Published papers

This study constructs a long-term database to describe the structure of labor input and labor prices in the Japanese economy over the 57-year period from 1955 to 2011, with the aim of documenting stylized facts on qualitative changes in labor. Labor inputs are classified into a detailed cross-tabulation by attributes—gender (2 categories), education (4), age (11), employment status (5), and industry (46)—yielding 20,240 distinct cells. Based on this framework, the study estimates comprehensive statistics on labor quality, including main and interaction effects, quality-adjusted price indices for labor input, and inequality indices across attributes. The results show that labor quality in Japan began to rise markedly in the early 1960s, accelerated during the early 1970s at the end of the high-growth period, and continued to increase even after the 1990s when total labor input started to decline. Overall, labor quality has exhibited a sustained upward trend. The driving forces behind this improvement vary across periods. In the mid-1950s, rapid transitions from self-employment and unpaid family work to wage employment contributed modestly to quality improvement. From the early 1960s, however, structural changes in labor demand associated with labor-saving technological progress led to a significant rise in labor quality, primarily through a shift from workers with lower secondary education to high school graduates. During this period, the relative prices of labor for less-educated workers declined compared to those for high school graduates. From the early 1970s, the wage premium for university graduates began to rise moderately, reflecting a shift in demand toward higher-skilled labor. By the mid-1970s, the first-order interaction effect between education and age turned positive, and the late 1970s to the 1980s saw an expansion of experienced, highly educated workers. After 1985, labor quality began to decline gradually due to population aging, a trend that continued until around 1995. Since the mid-1990s, however, the main age effect has turned positive again, as the decline in younger workers due to low fertility and the improvement in the quality of older workers have offset the effects of further aging. The gradual increase in educational attainment among older workers suggests that improvements in labor quality within the elderly workforce are likely to continue into the 2020s. Although the number of employed persons in Japan has been declining since 1997, the decline in labor input began earlier, around 1990. Nevertheless, labor quality has continued to improve during this period of declining labor input, with average annual growth rates of 0.57% in the 1990s and 0.42% in the 2000s. While the recent slowdown in labor quality is partly attributable to the expansion of part-time and female employment, it is also accompanied by an acceleration in the qualitative improvement of female workers.

The purpose of this paper is to analyze the sources of energy efficiency improvement in Japanese industries over the period 1955-2012, based on the new estimates of substitutions of KLEM (capital, labor, energy, and materials) inputs and the biases of technical changes. The first advantage of our analysis is that we apply the framework of econometric modeling developed in Jin and Jorgenson (2010), which provides a more flexible treatment of technology as an unobservable or latent variable. The second advantage is that we develop industry-level data of the quality-adjusted outputs and KLEM inputs for 35 non-government industries in Japan, maintaining as much consistency as possible with the Japanese System of National Accounts. Our industry data indicate that energy efficiencies in most Japanese industries worsened before the oil embargo in 1973, reflecting the stabilization of oil prices relative to the increasing prices of capital and labor. The period from the mid-1970s to the mid-1980s was the golden age, in which energy efficiencies improved considerably mainly due to the substitution effects caused by the rapid increases in energy prices. The opportunities to involve the energy-saving technical change diminished until the late 1990s, and the bias of technology changed to energy-using in the 2000s in most industries. This indicates that it will be much harder for Japanese industries to improve their energy efficiencies in the future, compared to the past experiences during the golden age, not only from higher costs for substitutions from energy to other inputs, but also from our projected bias of technical changes for energy until 2030.

