Japan's Lasting Stagnation Is Hidden Behind Government Statistics

"Paul Krugman (2014) has argued that the development of real GDP per capita in Japan since the early 1990s hardly differs from those in the US and the euro area. He came to this result by using working-age population as a denominator for the calculation of GDP per capita. In Japan, due to low birth rates and low immigration, the number of people between 15 and 64 is declining rapidly. Therefore, the real GDP per working-age population (i.e., between 15 and 64) has increased significantly (Fig. 1). Many commentators now follow this calculation method, thereby putting Japanese economic policy in a good light. However, Japan’s three lost decades have forced particularly women and pensioners to enter or to remain in the labor market to maintain the standard of living for themselves and their families. The upshot is that GDP per person employed has stagnated since 1990 (Fig. 1), pointing to low productivity growth. Yet, productivity gains are the prerequisite for real wage increases."