Economic Slowdown in Japan and the Role of Intangible Assets on the Revitalization of the Japanese Economy

The Japanese economy has stagnated since the economic bubble collapsed in 1990. The paper points out two reasons for the long-term stagnation of the Japanese economy: the slow growth in capital accumulation including ICT assets and the decline of entrepreneurship. In the advanced countries, intangible assets play a crucial role in the growth at the aggregate and firm levels. To revitalize the Japanese economy, we need policies which promote accumulation in intangible assets.bubble, non-performing loans, ICT investment, MFP, intangible investment

Measuring Organization Capital in Japan: An Empirical Assessment Using Firm-Level Data

Globalization and the ICT revolution of the 1990s have forced many firms to reorganize in order to survive in a more competitive market. There are several approaches that can be used to assess the measurement of organization capital since it is unobservable. Using an optimizing firm model and assuming that a firm holds multiple assets as suggested by Yang and Brynjolfsson (2001) and Cummins (2005), we examined whether organization capital is accumulated with investment in several types of assets. In contrast to Cummins's (2005) results, we found that the accumulation of organization capital is associated with investment in R&D assets and marketing assets. Using these results and following Basu, Fernald, Oulton, and Srinivasan (2003), we measured the contribution of organization capital to the conventional TFP growth. The estimation results implied that the growth of organization capital did not have significant effects on productivity growth.adjustment cost of investment, intangible asset, organizational capital, Tobins q, total factor productivity.

Productivity and the Business Cycle in Japan: Evidence from Japanese Industry Data

Constructing thirty-seven industries database, we examines whether measured productivity in Japan is procyclical and investigates the sources of that procyclicality using the production function approach employed by Hall (1990) and Basu and Fernald (1995). At the aggregate level, the measured Solow residual shows procyclicality. Large numbers of industries show constant returns to scale. No significant evidence for the presence of thick-market externalities is found. Our results also hold when we consider labor hoarding, part-time employment, and the adjustment cost of investment. The results suggest policies to revitalize the Japanese economy should concentrate on promoting productivity growth.

Productivity in Japan, the US, and the Major EU Economies: Is Japan Falling Behind?

Using the recently released EU KLEMS Database (March 2007) and other statistics, we examined whether Japan experienced similar problem as the major EU economies with regard to the introduction of ICT to market services. The major results obtained through our analysis are follows: 1. It is not the gap in TFP growth but differences in factor input growth that underlie the large difference in the economic growth performance of France, the UK and Italy on the one hand and Japan on the other in the period after 1995. The four major EU economies (Germany, France, the UK and Italy) and Japan experienced a slowdown in TFP growth of a similar magnitude after 1995. The US was exceptional in accomplishing an acceleration in TFP growth. 2. TFP growth in the electrical machinery, post and communication sector was still highest in Japan among the six economies after 1995. However, the problem for Japan is that, like in other countries, the share of this sector in the economy overall is not very large. The largest declines in TFP growth in Japan occurred in distribution services (retail, wholesale and transportation) and in the rest of the manufacturing sector (i.e., excluding electrical machinery). The labor input shares of these two sectors were very large (23.4% and 16.8% respectively). The US and the major EU economies except Italy recorded high TFP growth in these two sectors. 3. In manufacturing sectors, productivity levels in Japan were on par with those in the US, Germany and France. However, they were very low in comparison with the three countries both in market services and other goods-producing industries. It therefore seems that there is large room for improvement in Japan's productivity in market services and other goods-production services through the adoption of already existing technologies and better resource allocation. 4. The US and the UK experienced a very rapid increase in ICT capital service inputs after 1995. In contrast with this, in Japan, the contribution of ICT capital service input growth declined in all sectors after 1995. Across the six countries, we can observe a positive correlation between ICT capital service input growth and TFP growth. This fact supports the conjecture that Japan's sluggish growth in ICT capital service inputs is at least partly responsible for the slowdown in Japan's TFP growth after 1995. 5. According to several recent studies, it seems that in order to fully realize the direct and indirect efficiency-improving effects of ICT capital, the simultaneous accumulation of intangible assets, such as human capital and organizational capital, is indispensable. Investment activity in intangibles is less active in Japan than in the US and the UK, although there are many high-skilled workers in Japan. The relatively low level of intangible investment may be a good candidate to explain why the accumulation of ICT capital and TFP growth stalled in Japan.

Intangible Investment in Japan: New Estimates and Contribution to Economic Growth

The purpose of this paper is to measure intangible assets, to construct the capital stock of intangible assets, and to examine the contribution of intangible capital to economic growth in Japan. We follow the approach of Corrado, Hulten, and Sichel (2005, 2006) to measure intangible investment using the 2008 version of the Japan Industrial Productivity (JIP) Database. We find that the ratio of intangible investment to GDP in Japan has risen during the past 20 years and now stands at 11.6%, which is lower than the ratio estimated for the United States in the early 2000s. The ratio of intangible to tangible investment in Japan is also lower than equivalent values estimated for the United States. In addition, we find that, in stark contrast with the United States, where intangible capital grew rapidly in the late 1990s, the growth rate of intangible capital in Japan declined from the late 1980s to the early 2000s. In order to examine the robustness of our results, we also conducted a sensitivity analysis and found that the slowdown of the contribution of intangible capital deepening to economic growth and the recovery in Multi-Factor Productivity (MFP) growth from the second half of the 1990s observed in our base case remain unchanged even if we take on-the-job training and Japanese data with respect to investment in firm-specific resources into account.intangible investment, labor productivity, growth accounting

Estimates of Total Factor Productivity, the Contribution of ICT, and Resource Reallocation Effects in Japan and Korea

The purpose of our study is to identify the sources of economic growth based on a KLEMS model for Japan and Korea. We also identify the growth contribution of ICT assets and resource reallocation effects in the two economies. Both Japan and Korea enjoyed high TFP growth in ICT-producing sectors but suffered low TFP growth in ICT-using sectors. For Japan, we find that the main factor underlying the Lost Decade is the slow-down in TFP growth. We also found that Korea's TFP growth was slow until the Asian financial crisis of 1997-1999 but then accelerated after the crisis. It seems that before the crisis, Korea was following a catch-up process with developed economies that was predominantly input-led and manufacturing-based, as documented by Timmer (1999) and Pyo (2001). However, through the drastic economic reform undertaken during the crisis, Korea seems to have shifted to a new phase of economic growth since the end of the 1990s. TFP growth rates, especially those in manufacturing sectors, have substantially increased in post-crisis Korea. Both in Japan and Korea, productivity in service sectors is much lower than in manufacturing. The reason probably is excessive regulation and a lack of competition in service sectors. And these factors seem to have impeded introduction of ICT in service industries. As for ICT capital accumulation, the ICT investment/GDP ratio of Korea is higher than that of Japan. Especially, the speed of ICT accumulation in the ICT sector in Korea is much faster than that in Japan. Both in Japan and Korea, the largest component in ICT investment is computing equipment. In the case of resource reallocation across sectors, the reallocation effect of capital input was negligible or negative for most periods both in Korea and Japan. After the financial crisis of 1997-99, the resource allocation effect of capital in Korea remained negative, although the size of the negative effect declined. On the other hand, the reallocation effect of labor input was positive for most periods both in Korea and Japan.