December 7, 2022
Bank of Japan
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Nagano
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 moderately on the whole, but slowdowns have been
observed, mainly in advanced economies (Chart 1). The U.S. and European economies have
slowed somewhat, reflecting a surge in inflation and a continued rise in policy rates. In Europe,
the situation in Ukraine has continued to have an impact. The Chinese economy has recovered
from being pushed down as the impact of lockdowns implemented around spring 2022, such
as in Shanghai, has generally dissipated. However, the economy has not been sufficiently
firm, as COVID-19 cases have started increasing again amid the government's continued
zero-COVID policy, the real estate market has long been sluggish, and there has been
prolonged high unemployment among young people. Emerging and commodity-exporting
economies other than China have picked up on the whole, albeit with weakness seen in part.
Against this background, and despite being affected by factors such as high commodity prices,
Japan's economy has picked up as the resumption of economic activity has progressed while
public health has been protected from COVID-19. In the corporate sector, exports and
production have increased as a trend, with the effects of supply-side constraints waning, and
corporate profits have been at high levels on the whole. In this situation, business fixed
investment has picked up, although weakness has been seen in some industries. In the
household sector, private consumption has increased moderately, particularly for services
consumption, with the employment and income situation having improved moderately and
with support from pent-up demand. Meanwhile, the year-on-year rate of change in the
consumer price index (CPI) for all items less fresh food, or core CPI, has increased to 3.6
percent for October 2022, due to rises in the price of such items as energy, food, and durable
goods (Chart 2).
Japan's economy is likely to recover, with the impact of COVID-19 and supply-side
constraints waning, although it is expected to be under downward pressure stemming from
high commodity prices and slowdowns in overseas economies. Thereafter, Japan's economy
is projected to continue growing at a pace above its potential growth rate as a virtuous cycle
from income to spending advances on the back of the strengthened momentum for wage hikes
and progress in the resumption of economic activity. Meanwhile, the year-on-year rate of
change in core CPI has been increasing. From the turn of 2023, the rate of increase is expected
to decelerate with a smaller contribution to core CPI of rises in the price of such items as
energy, food, and durable goods (Chart 3).
B. Risk Factors for Economic Activity and Prices
The outlook just described is subject to a number of uncertainties; specifically, I am
particularly attentive to the following two factors.
The first is developments in both overseas economic activity and prices and in global financial
and capital markets. Significantly high inflation continues due not only to a surge in global
demand on the path to recovery from the pandemic, but also to the effects of supply-side
constraints and Russia's invasion of Ukraine. In response, central banks have been raising
policy rates sharply to contain high inflation, at the risk of economic slowdown. On the other
hand, financial markets have been nervous due to some concern about consistency between
monetary policy and fiscal policy, and also because of the difficulty in accurately measuring
monetary tightening effects as there is a time lag between policy decisions and the
materialization of their effects. In the United States and the euro area, policy rates have been
raised substantially during 2022, by 3.75 percentage points and 2.0 percentage points,
respectively. However, the latest rate of increase in consumer prices was 7.7 percent in the
United States and 10.0 percent in the euro area,1 both remaining well above target. This has
led markets to expect further policy rate hikes. There is thus concern that it may become
difficult to strike a balance between the containment of inflation and the sustainability of
economic growth, depending on the degree of cumulative impact of substantial policy rate
hikes. If this concern grows, there is a possibility that global financial and capital markets
will tighten unexpectedly through adjustments in asset prices and foreign exchange rates and
through capital outflows from emerging economies. This possibility must be borne in mind.
The second factor is geopolitical risks and developments in the price of commodities,
including grain. Uncertainty remains very high regarding geopolitical factors such as the
situation in Ukraine. There is concern that, if the price of commodities, including grain, rises
or remains high for a prolonged period, this could put further downward pressure on domestic
and overseas economies. Given that Japan is a commodity importer, and its energy self-
sufficiency rate is the second lowest among 36 OECD countries,2 the increased trade losses
due to higher commodity prices have put significant downward pressure on the economy
(Chart 4). It takes some time for the impact of losses from trade to materialize as a decline in
demand. Thus, depending on developments in the price of grain and other commodities, there
is a risk that private consumption and business fixed investment may become lower than
expected. Some point out that, in addition to widespread price rises in October 2022 caused
mainly by higher prices for imports such as grain and other commodities, a spate of price
rises is projected for February and March 2023. Higher inflation will put downward pressure
on households' real income, but how much it declines depends on the growth rate of nominal
wages. In this sense, as I will elaborate later, the crucial factors are how
energy self-
sufficiency is increased and to what degree firms raise wages; I am thus closely monitoring
wage revisions for spring 2023.
the future course of energy policy and
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 monetary easing, primarily for two reasons.