The purpose of this study is to develop a comprehensive time-series database on outputs, intermediate inputs, and labor and capital inputs by industry and to provide a first result of the growth accounting framework for the Kingdom of Bhutan during 1990–2014. In particular, the hydropower electricity generation has had a considerable impact not only on the production-side of GDP, but also on the demand-side of GDP in the recent Bhutanese economic growth. Our growth accounting framework is designed to identify the impacts by electricity. The structure of this report is as follows. In section 2, the time-series Supply and Use Tables (SUT) are newly developed, sustaining the basic consistency with the Bhutan system of national accounts (BTSNA). The development of the time-series use tables enables to provide the comprehensive estimates of prices and quantities in outputs and intermediate inputs (energy, material, and service) by industry. In the SUT, the economic transaction between Druk Green Power Corporation (DGPC) as a producer of hydropower electricity and Bhutan Power Corporation (BPC) as a distributor of electricity is described, sustaining a consistency with the physical tables in the Electricity Account by NSB (2015). In section 3, this study newly develops the labor database consisting of the number of workers, hours worked per worker, and hourly wage, which are cross-classified by gender, education attainment, age, and employment status by industry. Based on the data we develop, the time-series estimates of compensation of employees (COE) are estimated and the quality-adjusted labor inputs (QALI), as an appropriate measure of labor inputs recommended in the 2008 SNA are estimated in each industry. In section 4, the time-series matrices of investment and capital stock by type of assets and industry are newly developed. Based on the developed time-series use tables and capital stock matrices, the rate of returns are estimated endogenously by industry. Using the estimated use costs of capital by type of assets and industry, capital services by industry are estimated. In section 5, based on the estimated outputs and capital, labor energy, material, and service (KLEMS) inputs for Bhutan, the TFP growths by industry are developed for the whole periods of our observation of 1990–2014. The first set of the results at the industry and the aggregate levels are introduced. References and the details of the estimated tables are presented in sections 6 and 7, respectively.

This paper reviews the structural characteristics of a multi-sector general equilibrium model developed and extended over the past quarter century at the Institute of Economic Research, Keio University, and documents its applications in Japan’s policy-making process since 2001. The model is distinguished by two key features. First, most of its parameters are empirically calibrated using a uniquely constructed long-term database. Second, it consistently integrates economic variables with physical quantities such as energy consumption and CO₂ emissions. This framework enables the analysis of multi-layered price effects under carbon taxation (i.e., “multiple prices for a single good”) and the evaluation of demand creation and macroeconomic impacts arising from energy-efficiency investments. Three major policy applications are highlighted. (1) In the 2001 Long-term Energy Supply and Demand Outlook, the model contributed to constructing a baseline scenario consistent with macroeconomic growth by developing a household energy demand module and a power generation sub-model to ensure consistency with bottom-up models. (2) In the 2009 Mid-term Target Committee, it was used to examine the plausibility of marginal abatement costs through intensive model comparisons and to explicitly assess household burdens, including utility expenditures and real disposable income. (3) In the 2012 Energy and Environment Council, the model incorporated transaction mechanisms associated with the feed-in tariff (FIT) scheme and quantified the impacts of alternative energy mix scenarios (e.g., nuclear share) on electricity prices and GDP. The analysis demonstrates that general equilibrium modeling provides an essential consistency check, helping to avoid underestimation of energy demand and to properly assess the distribution and magnitude of policy-induced costs. Continuous accumulation of data and iterative model refinement remain critical for future policy evaluation.

This paper provides new benchmark estimates of industry-level price differentials between Japan and the United States, based on the input-output framework expanded from the 2005 Japan-U.S. Input-Output Table published in 2013 by the Ministry of Economy, Trade and Industry (METI). The purchasing power parities (PPPs) we construct cover not only the products for final demands, but also the products of outputs and for intermediate uses, using a classification of 174 products. We postulate a price model describing the relationships among producers’ prices and purchasers’ prices for domestically-produced and imported products, considering the differences in the trade structure, freight and insurance rates, duty tax rates, wholesale and retail trade margins, and transportation costs in each product between Japan and the United States. Using demand-side data for purchasers’ price PPPs for final uses (e.g., the Eurostat-OECD PPPs) and for intermediate uses (e.g., the METI survey), producers’ price PPPs for outputs are estimated based on our price model and the related parameters. Many sources of data on price differentials by agencies and ministries of the government of Japan are used in this paper. Compared to our previous study in Nomura and Miyagawa (1999), which developed the 1990 benchmark estimates of industry-level price differentials between Japan and the United States, there are several improvements. One improvement is the expansion in the framework and the price model to cover imports from China, Germany, Korea, Malaysia, Taiwan, and Thailand. The second improvement is our revisions on PPPs for wholesale and retail trades. The revisions of PPPs for trade have a considerable impact on the estimates of PPP for gross domestic product (GDP) from the production side. In this paper, we examine Japan’s margin rates and provide new estimates by products, based on establishment data from the Census of Commerce in 2002 and 2007 by METI. Our estimates suggest that the margin rates of retail in the official benchmark input-output table may be underestimated. Our estimates enable us to illuminate the sources of price competitiveness through inter-industry transactions. Higher costs of products for intermediate use such as trade, electricity, and other energy in Japan have considerable and wider impacts on the price competitiveness in all industries. Japan’s higher costs of trade (54% higher) and electricity (2.0 times higher) contribute to pushing the output prices in the manufacturing sector higher than the United States by 2.8% and 1.1%, respectively.

