reduction in mobile phone charges,
the consumption tax hike, free education policies, and the "Go To Travel" campaign, which covers a portion of domestic travel expenses.
3. Figures in angular brackets show the share of each component. Figures for temporary factors for Japan include mobile phone
charges (weight: 3%).
4. Figures for 2022/Q3 are those for July.
Sources: Haver; Ministry of Internal Affairs and Communications.
Chart 6
Price Change Distributions
Japan United States Euro Area
share of the number of items, % share of the number of items, % share of the number of items, %
40 40 40
Goods
Services
30 30 30
Energy
20
20 20
December 2019 December 2019
September 2019
10 10 10
Pre-Pandemic
0
0 0
-10 -5 0 5 10 15 20
-10 -5 0 5 10 15 20 -10 -5 0 5 10 15 20
or less or more or more or less or more
or less
y/y% chg. y/y% chg. y/y% chg.
share of the number of items, %
share of the number of items, % share of the number of items, %
40 40 40
30
30 30
20 20
20
July 2022 July 2022
July 2022
Latest
10 10
10
0
0
0
-10 -5 0 5 10 15 20
-10 -5 0 5 10 15 20
-10 -5 0 5 10 15 20
or more
or less or more or less or more
or less
y/y% chg. y/y% chg. y/y% chg.
Note: Figures for Japan are for the CPI for all items excluding fresh food. The pre-pandemic distribution for Japan is
based on data for September 2019, which was before the CPI developments in Japan were affected by such factors
as the consumption tax hike. Figures for the United States and the euro area are for the price index for all items.
Sources: Eurostat; Ministry of Internal Affairs and Communications; U.S. Bureau of Labor Statistics (BLS).
Chart 7
Forecasts of the Majority of the Policy Board Members
y/y% chg.
(Reference)
Real GDP CPI (all items less fresh food)
CPI (all items less fresh food and
energy)
+2.2 to +2.5 +2.2 to +2.4 +1.2 to +1.4
Fiscal 2022
[+2.4] [+2.3] [+1.3]
+2.6 to +3.0 +1.8 to +2.0 +0.8 to +1.0
Forecasts made in April 2022
[+2.9] [+1.9] [+0.9]
+1.7 to +2.1 +1.2 to +1.5 +1.2 to +1.4
Fiscal 2023
[+2.0] [+1.4] [+1.4]
+1.5 to +2.1 +0.9 to +1.3 +1.1 to +1.3
Forecasts made in April 2022
[+1.9] [+1.1] [+1.2]
+1.1 to +1.5 +1.1 to +1.5 +1.4 to +1.7
Fiscal 2024
[+1.3] [+1.3] [+1.5]
+1.1 to +1.3 +1.0 to +1.3 +1.2 to +1.5
Forecasts made in April 2022
[+1.1] [+1.1] [+1.5]
Notes: 1. Figures in brackets indicate the median of the Policy Board members' forecasts (point estimates).
2. The forecasts of the majority of the Policy Board members are constructed as follows: each Policy Board member's forecast
takes the form of a point estimate -- namely, the figure to which they attach the highest probability of realization. These
forecasts are then shown as a range, with the highest figure and the lowest figure excluded. The range does not indicate the
forecast errors.
3. Each Policy Board member makes their forecasts taking into account the effects of past policy decisions and
with reference to views incorporated in financial markets regarding the future conduct of policy.
Source: Bank of Japan.
Chart 8
Prices and Wages
y/y % chg.
7
6
CPI (less fresh food)
5
Hourly scheduled cash earnings
4
3
2
1
0
-1
-2
-3
-4
FY 85 90 95 00 05 10 15 20 22
Notes: 1. For hourly scheduled cash earnings, Q1=March-May, Q2=June-August, Q3=September-November, and
Q4=DecemberFebruary. Figures are for full-time and part time employees before fiscal 1994 and for full-time employees thereafter.
2. The CPI figures are Bank staff estimates and exclude the effects of the decline in mobile phone charges, consumption
tax hikes, free education policies, and the "Go to Travel" campaign.
Sources: Ministry of Health, Labour and Welfare; Ministry of Internal Affairs and Communications.
Chart 9
Real GDP and Number of Persons Employed
Decomposition of Change in
Number of Persons Employed
Real GDP Growth
avg., y/y% chg.
mil. mil.
5 50 100
Aged 65 and over (left scale)
Rate of change of labor
productivity (real GDP per
Women aged 15-64 (left scale)
worker)
4
Men aged 15-64 (left scale)
Rate of change in the number 40 90
All (right scale)
of workers aged 65 and over
3
Rate of change in the number
of workers aged 15-64 30 80
2
Real GDP growth rate
20 70
1
10 60
0
-1 0 50
CY
1980s 1990s 2000s 2010s 80 85 90 95 00 05 10 15 20
Sources: Cabinet Office; Ministry of Internal Affairs and Communications.
Chart 10
Growth of Japan's Economy through
a Virtuous Cycle of Corporate Activity
and Household Disposable Income
Growth of overseas
economies
Increase in
selling prices
Increase in added
Wage inflation
value and labor
Rise in prices
productivity
Asset
formation
using
Increase in
Expansion of
households'
household
Expansion firms' investment;
surplus funds
disposable
business selection
of exports
income
and concentration
Expansion
of households'
dividend
Expansion Expansion of
income
of corporate
household
sales and profits
spending
Chart 11
Household Disposable Income
Japan United States Germany
tril. yen tril. USD tril. EUR
350 20 2.2
2.0
18
300
1.8
16
1.6
250
14
1.4
12
200
1.2
10
1.0
150 Disposable income
8
0.8
Employee compensation
6
100
0.6
Interest income
4
0.4
Dividend income
50
2
0.2
0
0 0.0
CY
CY 90 00 10 20 CY 90 00 10 20 90 00 10 20
Notes: 1. Figures for Japan before 1994 are calculated using year-on-year changes in each item in the 2000
System of National Accounts.
2. Figures for interest income and dividend income in Germany are "other interests, rents" and "distributed income of
corporations," respectively.
Sources: Bureau of Economic Analysis (BEA); Cabinet Office; Statistisches Bundesamt.
Chart 12
International Comparison of Entry and Exit Rates
Entry Rate Exit Rate
%
%
16 14
14
12
12
10
10
8
8
6
6
4
4
Japan United States
United Kingdom Germany
2
2
France
0
0
CY
08 10 12 14 16 18 20 CY 08 10 12 14 16 18 20
Note: Figures for Japan are on a fiscal-year basis.
Sources: Eurostat; Ministry of Health, Labour and Welfare; Small and Medium Enterprise Agency; U.K. Office for National
Statistics; U.S. Census Bureau.
Chart 13
Final Demand-Intermediate Demand (FD-ID)
Price Indexes (All Commodities)
CY 2015=100
170
160
ID index (stage 1) ID index (stage 2)
150
ID index (stage 3) ID index (stage 4)
140
FD index (excluding exports)
130
120
110
100
90
80
70
CY
15 16 17 18 19 20 21 22
Note: The indexes divide demand into the final demand stage and four stages of intermediate demand based on
the Input-Output Tables for Japan. The prices of goods and services are then aggregated according to the stage to
which they belong to compile the FD index and the ID indexes for stages 1 to 4, ranging from the most upstream to
the downstream stages of the production process.
Source: Bank