The first reason is that Japan's economy is still on its way to recovery from the downturn
brought about by the pandemic. Japan's real GDP was positive for three quarters in a row
from the October-December quarter of 2021, but it turned negative in the July-September
quarter of 2022, remaining below the 2019 average level (Chart 5). Having experienced
deflation over roughly a decade and a half, Japan's economy suffered from the "three
excesses" in employment, production capacity, and debt. This engendered a strong "defensive
mindset" and led to an economy characterized by low growth, low inflation, and low wage
growth. Due to this defensive mindset, Japan was slow to respond to changes in the economic
environment caused by the pandemic, compared with the United States and Europe. I consider
this to be one of the reasons for the delayed recovery in Japan's economy. The output gap,
which captures the utilization of labor and capital, has also been consistently negative since
the April-June quarter of 2020 (Chart 6). Tightening monetary policy when demand remains
insufficient compared with supply capacity would put significant downward pressure on the
economic activity of firms and households, and could draw Japan's economy back into
deflation.
The second reason I believe the Bank should continue with monetary easing is that the current
price rises have not been accompanied by wage growth. Let us compare price developments
in Japan with those in the United States and Europe. Services prices have been increasing
while the hourly wage growth rate is in the range of 4.0-6.0 percent in the United States and
3.0-4.0 percent in the euro area. The inflation rate excluding energy and food remains at a
high level -- 6.3 percent for October 2022 in the United States and 5.0 percent for November
in the euro area. This has prompted central banks to continue to make rapid policy rate hikes
in an effort to prevent a wage-price spiral. In Japan, the inflation rate excluding fresh food
and energy has indeed risen, to 2.5 percent for October. The breakdown shows that the
inflation rate for services -- which account for more than half of the total price increase, and
in which wages make up a large proportion of costs -- has increased but is still below 1 percent.
In my view, concern about a wage-price spiral in Japan is far from warranted. I consider
continued accommodative monetary policy to be essential to support firms' initiatives as
Japan's economy recovers from the pandemic and to develop an environment conducive to
wage rises necessary for the sound development of the national economy.
III. Japan's Economic Growth
To achieve the 2 percent price stability target in a sustainable and stable manner and realize
sustainable economic growth, it is essential that wages rise in tandem with economic growth.
However, this expected situation has not yet been realized as Japan's economy has long been
mired in a state of low growth, low inflation, and low wage growth. In what follows, I will
first touch on issues currently facing Japan's economic and wage structures, which are
different from those of the United States and Europe. I will then turn to a discussion of three
types of dynamism -- that of firms, employment, and household financial assets -- that I
believe to be indispensable to a renewed strong growth of Japan's economy, based on my own
experience at a private firm.
A. Economic and Wage Structures in Japan
There are three major characteristics of Japan's economic and wage structures that strike me
as needing to change.
The first is the excessively defensive mindset in Japanese society. Since the bursting of the
bubble economy in the early 1990s, the successful experience of cutting costs to weather
rapid deterioration in the business environment conjoined with the experience of low growth
brought about by deflation has reinforced a defensive mindset in the overall economy. In my
view, this has caused delays in firms' measures to boost their earning power, including the
"investment in people" needed for sustainable growth and the channeling of management
resources into highly productive businesses. Management emphasis on cost cutting is prone
to maintain unproductive businesses to retain employment, and cost structure reforms do not
necessarily translate into greater productivity or higher added value. This has engendered
excessive competition among firms in Japan and seems to have led to a decline in the
competitiveness of Japan's industry as a whole. In fact, Japan ranks last among the Group of
Seven (G7) countries in terms of labor productivity (Chart 7).
