negatively to economic growth. charts 4 ( 2 ) – ( 4 ) indicate that both demographic and labor market changes have contributed directly to a declining trend in economic growth ( these changes are referred to as the population effect, the labor force effect, and working hour effect ). at the same time, the per capita, per worker, and per hour growth effects shown in the same charts all revealed declining trends over the same period. the per capita real gdp growth rate is a good proxy for measuring the average living standard of a country. the growth rate per employed worker is a useful indicator related to labor productivity or supply capacity. the growth rate per hour is valuable when one wants to see the impact of changes in hours worked. in the future, this hourly based indicator may become even more important in measuring a country ’ s efficiency ; this is because further efforts to raise the labor participation rates for women and elderly people – in addition to a decline in the absolute number of full - time workers – are expected to reduce the total number of hours worked in the whole economy. generally speaking, the per capita gdp growth rate tends to become lower than the real gdp growth per employed worker when the working - age population declines or the population ages. in any case, the overall declining trends based on the three indicators could be explained by ( a ) a decline in the tfp growth rate ( which could be explained by, for example, a completion of the catching - up process and a shift in the industrial structure as will be described later ) and ( b ) a decrease in the growth rate of capital stock. nonetheless, it is important to note that japan ’ s real gdp growth rate per hour has been comparable to those of the united states and the united kingdom, and it has been higher than those of germany and france ( chart 5 ). at the same time, this implies that japan needs to raise the per hour growth rate to a level far higher than those of other advanced countries just to maintain the same per capita economic growth rates. impact of demographic changes on fixed asset investment demand the declining working - age population and ageing population may contribute to sluggish demand for residential housing and fixed - asset investment. in this regard, dr. myrdal already thought through the impact of these factors in his 1940 book population : a problem for democracy. according to him, a decrease in the population is expected to produce a negative impact on ( aggregate ) demand, particularly investment ( fujita [ 2010 ] ). the

the bank of japan ’ s june report on recent economic and financial developments bank of japan, communication, 16 june 1999. the bank ’ s view2 japan ’ s economy, at present, has stopped deteriorating, but clear signs of recovery have not been observed yet. with regard to final demand, business fixed investment has basically been on a downward trend, although there was a slight improvement in early 1999. recovery in private consumption continues to be weak on the whole. net exports ( exports minus imports ) are decreasing slightly at present, due mainly to an increase in imports. meanwhile, housing investment has been recovering. public works seem to be increasing rapidly against the background of the surge in orders in early spring. reflecting such developments in final demand and continued progress in inventory adjustment, industrial production has stopped decreasing. the deterioration in corporate and consumer sentiment seems to have ceased due to this economic situation and the effects of measures taken to restore the stability of japan ’ s financial system. however, corporate profits remain weak, and employment and household income conditions are deteriorating as the unemployment rate remains historically high and wages continue to be below the previous year ’ s level. in corporate finance, firms ’ concern about the availability of funds in the future has subsided, but has not completely disappeared yet. as for the outlook, with the progress in inventory adjustment gradually paving the way for a recovery in production, the government ’ s economic measures and the monetary easing by the bank will continue to underpin the economy. improvements in the financial environment, such as alleviation of concern about japan ’ s financial system, are also expected to exert positive effects on the economy gradually. moreover, the recovery of overseas economies, especially of asian economies, is likely to have a positive effect on domestic production. with respect to corporate activities, however, firms have started taking steps toward full - scale restructuring, facing the continued decline in profits. although such corporate restructuring is expected to improve productivity, it may, in the short run, reduce fixed investment and this report was written based on data and information available when the bank of japan monetary policy meeting was held on june 14, 1999. the bank ’ s view on recent economic and financial developments, determined by the policy board at the monetary policy meeting held on june 14 as the basis of monetary policy decisions. discourage household expenditure through the resulting deterioration in employment and income conditions. under such circumstances, it is still difficult to expect an immediate selfsustained recovery in private demand. overall economic developments require careful monitoring in consideration