PPT Japan Economic Survey 2024

OECD ECONOMIC SURVEY OF

JAPAN Increasing resilience to shocks Tokyo 11 January 2024 oe.cd/japan

@OECDeconomy @OECD

The post-pandemic rebound has lost momentum with domestic demand moderating Gross Domestic Product Volume, index 2019Q4=100 Japan

OECD

110

110

105

105

100

100

95

95

90

90

85

85

80

2019Q4

Source: OECD National Accounts database.

2020Q4

2021Q4

2022Q4

80

Inflation remains above the 2% target Consumer price inflation % 5

Headline

4

Excluding fresh food

5

Excluding food and energy

4

3

3

2

2

1

1

0

0

-1

-1

-2

-2

-3

2016

2017

2018

Source: Ministry of Internal Affairs and Communications.

2019

2020

2021

2022

2023

-3

Nominal wages have been trending up Total wages 3-month moving average Index 2020=100, seasonally adjusted 115

Nominal wages

115

Real wages

110

110

105

105

100

100

95

2010

2012

Source: Ministry of Health, Labour and Welfare.

2014

2016

2018

2020

2022

95

Growth is set to moderate and inflation is projected to be 2% in 2025 2023

2024

2025

Real GDP growth, %

1.9

1.0

1.1

Headline consumer price inflation, %

3.2

2.6

2.0

Gross public debt, % of GDP

243.5

243.3

242.3

Source: November 2023 OECD Economic Outlook database, updated to take into account the 8 December 2023 Japanese national accounts release.

Addressing fiscal challenges

Structural and fiscal reforms are needed to ensure fiscal sustainability Gross government debt % of GDP

300

Japan

United States

300

OECD

250

250

200

200

150

150

100

100

50

50

0

1990

1995

Source: OECD Economic Outlook database.

2000

2005

2010

2015

2020

0

7

Reducing the length of hospital stays can increase the efficiency of health and long-term care spending Average length of hospital stay for inpatient care Days, 2021 30 25 20 15 10

JPN

KOR

HUN

CZE

PRT

LUX

FRA

DEU

ITA

AUT

OECD

LVA

CHE

LTU

EST

SVK

FIN

ESP

POL

GRC

GBR

CRI

BEL

USA

SVN

IRL

NOR

NZL

ISR

ISL

SWE

AUS

0

TUR

5

Source: OECD Healthcare Utilisation database.

8

Gradually increasing consumption taxes can help finance new planned expenditures Standard value-added tax rates %, 2022 30 25 20 15 10

Note: OECD aggregate refers to the unweighted average.

Source: OECD, Revenue Statistics database.

SWE

NOR

DNK

ISL

FIN

GRC

IRL

PRT

ITA

ESP

LVA

BEL

NLD

AUT

GBR

FRA

OECD

DEU

TUR

ISR

MEX

NZL

KOR

AUS

JPN

0

CHE

5

9

The use of supplementary budgets should be limited to large macroeconomic shocks National general account budget Trillion yen 180

180

160

160

Third Second First supplementary budget Initial budget

140

140

120

120

100

100

80

80

60

60

2012

2013

2014

Note: Horizontal axes show fiscal years.

Source: Ministry of Finance.

2015

2016

2017

2018

2019

2020

2021

2022

2023

10

Boosting productivity growth

Productivity growth should be revived GDP per hour worked USD, current PPPs, 2022 100

100

80

80

60

60

40

40

20

20

0

JPN

OECD

Source: OECD, Productivity database.

CAN

ITA

GBR

FRA

DEU

USA

0

12

Weakly targeted support for small and medium-sized enterprises should be reduced to boost business dynamism Loan guarantees Trillion yen 45

45

40

40

35

35

30

30

25

25

20

20

15

15

10

10

5

5

0

0

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Note: Data refer to government guarantees of banks’ loans to SMEs and the horizontal axis refers to fiscal years. 2023 data are as of September.

Source: Japan Federation of Credit Guarantee Corporations.

2023

13

Limiting demographic headwinds

Population ageing is projected to continue Old-age dependency ratio 90 80

% 2022

Estimated increase by 2050

90 80 70

60

60

50

50

40

40

30

30

20

20

10

10

0

0

MEX ISR COL AUS ISL CRI TUR LUX USA NZL CAN SWE CHL NLD GBR OECD DNK BEL IRL NOR CHE HUN DEU FIN EST CZE AUT FRA SVK POL LTU SVN LVA ESP ITA PRT GRC JPN KOR

70

Note: 65 and older as a share of the population aged 20 to 64.

Source: OECD, Demography and Population Statistics database.

Increasing the take-up and duration of parental leave by fathers can boost fertility rates Take-up of parental leave %

100

Women

100

Men

80

80

60

60

40

40

20

20

0

2007

2008

2009

2010

Source: Ministry of Health, Labour and Welfare.

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

0

Abolishing the right of firms to set mandatory retirement would increase employment Mandatory retirement age set by firms Share of firms using mandatory retirement in %

100

2015

100

2022

80

80

60

60

40

40

20

20

0

0

60

61-64

Source: Ministry of Health, Labour and Welfare, General Survey on Working Conditions.

65 and over

Other

Employment protection for formal workers should be relaxed to increase the share of females in regular jobs Non-regular workers as a share of all employees % 60

60

50

50 Women

40

40

Men 30

30

20

20

10

10

0

0

1986

1990

1994

1998

2002

2006

Source: Ministry of Internal Affairs and Communications, Labour Force Survey, Basic Tabulation.

2010

2014

2018

2022

A comprehensive strategy to integrate migrants is needed to attract high-skilled foreign workers Quality of opportunities for highly-educated immigrants, 2023 0 = worst, 1= best 1.0

0.8

0.8

0.6

0.6

0.4

0.4

0.2

0.2

0.0

0.0

CRI ESP KOR GRC CHL ITA NLD JPN COL AUS MEX ISL DEU FIN CHE ISR OECD NOR FRA TUR BEL SWE DNK EST IRL AUS POL PRT CAN SVN GBR NZL USA LTU LTV CZE LUX SVK HUN

1.0

Source: OECD, Migration Statistics database.

Addressing environmental challenges

Meeting emission reduction targets requires bold and efficient policies Total greenhouse gas emissions

Million tonnes of CO2 equivalent

1 600

1 600

1 400

1 400

1 200

1 200

1 000

1 000

800

800 Total emissions

600

600

Linear path to targets

400

400

2030 target

200

200 0

1990

2000

2010

2020

2030

2040

Note: The linear path is the interpolated path to the emission reduction targets relative to 2018 levels for 2030 (-46%) and 2050 (net zero emissions).

Source: OECD, Greenhouse Gas Emissions database and OECD calculations.

2050

0

Enhancing the electricity grid would boost the contribution of renewables to electricity generation Share of renewables

% of electricity generation 35

Japan

35

OECD

30

30

25

25

20

20

15

15

10

10

5

5

0

0

2000

2002

2004

2006

2008

Source: IEA (2022), IEA World Energy Statistics and Balances database.

2010

2012

2014

2016

2018

2020

2022

Main messages Fiscal

Contain ageing-related expenditures and gradually increase revenues to put public debt on a downward trend and improve the fiscal framework

Adopt a comprehensive approach to raise fertility, the employment of women and Demographics older persons and inflows of foreign workers and boost productivity

Green

Promote renewables, ensure planned carbon pricing policies follow international best practices and improve contingency planning in emission reduction plans

OECDEconomy OECD

For more information

https://oe.cd/japan Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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