The second characteristic is low economic metabolism. Given the expectation of lifetime
employment and seniority-based wages, it is likely that many Japanese firms have perceived
raising wage levels as a management risk in terms of business continuity, and have thus put
priority on suppressing wage levels. Moreover, given the practice of lifetime employment, I
sense that workers, fearing job loss due to corporate bankruptcy, have also developed a
stronger desire for employment stability than for wage increases. Amid these economic and
wage structures, job-switching rates and business entry and exit rates in Japan have been in
the range of 3.0-6.0 percent, remaining low compared with the United States and Europe
(Charts 8, 9, and 10). Prices have not risen due to 30 years of stagnant wage levels and to
households' sluggish purchasing power (Charts 11 and 12). Consequently, Japan's economy
has fallen into a state of low growth, low inflation, and low wage growth.
The third characteristic that I think needs transforming is the response to changes in the
economic environment. Since the 1985 Plaza Accord, in response to a rapidly appreciating
yen, firms' efforts have been directed at building global supply chains. The industrial structure
has changed from that in the Showa Era when industrial clusters were formed in an export-
oriented country. Meanwhile, small and medium-sized firms in industrial clusters that have
benefited from overseas economic growth have been exposed to competition from overseas
firms within Japan as global supply chains have taken shape. They have also faced a
deterioration in the country's energy self-sufficiency since the Great East Japan Earthquake
in 2011, and a rise in energy costs (Chart 4). These factors have caused small and medium-
sized firms to see their profitability decline. This has led them to put off "investment in
people" and investment for higher growth, which I think is one factor behind the slump in
productivity.
If Japan's economic and wage structures remain as they are, it will forestall progress in
moving human capital to highly productive sectors so as to place the right people in the right
jobs across the country and will keep wage levels stagnant. As there is no magic wand that
will enable Japan to regain its growth potential, it is crucial that Japan's economic and wage
structures are brought closer to those of other advanced economies, where wages rise in
tandem with economic growth. To this end, it is vital to enhance energy self-sufficiency,
to
facilitate initiatives by small and medium-sized firms to boost their export capabilities
through joint support from
industry, academia, government agencies, and financial
and to move ahead with reform efforts to improve productivity (Chart 13 gives a
institutions,
simplified representation).
B. Improving Labor Productivity through Corporate Dynamism
Achieving the continuous wage increases needed for the economy to grow in a sustainable
manner will require improvements in labor productivity to generate added value, which is the
source of wage growth. In this regard, it is vital that firms raise their capital equipment ratio
and improve the quality of labor by means of business fixed investment and "investment in
people," including wage increases. I expect labor market conditions to grow tighter, especially
as the economy recovers from the pandemic. Therefore, boosting the capital equipment ratio
through labor-saving and efficiency-improving investment is likely to be a pressing issue.
The key to raising labor productivity is to generate new added value through innovation
driven by various types of investment, including research and development (R&D)
investment, or a combination of various investments. Japanese firms have typically excelled
at process innovation, under a product-oriented business model that centers on products and
services they could bring to the market under their existing frameworks and on relevant
pricing strategies. However, a different approach is called for in the so-called VUCA era,3 in
which high value is generated by human resources and other intangible assets and growth
entails risk. In the United States and Europe, to create products and services that anticipate
customer needs based on a market-oriented approach, firms have undertaken business reforms
to transform their existing frameworks and shift business resources to growth areas. Japan
has lagged behind in this regard, which I believe has led to an innovation deficit. An
international comparison of the proportion of firms that launched new products and services
shows that Japan ranked lowest among major advanced economies -- notwithstanding that
the data are taken from slightly old research (Chart 14). Firms with price-to-book ratios of
less than 1 account for 3 percent of all listed firms in the United States and 18 percent in
Europe, but 43 percent in Japan, indicating a low assessment of their capacity to generate
earnings.4 My hope is that the rising sense of urgency among management or business
owners will spur innovation among Japanese firms.
