2021 OECD ECONOMIC SURVEY OF JAPAN Getting beyond the pandemic and securing sustainable growth 3 December 2021
https://www.oecd.org/economy/japan-economic-snapshot/
Key messages Continue policy support to get beyond the pandemic Prepare plans to ensure long-run fiscal sustainability Boost productivity and labour supply Strengthen efforts to reduce greenhouse gas emissions Make the most of the digital transformation 2
Reforms have boosted employment DEU % 90
FRA
JPN
A. Participation rate 25-64
% 80
88
78
86
76
84
74
82
72
80
70
78
68
76
66
74
64
72
62
70
2000
2005
2010
2015
Source: OECD, Labour Force Statistics.
2020
60
2000
USA
B. Employment to population ratio 15-64 olds
2005
2010
2015
2020
3
The pandemic hit economic activity hard Index, 2019 =100
102
Japan
OECD
100 98 96 94 92 90 88 86 2020Q1
2020Q2
2020Q3
Source: OECD Economic Outlook database.
2020Q4
2021Q1
2021Q2
2021Q3
4
Vaccination has made rapid progress A. Fully vaccinated per 100 population 90 80 70
Japan France USA
Canada UK
18 16 14
60
12
50
10
40
8
30
6
20
4
10
2
0
0
Source: ourworldindata.org
B. New deaths per million 7-day moving average Japan France USA
Canada UK
5
The impact on the labour market was muted A. Employment
Million, s.a. monthly data
38
30,5
B. Unemployment rate
% of labour force, s.a.
7
All
15-24 year olds
6 5 4 37
29,5
3 2 ← Male 36
Apr-19
Oct-19
Female →
Apr-20
Oct-20
1 Apr-21 Sep-21
28,5
0
Source: Statistics Bureau of Japan, Labour Force Survey.
Apr-19
Oct-19
Apr-20
Oct-20
Apr-21 Sep-21 6
Fiscal support has been substantial A. Government deficit
Trillion yen
% of GDP
B. Loan guarantees
45
0
40 -2
35
-4
30 25
-6
20 15
-8
10
-10 -12
5 2008
2010
2012
2014
2016
2018
2020
2022
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: OECD Economic Outlook database, Japan Federation of Credit Guarantee Corporations.
7
Consumer price inflation remains subdued Y-o-y % change
2,0 Headline
Core
1,5 1,0 0,5 0,0 -0,5 -1,0 -1,5
2016
2017
2018
Source: Statistics Bureau, Bank of Japan.
2019
2020
2021 8
The recovery is gaining strength 2020percentage change 2021 unless noted 2022 Annual otherwise Gross domestic product
2023
-4.6
1.8
3.4
1.1
2.8
2.8
2.6
4
0
-0.2
0.8
0.8
General government budget balance (% of GDP)
-9.5
-6.4
-6.9
-3.1
General government gross debt (% of GDP)
237
242
243
244
Unemployment rate Inflation (CPI)
Source: December 2021 OECD Economic Outlook.
9
Key recommendations to overcome the pandemic • Continue to roll out vaccinations and support the health sector’s ability to react to infections. • Continue to restructure support towards demand-supporting structural reforms that will benefit the economy in the longerrun. • While inflation remains below target, maintain the current accommodative monetary policy stance to support economic recovery. • Financial supervisors need to remain vigilant with regard to liquidity and funding risks. 10
Ensuring long-run fiscal sustainability
11
Public debt rose further with the crisis Projected level of debt in 2023 % of GDP
300
Net debt
Gross debt
250 200 150 100 50 0
CAN
DEU
FRA
Source: OECD Economic Outlook database.
USA
GBR
JPN
ITA 12
Fiscal sustainability will require action to increase revenue and boost productivity growth Gross debt
% of GDP
260 240
220 200 180 160
Baseline Digital transformation Fiscal reform Combined reforms
140 120
100 80
2015
2020
Source: OECD calculations.
2025
2030
2035
2040
2045
2050 13
Key recommendations for securing long-term fiscal sustainability • Elaborate a roadmap to realise a primary surplus in a comprehensive plan to achieve longer-term sustainability. • Once the economy has recovered, gradually raise revenues, including by increasing the consumption tax rate further by small increments on a more regular basis.
14
Boosting productivity and labour supply
15
Female labour force participation has risen but gender gaps remain sizeable %
78
A. Female labour force participation 15-64 year olds JPN
USA
B. Gender wage gap Full-time employees
%
25
DEU
76 20
74 72
15
70
68
10
66 64
5
62 60
2010
2012
2014
2016
2018
2020
0
ITA
FRA
DEU
Source: OECD LFS by sex and age indicators and gender wage gap indicator.
GBR
CAN
USA
JPN 16
Labour productivity has been weak Labour productivity growth by main sector, 2010-2020
%
2
Manufacturing
%
Hourly productivity growth Centred 5-year moving average
1971
1978
6
Business services
5
1,5
4 1
3 2
0,5
1 0
USA
GBR
DEU
CAN
ITA
FRA
JPN
Source: OECD Productivity Statistics (database).