Trans-Pacific competition between Japanese and U.S. industries has provided powerful incentives for mutually beneficial economic cooperation between Japan and the United States. The benefits would be greatly enhanced by the proposed Trans-Pacific Partnership, an international agreement that would involve Japan, the United States, and 10 additional countries of the Asia-Pacific region. In this paper, we analyze competition between Japanese and U.S. industries in detail over more than a half century. We conclude with a discussion of opportunities for improving productivity performance in both countries. We first present new estimates of price level indices for Japan and the United States over the period 1955–2012. These indices are key indicators of international competitiveness between the two countries, often expressed as over-valuation or under-valuation of the Japanese yen relative to the U.S. dollar. We provide price level indices for outputs and inputs of 36 industries and for the two economies as a whole. The inputs at the industry level include capital, labor, energy, materials, and services (KLEMS). For an economy as a whole, output is gross domestic product (GDP) and the inputs are capital and labor services. We use our price level indices to generate new estimates of productivity gaps for the two countries and for individual industries. The productivity gap is an indicator of the efficiency of production. A wide Japan-U.S. productivity gap that existed in 1955 contracted for more than three decades, and Japan came close to parity with the United States in 1991. After the collapse of the "bubble economy" in Japan, the Japan-U.S. productivity gap widened again and only a few industries in Japan retained a productivity advantage over their U.S. counterparts in 2012. We conclude that industries sheltered from international competition offer the greatest opportunities for improvements in productivity performance.

The economic potential of Myanmar is attracting significant attention. However, some questions have been raised about the reliability of Myanmar's official system of national accounts (MMSNA). First, it is suspected that under the military regime, economic growths might have been significantly overstated since the latter half of the 1990s, by the Economist Intelligence Unit (EIU 2010) and the ADB (2016). The second problem is that until the shift to the managed floating exchange rate system in April 2012, the official exchange rate had been used in the MMSNA in converting international trade into the national currency. Under the official exchange rate, which set the value of the Myanmar kyat at a level far above the market exchange rate, the amounts of exports and imports were significantly undervalued, resulting in a significant underestimation of GDP. The third problem is extensive illegal trade. In recent years, Global Witness (2015a and 2015b) and Dapice et al. (2014) pointed out that illegal exports of jade, whose prices began to surge in the latter half of the 2000s, have not been properly reflected in the MMSNA. According to those recent research findings, the total transaction value of jade is estimated to equate to 48% of Myanmar's GDP in 2014. In a bid to respond to those problems, this paper tries to develop new estimates of GDP. Our results show that Myanmar's real GDP growth turned negative twice, first in 2003–2004 and second in 2007–2008. In terms of the average growth rate for the period 1998–2010, our estimate of 4.9% represents a downward revision of 7.0 percentage points compared with the MMSNA estimate of 11.9%. The downward revision to economic growth in 1998–2010 based on our estimates bring Myanmar's GDP growth and labor productivity growth closer to those of Thailand and Bangladesh. Meanwhile, the impact of revaluing jade transactions on macroeconomic growth is observed from the mid-2000s, for instance, turning negative growth estimated for 2004 before reflecting the reassessed values of jade transactions to positive growth. The impact of revaluation of jade is even more conspicuous in 2008 and thereafter with jade production accounting for more than 10% of Myanmar's GDP. Notably, the revaluation of jade results in a significant upward revision in 2009–2010, from 3.2% to 17.9%. On the other hand, real GDP dropped 21.5% in 2012 as jade production decreased by half following the transfer of power to the civilian government. Based on our estimates reflecting the revaluation of jade, Myanmar was comparable to India and Vietnam—both in real GDP growth and labor productivity growth—in the period 1998–2010. However, Myanmar was alone to fall into negative growth in the period 2010–2014.

