. declining mobility is found in the household sector in the united states. figure 5. 2 shows changes in the householder mobility rate between 2005 and 2009. a sharp decline is found across all age groups. since there is no such change in renters, this sharp decline suggests that the housing crash reduced householder mobility rates. loss of non - tangible / human capital the second consequence of severe and prolonged balance sheet adjustment is the loss of non - tangible or human capital. de - leveraging firms and households suffering long underutilization or under - employment tend to lose their non - tangible or human capital. in japan, this has been observed especially in small to medium - sized enterprises : loss of entrepreneurship, loss of human networks in skilled manufacturing, and loss of access to technological advances. in the united states, the long - term unemployed or underemployed risk losing their human capital. problems in financial intermediation the third consequence of severe and prolonged balance sheet adjustment is the deterioration in financial institutions ’ efficient functioning as financial intermediaries. this was most acutely observed in japan during the several years after the bubble burst : a pile - up of bis central bankers ’ speeches non - performing loans seemed to lead to a breakdown in the “ market selection mechanism ” around 1997. figure 6 shows the result of a large - scale panel analysis of japanese firms, in which the total factor productivity of exiting and surviving firms is compared. survival of the fittest is a basic premise of the natural selection mechanism. thus, if the market mechanism works well, the productivity of successful and surviving firms should be higher than that of failing and hence exiting firms, at least on the average. in this figure, the shaded areas show cases where the productivity of failing and thus exiting firms is higher than that of surviving firms, which is an anomaly. in fact, the shaded areas are rather exceptional most of the time. however, if we look at the period 1996 – 97, the period of the financial crisis, we see many shaded areas indicating that more productive firms were exiting in many industries. this strongly suggests a breakdown in the natural selection mechanism. results of acute b / s adjustment under population ageing : japan in the 2000s so, what are the end results of acute balance sheet adjustment under population ageing? some of these consequences can be seen in the japanese situation in the 2000s. first, growth prospects declined. the average real gdp growth fell from 5 % to 4 % in the 70s and 80s to around 1 %

##desbank. small and medium - sized firms in germany are those with sales of less than 50 million euros. households'disposable income as of the end of 2019, so much higher than the proportion for the united states ( chart 18 ). moreover, dividend and interest income is small, at 4 percent, suggesting that households'income is highly susceptible to the earning power of the firms where they work. almost 70 percent of japanese workers are employed by small and mediumsized firms and stay at the same firm for a long period of time. however, about 60 percent of such firms operate at a loss and expectations for sustainable wage growth are low. 12 many households tend to have a higher preference for holding on to their cash and deposits so as to be prepared for future expenses. to boost their earning power, an effective option is to hone capabilities by reskilling, or acquiring new skills, seek to earn higher wages commensurate with ability, and change jobs, as is the case in the united states and europe ( chart 19 ). the job - switching rate in japan has remained lower than those in the united states and europe ( charts 20 and 21 ). however, labor market conditions are tight, as evidenced by the unemployment rate being at a historically low level of 2. 5 percent for june 2023 ( chart 13 ). if a smooth migration of labor is made to growing industries, where wages are higher and aggressive investment in human resource development is made to boost the value of employees, this will enhance the added value of entire regions and accelerate the virtuous cycle of growth and profit sharing. my view is that this will turn hope about wage growth that can keep up with inflation into confidence. in the guidelines for integrated threepronged labor market reforms that it announced in may 2023, the japanese government has committed to compiling various models for job - based pay according to the actual circumstances of individual firms by the year - end. at the same time, the government is planning subsidies and tax reforms in terms of facilitating diverse working styles and labor mobility. i am paying attention to the positive responses from firms and households in this regard. another key to strengthening households'earning power is increasing their dividend and interest income. in japan, cash and deposits make up 54 percent of household financial assets, while equity and investment trusts make up 15 percent. compared to the united states and germany, there is a higher preference in japan for holding on to cash and deposits ( chart