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The narrative linking Japan’s stagnation since 1991 to its financial crisis is largely a myth, more recently discussed in this episode of .
Japan’s growth performance is almost entirely explained by poor demographics. See Table 1 of my paper with and Wen Yao, The Wealth of Working Nations:
sciencedirect.com/science/articl
If you look beyond GDP or GDP per capita—and instead use GDP per working-age adult (defined in several robust ways to consider, for instance, that Japanese retire later than in other G7 economies) or output per hour worked—Japan has kept pace with its peer group.
In fact, from 1999 to 2019 (we stop before COVID; the paper was written in 2023, although it was published more recently), Japan outperformed the U.S. in terms of growth per working-age adult.
There is no plausible world in which Japan could be 50% richer than it is today, given its demographics. That claim defies the basic logic of the neoclassical growth model.
Could Japan be 10% richer without the bad 1990s? Perhaps. But not more than that.
And Japan’s present is the future of every advanced economy. Let’s stop obsessing over the financial crisis and focus on what actually matters: Demographics is destiny.
sciencedirect.com/science/articl
If you look beyond GDP or GDP per capita—and instead use GDP per working-age adult (defined in several robust ways to consider, for instance, that Japanese retire later than in other G7 economies) or output per hour worked—Japan has kept pace with its peer group.
In fact, from 1999 to 2019 (we stop before COVID; the paper was written in 2023, although it was published more recently), Japan outperformed the U.S. in terms of growth per working-age adult.
There is no plausible world in which Japan could be 50% richer than it is today, given its demographics. That claim defies the basic logic of the neoclassical growth model.
Could Japan be 10% richer without the bad 1990s? Perhaps. But not more than that.
And Japan’s present is the future of every advanced economy. Let’s stop obsessing over the financial crisis and focus on what actually matters: Demographics is destiny.