This paper estimates commodity-specific wholesale and retail margin rates using microdata from the Census of Commerce (Ministry of Economy, Trade and Industry) at four points in time between 1997 and 2014, and on the basis of these estimates and the 2007 benchmark estimates of the U.S. Bureau of Economic Analysis, evaluates price competitiveness in the wholesale and retail industry through the measurement of Japan-U.S. price differentials in wholesale and retail services. While Japan's wholesale and retail sector accounts for a large share of GDP at 14%, inefficiencies continue to be identified and the sector is regarded as one of the targets in Japan's growth strategy. Jorgenson, Nomura and Samuels (2016) found that in 2005, the total factor productivity (TFP) level of Japan's wholesale and retail industry was 33% lower than that of the United States, making it the single largest sector accounting for 6.9 percentage points of Japan's overall TFP shortfall (14.5%). Their measurement relies on the domestic output price level indices (PLI) for wholesale and retail services between Japan and the United States estimated by Nomura and Miyagawa (2015), as well as on Japan-U.S. differences in commodity-specific margin rates. As examined in Nishimura and Tsubouchi (1990a, 1990b) and Ito and Maruyama (1990), margin rates are an important indicator for evaluating the competitiveness of the distribution industry, but their measurement is far from straightforward and can change substantially over time. In estimating margin rates, this paper refines the measurement framework for commodity-specific margin rates by taking into account the divergence between domestically produced and imported goods, the logistics costs borne by wholesale and retail businesses, the multi-tiered nature of wholesale distribution, and transactions not subject to margins. It also calculates commodity-specific margin rates viewed through the lens of commodity flows — as distinct from margin rates estimated at the establishment level — and evaluates the influence of differences in procurement sources, sales destinations, sales methods, and sales formats as factors underlying their changes. While margin rates in Japan's national accounts are grounded in benchmark estimates from the basic input-output tables, the estimates presented in this paper also identify issues with the official statistics. Margin rates alone are not a sufficient indicator for evaluating the competitiveness of wholesale and retail services, as they are heavily dependent on the price level of the goods themselves. According to PLI estimates for wholesale and retail services that control for Japan-U.S. differences in commodity price levels, no significant difference is found in retail service prices between Japan and the United States in 2007. Japanese wholesale service prices, on the other hand, are approximately 23% higher than those in the United States. While this disadvantage tends to be obscured by comparisons of margin rates alone, Japan's wholesale services for agricultural, forestry and fishery products and food products are sectors with inferior price competitiveness. Although the findings should be interpreted with a margin of uncertainty given measurement error and differences in service quality that have not been fully accounted for, food products, agricultural, forestry and fishery products, chemical products, and paper and paper products account for approximately 90% of Japan's price competitiveness disadvantage in wholesale services, suggesting that room remains for efficiency improvement.

The estimated values of wholesale and retail margins in the current input-output tables (basic tables) serve as benchmark estimates of commercial output in Japan's System of National Accounts (JSNA), and commodity-specific margin rates are incorporated into commodity flows, exerting a direct and indirect influence of considerable magnitude on the accuracy of the JSNA's Supply and Use Tables (SUT) and GDP measurement. This paper examines the various challenges associated with margin estimation in the current input-output tables, and aims to explore directions for improving accuracy both as primary statistics and as derived statistics. The paper addresses two principal issues: the total commercial margin (commercial output) and commodity-specific margin rates. With regard to the first issue — total margins (commercial output) — preliminary calculations conducted under certain assumptions suggest that the current estimates may be understated by approximately 2.5 to 13.4 trillion yen in the 2005 tables and by approximately 29.9 to 39.5 trillion yen in the 2011 tables. Given the substantial influence of the commercial sector, this implies that current nominal GDP is understated by as much as 3.2 trillion yen (0.6% of current GDP) in 2005 and by as much as 10.5 trillion yen (2.1%) in 2011 at the level of the national economy as a whole. With regard to the second issue — commodity-specific margin rates — the paper evaluates the possibility of estimation bias arising from the indirect estimation method based on the "industry-type (enterprise) margin assumption" used in current estimates, as well as the problem of the ten-commodity constraint (output by item) in the 2011 Economic Census for Business Activity, which serves as the underlying data source for the 2011 tables.

