Innovation is key to boosting economic growth in the face of a rapidly ageing population. While Japan spends heavily on education and R&D, appropriate framework conditions are essential to increase the return on such investments by strengthening competition, both domestic and international, and improving resource allocation.
The Japanese economy is on a path to stronger growth, but fundamental structural reforms are urgently needed to promote a more robust recovery, address high levels of government debt and reverse a trend toward declining living standards, according to the latest OECD Economic Survey of Japan.
Low oil prices and monetary easing are boosting growth in the world’s major economies, but the near-term pace of expansion remains modest, withabnormally low inflation and interest rates pointing to risks of financial instability, according to the OECD’s latest Interim Economic Assessment.
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This country note from Going for Growth 2015 for Japan identifies and assesses progress made on key reforms to boost long-term growth, improve competitiveness and productivity and create jobs.
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The global economy continues to run at low speed and many countries, particularly in Europe, seem unable to overcome the legacies of the crisis. With high unemployment, high inequality and low trust still weighing heavily, it is imperative to swiftly implement reforms that boost demand and employment and raise potential growth.
While the outlook for many OECD countries remains subdued, Emerging Asia is set for healthy growth over the medium term. Annual GDP growth for the ASEAN -10, China and India is forecast to average 6.5% over 2015-19. Growth momentum remains robust in the 10 ASEAN countries, with economic growth averaging 5.6% over 2015-19.
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After two decades of low growth and persistent deflation, Japan is showing signs of renewed economic dynamism. But to regain its primacy as a leading economic powerhouse and raise the well-being of its citizens, Japan needs a structural reform package to narrow the productivity gap with leading OECD countries, notably by increasing the labour participation of women and older citizens.
The productivity level in services relative to manufacturing is particularly low in Japan, dragging down economy-wide labour productivity, which is significantly below the average of the upper-half of OECD countries.