Furthermore, to bring about innovation, it is vital to shift business resources to higher-
productivity businesses and sectors because there is an upper limit to such resources in Japan
as a whole. Since startups have fewer constraints than large firms, they are particularly called
on to take a leading role in the country in launching and scaling up new businesses that go
beyond existing businesses. Moreover, in addition to coping with the weak yen environment,
there is recently a growing awareness among firms of the need to restructure supply chains -
- by, for example, creating multiple chains -- from the perspective of economic security and
business continuity. I think that firms' shift back to domestic production will thus be an
important business strategy. In this respect, the key to promoting domestic investment lies
with the growth of startups and small and medium-sized firms that are targeted for such
investment. Nevertheless, the reality in Japan is that startups with innovative technologies
and business models often lack business resources -- namely, people, goods, money, and
networks -- which prevents them from growing significantly. There are 644 unicorns (private
startups valued at over 1 billion U.S. dollars) in the United States, 172 in China, 46 in the
United Kingdom, and 29 in Germany, while there are only 6 in Japan, which is inordinately
few relative to GDP.5 I expect to see a change to an economic environment that drives the
growth of startups. This includes the implementation of government policies for cultivating
startups and supporting the growth of venture capital. Other examples are the increase in
business exits through initial public offerings (IPOs) and the merger and acquisition (M&A)
activities of large firms, and the resultant growth in the number of business startups and higher
labor mobility. My hope is that these initiatives will further increase corporate dynamism.
The business succession of small and medium-sized firms also presents a prime opportunity
to boost the potential for innovation. Some cases of business succession resemble the takeover
of a family business as a venture startup, in which successors combine their own strengths
with the advantages of the existing business to pursue new business or shift business formats.
Business succession is expected to promote innovation through new business initiatives that
capitalize on the trust, experience, and technology of the family business. Meanwhile,
observing the increase in business cessation due to the lack of a successor, local governments
and regional financial institutions have come to recognize that the rebirth of firms with roots
in the region ties in directly with regional revitalization. I believe that key growth strategies
for Japan's economy are stronger cultivation and support of small and medium-sized firms
through collaboration among industry, academia, government agencies, and financial
institutions, as well as efforts to reinforce follow-up support by the regional financial
institutions acquainted with the circumstances of their corporate clients.
C. Employment Dynamism to Place the Right People in the Right Jobs across Japan
The COVID-19 pandemic made evident the labor shortages and delays in digitalization that
Japan faces, prompting firms' recognition that if they are unable to secure needed human
capital due to restraints placed on wages, this will be a management risk in terms of business
continuity. Firms are also strongly aware of the importance of "investment in people,"
including raising wage levels and promoting initiatives to cultivate digital technology
professionals. Momentum for wage hikes is growing, and firms are moving ahead with re-
skilling and other efforts to augment vocational training for employees. I have the sense that
Japan has finally started to move toward transformation.
Since employees will be better equipped to choose which firm they wish to work for, firms
will need to have business strategies that boost their earning power if they are to acquire the
funds needed for "investment in people," including wage increases. On the other hand, some
argue that small and medium-sized firms and regional firms struggle to hire specialized
human resources due to the problem of wage disparities. However, as the pandemic has
brought about changes in people's values regarding the way they work, these firms could
become more likely to acquire human capital than before, depending on the creative steps the
management takes to diversify working styles -- including having side jobs or multiple jobs,
and working remotely -- and to enhance job satisfaction.
As this transformation unfolds and employment dynamism emerges, it is possible that
talented human capital will shift not only to highly productive industries, occupations, and
firms that can sustain wage increases, but also to small and medium-sized firms, regional
firms, and startups that can provide their employees with new values. I hope that such a shift
in human capital will fuel progress in placing the right people in the right jobs across Japan
and bring about productivity improvements and the revitalization of regional economies,
leading to sustainable wage increases and a virtuous cycle from income to spending.
D. Enhancing Disposable Income through the Dynamism of Household Financial Assets
In addition to the dynamism of firms and employment, I believe the dynamism of household
financial assets, enhancing disposable income in tandem with economic growth, is also
essential to achieving sustainable growth in Japan's economy.