This paper aims to measure capital service prices by type of capital good and by industry for the period 1960–92, grounded in neoclassical production theory. The observable variables available to us — new investment expenditures, acquisition prices by asset type, capital income by industry, and so on — are in practice observed under the influence of a complex tax system levied on corporate income and on the acquisition and holding of assets, as well as various preferential tax treatments, and a model capable of describing these conditions is required. Drawing on the theoretical framework of dual capital service quantities and capital service prices within neoclassical theory, we extend the model system to incorporate Japan's corporate tax regime — including corporate income tax, corporate inhabitant tax, enterprise tax, acquisition tax, and fixed asset tax — as well as preferential tax measures such as allowance and reserve systems and special depreciation schemes. Under this model, we measure specific variables that are made as consistent as possible with the various theoretical variable concepts derivable from the observed data, and estimate capital service prices by industry and by asset type over the period 1960–92. In Japan in particular, land — a non-reproducible tangible fixed asset — accounts for a large share of total tangible fixed assets, and whether or not it is accounted for has a substantial effect on measured capital service prices. The range of application of neoclassical theory also gives rise to differing hypotheses regarding certain elements. With respect to the rate of return on capital, for instance, whether one assumes equalization across industries or equalization across capital goods within each industry is a question that cannot be resolved a priori. The paper therefore examines the effects of these choices — the incorporation of the tax system, alternative specifications of the rate of return on capital, and the introduction of land stock into the framework — through the lens of the resulting capital service price estimates. The conclusions drawn from the estimated rates of return on capital and capital service prices may be summarized as follows. (a) In terms of the time-series trend in the rate of return on capital, both pre-tax and post-tax rates rose from the 1960s through the first oil shock, and declined rapidly thereafter. From around the mid-1980s they began to recover, peaking with the collapse of the asset bubble in 1989 before declining again. (b) The post-tax rate of return on capital has exhibited an accelerating downward trend since 1980, attributable primarily to rising effective corporate tax rates, with declining utilization rates of allowance and reserve schemes also contributing. (c) The incorporation of the tax system has only a modest effect on the aggregate capital service price for the economy as a whole, but it reduces the disparity in capital service prices across industries while amplifying the disparity across asset types. (d) The assumption of equalization of the rate of return on capital across industries in measuring capital service prices is not supported by the estimation results. Over the observation period, the rate of return on capital exhibited substantial cross-sectional and time-series variation across industries. (e) When land assets are included alongside reproducible tangible fixed assets, the aggregate post-tax rate of return on capital for the economy as a whole is substantially reduced and capital service prices fluctuate markedly. Rising land prices in Japan and the capital gains they generate increase the instability of capital service prices. (f) For assets such as electrical machinery and automobiles, capital service prices followed a stable path from 1980 onward and declined from 1990 onward.