0
1985
1992
1999
2006
2013
2020
17
Business dynamism remains sluggish %
10 9 8 7 6 5 4 3 2 1 0
Entry rate
2000
2002
2004
2006
Exit rate
2008
Source: Ministry of Economy, Trade and Industry.
2010
2012
2014
2016
2018
18
Business regulation remains relatively complex Product Market Regulation Indicators
2,5
OECD average
Japan
2
1,5
1
0,5
0
Public ownership
Involvement in business operations
Source: OECD PMR database.
Simplification and Admin. burden on start-ups evaluation of regulations
Barriers in service & network sectors 19
Key recommendations for boosting productivity and labour supply • Act to strengthen labour supply further. • Continue Work style reforms including equal pay for equal work and flexible working arrangements with improving child-care provision to boost female labour force participation. • Continue to raise the compulsory retirement age or abolish it. • Increase targeted spending on R&D, investment and education and training to boost productivity growth. • Encourage mergers, acquisitions and divestitures of SMEs in the face of labour shortages to promote consolidation of managerial resources in viable firms. 20
Reducing greenhouse gas emissions
21
Meeting greenhouse gas emission reduction targets will be challenging Million tonnes CO2 equivalent
Total emissions
1600
Linear path to targets
1400 1200 1000
2030 target
800 600 400 200
0
1990
1995
2000
2005
2010
2015
2020
2025
Source: OECD greenhouse gas emissions dataset and calculations.
2030
2035
2040
2045
2050
22
Energy supply relies heavily on fossil fuels Million tonnes of oil equivalent
600
Total primary energy supply Coal
Oil
Natural gas
Nuclear
Other renewable
Biofuels and waste
500 400 300 200 100 0
1990
1995
2000
Source: IEA World Energy Balances database.
2005
2010
2015 23
Key recommendations for securing long-term environmental sustainability • Elaborate an emission reduction plan with a concrete and feasible timetable, including for the investments needed to adjust the energy mix and meet the zero net emission target. • Make greater use of market-based instruments, such as the carbon tax, a trading system or carbon-credit market, while taking into account the social and economic impact, as part of the wider strategy that also includes investment and regulation. • Invest in more interconnector capacity and ensure regional electricity grids support an increase of renewable electricity supply. 24
25
Broadband subscription is well developed Mobile broadband subscriptions Per 100 inhabitants
200
Data and voice subscriptions
180
Data-only subscriptions
160
Total
140 120 100 80 60
40 20 0
JPN
OECD
Source: OECD, Broadband database; OECD.
26
R&D in the ICT sector is weak Business R&D, 2019 or latest
% of GDP
%
3,0
6
2,5
5
2,0
4
1,5
3
1,0
2
0,5
1
0,0
0
JPN
OECD
Source: OECD, Main Science and Technology Indicators.
R&D in the ICT sector as a share of ICT sector value added, 2019 or latest
JPN
OECD 27
Digital government use is limited Individuals using the Internet for sending filled forms via public authorities' websites % 50 45 40
35 30 25
20 15 10
5 0
JPN
G7
Source: ICT Access and Usage by Households and Individuals database.
28
Schools are not always well prepared to use ICT tools 80 70
Percentage of students in schools whose principal agreed or strongly agreed with statements about the school’s capacity to enhance learning and teaching using digital devices OECD average
Japan
60 50 40
30 20 10 0
The availability of adequate software An effective online learning support is sufficient platform is available
Source: OECD calculations based on PISA 2018.
Teachers have the necessary technical and pedagogical skills to integrate digital devices in instruction 29
There are relatively few graduates in science, technology, engineering and mathematics Share of students graduating from science, technology, engineering and mathematics, 2018
Women
%
60
Men
50 40 30 20 10 0
Japan
United States
Canada
Source: OECD Education at a Glance, 2020.
France
Italy
United Kingdom
Germany 30
Firm-based training could be developed further Percentage of workers in each sector group who took firm-based training, 2012 or 2015 Highly digital-intensive sectors
%
Other sectors
90
60
30
0
USA
GBR
CAN
DEU
FRA
JPN
Source: Calculations based on OECD Survey of Adult Skills (PIAAC).
ITA 31
Recommendations for making the most of the digital transformation • Develop base registries to link government databases. • Address regulatory and privacy issues to facilitate greater use of digitalisation. • Raise e-government supply, service orientation and cost efficiency in the public sector, for instance by building on private sector expertise. • Continue to develop financing methods serving firms with high shares of intangible capital. • Expand access to entrepreneurial training and finance, in particular for women. • Reform STEM curricula to make them more attractive to study. • Provide training and support for teachers to integrate ICT into their lessons. • Promote greater female participation in STEM disciplines, such as through mentor programmes. • Continue to work with companies to reform seniority wage schemes and promote mid-career hires. 32
For more information
https://www.oecd.org/economy/japan-economic-snapshot/ OECD OECD Economics
Disclaimer: 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.
33