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TOE Alert: Is BOJ right that Japan's potential growth is as low as 0.5%? Part 1

posted by Richard Katz on November 18, 2015

Found in Japan, categorized in Macro

Tags: Richard Katz TOE BOJ Japan economy

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Headline

We can understand why the BOJ would want to put out a low figure. Inflation is a function of the gap between actual GDP and potential GDP, among other factors.

Abstract

Key points:

 

·       BOJ says Japan’s “potential growth” is just 0.5% a year

·       If that were true, it would make it easier to hit 2% inflation target

·       Our gut feeling is that 0.5% is too pessimistic

·       Data from the past four years appear to show a slowdown in productivity growth that is harmonious with BOJ’s 0.5% estimate; however, four years is too short to draw a conclusion

·       We need to look at the factors that might cause such a slowdown

·       Today, we look at capital investment and find it is not the culprit

About Richard Katz

Richard Katz is Senior Fellow at the Carnegie Council for Ethics In International Affairs, the New York correspondent for Weekly Toyo Keizai, a leading Japanese business magazine, and formerly the editor of The Oriental Economist Report, a monthly newsletter on Japan.

Mr. Katz has taught about Japan’s economy as an Adjunct Associate Professor at the New York University Stern School of Business, and as a Visiting Lecturer in Economics at the State University of New York (SUNY) at Stony Brook.

Mr. Katz is the author of two books on Japan's economic travails and has just finished a third book on reviving entrepreeurship in Japan.

View profile of Richard Katz

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