Although household financial assets in Japan have grown to more than 2,000 trillion yen, the
proportion of equities and investment trusts held is lower than in the United States or Europe
(Chart 15). In 2019, before the pandemic, labor income accounted for 70 percent of disposable
income in the United States while dividend and interest income accounted for 19 percent. By
contrast, in Japan, labor income accounted for 94 percent of disposable income, with only 4
percent coming from dividend and interest income (Chart 16). In Japan, the proportion of
income other than labor income is remarkably small. This includes income from dividends,
which distribute firms' income to households as this increases in tandem with economic
growth. With the current household financial asset composition and low job-switching rates,
the norm in Japan is that one person only has a job opportunity at one company; thus,
household income is highly vulnerable to the performance of the firm where a person works
for many years. Moreover, given the demographics of Japan's super-aged society, in which
30 percent of the population are pensioners aged 65 and over, the bridge connecting
households and the economy is narrow, making it difficult for households to reap the benefits
of economic growth. Also, although residential property is a typical financial asset for
households, the lifespan of houses in Japan is less than 40 years,6 and the second-hand
housing market is small, accounting for only 15 percent of the housing market overall.7 This
makes houses almost consumer durable goods, hardly an option as part of stable asset
formation for retirement.
Let me note that social insurance premiums for the working age population in Japan have
increased by 1.9 times over the past 30 years.8 In this situation, for the economy to be more
sustainable and for standards of living to improve alongside economic growth, people need
to restructure their financial assets in a way that enables them to benefit from economic
growth. If corporate profits and labor income of households increase together with economic
growth, tax revenues and social insurance premiums -- which are sources of public assistance
and mutual aid -- also increase. Then, if an increase in household income such as that from
dividends is embedded as in other advanced economies, the balance of self-generated income,
mutual aid, and public assistance will be more appropriate, and people will actually be able
to reap the benefits of economic growth. I hope that, in addition to the existing Nippon
Individual Savings Account (NISA) and iDeCo pension plans, the government's Doubling
Asset-Based Incomes Plan will promote lifelong household asset formation over the course
of 30 to 50 years, focusing on the long term, on risk diversification, and on regular
contributions. I expect that this would generate stable income and stimulate private
consumption, thereby forming a virtuous cycle from income to spending.
Thank you.
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Nagano
December 7, 2022
NAKAMURA Toyoaki
Member of the Policy Board
Bank of Japan
Chart 1
IMF Projections in the
World Economic Outlook
(October 2022)
y/y % chg.
16
14
12
IMF projections
10
8
6
4
2
0
-2
Japan United States Euro area
-4
China World output
-6
-8
CY
80 85 90 95 00 05 10 15 20 24
Source: IMF.
Chart 2
Consumer Prices
Japan United States Euro Area
y/y % chg. y/y % chg.
y/y % chg.
11 11
11
Temporary factors Energy <7%>
Energy <11%>
Energy <7%>
Housing rent <32%> Housing rent <7%>
Housing rent<19%>
Services (less housing Services (less housing
rent) <35%>
rent) <31%>
Services (less housing rent) <31%>
Goods <47%>
Goods <30%>
Goods <40%>
HICP <100%>
CPI <100%>
CPI (less fresh food) <100%>
109876543210 109876543210 109876543210
-1 -1 -1
-2 -2
-2
CY CY 18 19 20 21 22 CY
18 19 20 21 22 18 19 20 21 22
Notes: 1. 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 travel subsidy programs.
2. Figures in angular brackets show the share of each component. Figures for 2022/Q4 are those for October.
Sources: Haver; Ministry of Internal Affairs and Communications.
Chart 3
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)
+1.8 to +2.1 +2.8 to +2.9 +1.8 to +1.9
Fiscal 2022
[+2.0] [+2.9] [+1.8]
+2.2 to +2.5 +2.2 to +2.4 +1.2 to +1.4
Forecasts made in July 2022
[+2.4] [+2.3] [+1.3]
+1.5 to +2.0 +1.5 to +1.8 +1.5 to +1.8
Fiscal 2023
[+1.9] [+1.6] [+1.6]
+1.7 to +2.1 +1.2 to +1.5 +1.2 to +1.4
Forecasts made in July 2022
[+2.0] [+1.4] [+1.4]
+1.3 to +1.6 +1.5 to +1.9 +1.5 to +1.8
Fiscal 2024
[+1.5] [+1.6] [+1.6]
+1.1 to +1.5 +1.1 to +1.5 +1.4 to +1.7
Forecasts made in July 2022
[+1.3] [+1.3] [+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 4
Contribution to Changes in Trading Gains and Losses
y/y chg., % points
4
3
2
1
0
-1
-2
Other Commodity prices, etc.