This study is an empirical investigation aimed at elucidating the structural changes in the Japanese economy over the thirty-year period from 1960 to 1990, based on a consistent set of statistical standards. In this paper, we construct a database known as the Long-Link Input-Output Table (LLIO), built by linking existing input-output tables across benchmark years. The analytical framework is divided into two linking periods — 1960–75 (301 common classifications) and 1975–90 (333 common classifications) — with detailed economic indicators calculated for each period. A distinguishing methodological feature is that, rather than limiting the analysis to comparisons of nominal values, we construct a long-term price deflator benchmarked to 1975, thereby capturing changes in input structures on a real basis with price fluctuations removed. By tracing the time-series changes in real input coefficients and Leontief inverse matrix coefficients, the study reveals the evolution of inter-industry technological structures from the high-growth era through the period immediately following the collapse of the asset bubble. In addition, under a set of specified assumptions, we provide estimates of the average annual total factor productivity (TFP) growth rates at a detailed sectoral classification, and offer a multifaceted description of the dynamism of the Japanese economy over this thirty-year period through analysis of self-sufficiency rates and export-import structures using skyline charts. This database and the accompanying analysis, which systematize the long-term evolution of industrial structure through a consistent methodology, are intended to serve as foundational reference material for research in economic policy and industrial organization.

This report aims to empirically elucidate the deepening economic interdependence of the Asia-Pacific region and the mechanisms underlying the formation of international division of labor structures, using international input-output tables. The analysis covers eight Asia-Pacific economies: the Asian NIEs (South Korea, Taiwan, and Singapore), four ASEAN countries (Malaysia, Thailand, the Philippines, and Indonesia), and China. Since the 1970s, the economic growth rates of these countries have far exceeded the world average, with the Asian NIEs recording annual growth of 9.1% and the ASEAN countries 7.5%. Per capita GNP levels in 1975 were broadly comparable to those of the Japanese economy in the late 1950s to early 1960s, suggesting that these economies are following a growth trajectory similar to Japan's high-growth experience. The theoretical framework divides the technological structure of commodity production into intermediate input coefficients and factor input components, and sets unit cost minimization as the behavioral principle of producers. The paper theoretically examines the mechanism by which differences in factor endowments across countries generate differences in factor prices, which in turn influence the choice of production technology and shape each country's comparative advantage structure. Changes in development strategies across countries constitute another important analytical dimension. The shift from import substitution policies of the 1950s and 1960s to export promotion policies in the 1970s, and further to the strategy of export-induced secondary import substitution, has brought about rapid changes in each country's production structure and in the structure of mutual interdependence. The Asia-Pacific region's share of world trade expanded from 43% in 1969 to 53% in 1988, while intra-regional trade grew from 17% to 26% over the same period. This paper seeks to capture these patterns of interdependence empirically through international input-output tables, and is positioned as a first step toward constructing a framework for determining international division of labor patterns — while acknowledging that the theoretical model remains at a prototype stage and that many questions regarding its empirical validity require further investigation.

This report analyzes the rapidly deepening economic interdependence of the Asia-Pacific region from the dual perspectives of trade and foreign direct investment, and examines the economic rationality underlying the competitive position of Japan's machinery industry within that context. Chapter 2 analyzes the trade structure and patterns of comparative advantage among four countries — Japan, the United States, South Korea, and Thailand — using international input-output tables. The analysis confirms an asymmetric trade pattern in which Japan and the United States serve as suppliers of capital goods while South Korea and Thailand are suppliers of light industrial products. Drawing also on the perspective of the Leontief paradox, the paper seeks to explain this structure through differences in factor endowments across countries, and examines whether the observed trade patterns can be grounded in economic rationality. Chapter 3 focuses on evaluating international differences in commodity relative prices, presenting a theoretical framework for assessing price competitiveness and technological gaps across industrial sectors through the estimation of Japan-U.S. international relative prices. Chapters 4 and 5 apply this framework to the automobile, general machinery, and electrical machinery industries, demonstrating that these industries hold a comparative advantage in terms of technological level and were able to at least maintain price competitiveness under the exchange rates prevailing in the latter half of the 1980s. At the same time, the analysis suggests that without further advances in technological capability, continued yen appreciation would erode dollar-based price competitiveness. The effects of expanding foreign direct investment on the economic structures of both investing and recipient countries, and on international patterns of industrial division of labor, are identified as ongoing analytical challenges, given that while change has been rapid, data constraints mean the analysis remains at a quantitatively limited stage.

