TOE Alert: Is Japan's Potential Growth Really As Low as 0.5%, Part 4

Headline

Compared to other rich countries, Japan is not getting as much bang for the KBC buck, nor from its hefty R&D buck.

Abstract

Key points:

·       Productivity is boosted not just by giving workers more tools, but smarter ones

·       Japan invests a lot in knowledge-based capital (KBC), e.g. R&D and software

·       However, it gets less of a productivity benefit from KBC than other countries

·       One reason is that it invests less, and less skillfully, in “economic competencies,” the worker skills and corporate strategies that convert technological advancement into topflight commercial advantage either via new products like smartphones or better processes, as Toyota had done with just-in-time manufacturing

·       Japan’s “total factor productivity (TFP)” in manufacturing has not improved as much as in other countries, meanwhile its TFP in the entire rest of the economy topped out in 1991(!) and has not improved since then

·       For example, Japan’s corporate managers have seen software more as a route to cutting costs than in creating strategic advantage