-3
Exchange rates Trading gains/losses-real GDP ratio
-4
CY 07 09 11 13 15 17 19 21
Notes:1. The contribution of commodity prices, etc. is calculated using changes in export/import price indexes on a contract
currency basis. The contribution of exchange rates is calculated using the difference between export/import price
indexes on a yen basis and those on a contract currency basis. "Other" is the contribution of other factors such as
changes in quantities.
-
2. Trading gains/losses = (Nominal net exports / Weighted average of export and import deflators) Real net exports
Sources: Cabinet Office; Bank of Japan.
Chart 5
Real GDP
Japan United States Euro Area
s.a., CY 2019 = 100
s.a., CY 2019 = 100 s.a., CY 2019 = 100
110 110
110
105 105
105
100 100
100
95 95
95
90 90 90
85 85 85
CY CY
CY 19 20 21 22 19 20 21 22
19 20 21 22
Sources: Cabinet Office; Haver.
Chart 6
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 19/Q4 21/Q1 22/Q1
85 90 95 00 05 10 15 20 22
Note: The output gap is estimated by the Bank's Research and Statistics Department.
Source: Bank of Japan.
Chart 7
Comparison of Labor Productivity in G7 Countries
USD, constant prices, 2015 PPPs
80
Japan United States Canada
United Kingdom Germany France
70
Italy
60
50
40
30
CY
90 95 00 05 10 15 20
Note: GDP per hour worked.
Source: OECD.
Chart 8
Labor Mobility in Japan
shares of total employees, %
30
Unemployed→Employed
25
Employed→Unemployed
Job changers (excluding between regular employment)
20
Job changers (between regular employment)
15
10
5
0
CY 13 14 15 16 17 18 19 20 21 22
Note: Job changers are employees who have left their previous job in the past year and are currently employed.
"Employed→Unemployed" refers to those who have left employment in the past year and are not currently employed.
Source: Ministry of Internal Affairs and Communications.
Chart 9
Labor Mobility
in Europe and the United States (as of 2019)
EU-OECD countries axis, %
USA axis,%
30 60
25 50
20 40
15 30
10 20
5 10
0 0
Job-to-job Separations to non-employment Hirings from non-employment
Notes: 1. Figures for Europe are percentages of those whose employment status has changed from the previous year relative to the
number of all employed persons. Non-employment refers to the status of being unemployed or inactive in the labor force.
Figures for Norway are based on data for 2018.
2. Figures for the United States are percentages of those whose employment status has changed from the previous quarter
relative to the number of all employed persons. Non-employment refers to non-employment that has lasted for more than
one quarter. Quarterly average is the average over four quarters. Annual estimate is the cumulative total of four quarters.
Source: Causa, O., Luu, N., and Abendschein, M., "Labour market transitions across OECD countries: Stylised facts,"
OECD Economics
No.1692, 2021.
Department Working Papers,
Chart 10
International Comparison of Entry and Exit Rates
Entry Rate Exit Rate
% %
16
16
14
14
12
12
10
10
8
8
6
6
4
4
Japan United States
2 2
United Kingdom Germany
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 11
Comparison of Average Annual Wages in G7 Countries
ten thou. USD, constant prices, 2021 USD PPPs
8
Japan United States Canada
United Kingdom Germany France
7
Italy
6
5
4
3
CY
90 95 00 05 10 15 20
Note: Average annual wages in full time equivalent.
Source: OECD.
Chart 12
Prices and Wages
y/y % chg.
7
6
5
CPI (less fresh food) 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 travel subsidy programs.
Sources: Ministry of Health, Labour and Welfare; Ministry of Internal Affairs and Communications.
Chart 13
Virtuous Cycle from Income to Spending
Economic growth
Expansion of firms'
Expansion of
investment (tangible and
corporate profits
intangible assets)
Wage
Higher
Increase in productivity &
growth dividends
Facilitation of innovation
Increase in social
Selfgenerated Selfgenerated
insurance premiums
Mutual aid
Higher corporate value
Increase in household
Public
(rise in stock prices)
assistance
disposable income
Increase in tax
revenue Selfgenerated
Stimulation of Households' asset
consumption activity formation
Sound developme