This report aims to empirically elucidate the characteristics of Japan's economic growth from the post-war recovery period through 1990. The motivation for revisiting this subject stems from three sources: recent developments in New Growth Theory, the structural changes in the economic environment that followed the oil crisis, and the growing importance of understanding how the rapid economic growth of Asian countries since the 1980s has affected the Japanese economy. On the theoretical front, the paper critically examines Krugman's (1994) claim that economic growth in Asian countries is explained not by improvements in productive efficiency but by increases in factor inputs. With respect to Japan, time-series data confirm improvements in productive efficiency, while also showing that capital accumulation has been the largest contributor to growth. This suggests that efficiency gains driven by exogenous technological progress must have been effectively internalized into the economic structural system through capital accumulation. A second focus is the deepening of interdependence within the Asian economic sphere. Drawing on the 1985 international input-output table, the research group has previously documented the growing economic interdependence within the Asian region. The recent trend toward increased outward foreign direct investment by Japanese firms raises concerns about the hollowing-out of the domestic economy, while at the same time carrying the positive dimension of contributing to the economic development of Asian countries through the diffusion and transfer of technology. From the perspective of relative factor prices, the relocation of production bases overseas by parts of Japanese manufacturing is a natural consequence of the pursuit of economic rationality. How this affects the industries that remain in Japan, and what role it plays in sustaining Japan's economic growth, constitute the central analytical questions of this paper. Clarifying the nature of industrial structural change and technological spillovers associated with the overseas expansion of Japanese firms is identified as a key task.

This report summarizes the findings of a research group that has sought to quantitatively capture the characteristics of Japanese and U.S. economic growth over approximately four and a half decades since the 1960s, and to trace how these characteristics are reflected in the industrial and trade structures of both countries. The rapid yen appreciation of the 1990s has affected the Japanese economy through two contrasting channels. For industries heavily dependent on imported raw materials, the stronger yen has lowered yen-denominated import costs, producing a favorable effect on competitiveness. At the same time, however, rising factor prices in dollar terms have squeezed production costs and rapidly eroded international competitiveness. Previous analysis by the group concluded that an exchange rate of approximately 120 yen to the dollar represents the cost parity point between Japan and the United States, and that yen appreciation beyond that level undermines Japanese industry's cost competitiveness vis-à-vis the U.S. An additional irony is also noted: productivity improvements by Japanese industries, by contributing to an expansion of the trade surplus, have paradoxically reinforced the very yen appreciation that threatens their competitive position. The research has deepened progressively across successive phases. The first year examined the time-series trends in productivity across Japanese industry as a whole. The second year focused specifically on productivity and international competitiveness in the Japanese and U.S. automobile industries. When automobile output prices are measured using a wholesale price index that appropriately controls for qualitative changes in the product, the results diverge sharply from those obtained using the implicit deflator approach based on input-output tables: Japan's automobile industry is shown to have achieved productivity growth considerably exceeding that of the United States, and to hold a higher absolute productivity level as well. It was further demonstrated that the competitiveness of Japan's automobile industry reflects not only productivity gains within the industry itself, but also the indirect contribution of productivity improvements in related industries, operating through the inter-industry linkages of the broader economic structure. This year's analysis extends that work further. Using the triangularization of input-output tables, it elucidates the changing structure of Japanese industry and the patterns through which productivity gains propagate across sectors, and shows that the structure of industry sets organized by raw material category is a fundamental source of international competitiveness. The analysis also broadens its geographic scope to encompass the Asian NIEs (South Korea, Taiwan, Hong Kong, and Singapore) and ASEAN countries (Indonesia, Malaysia, Thailand, and the Philippines), seeking to clarify through an international input-output table the changing patterns of interdependence among four countries — Japan, the United States, South Korea, and Thailand — and the factors driving those changes.

This report presents an empirical analysis of the Japan-U.S. domestic-international price gap — a subject of growing attention amid the appreciation of the yen — from the perspective of international relative prices measured on a producer price basis. While conventional research has centered on price surveys conducted on a purchaser price basis, this study aims to estimate international relative prices grounded in producer ex-factory prices. This approach makes it possible to distinguish between price differentials attributable to productivity gaps and technological disparities on the one hand, and structural and institutional factors stemming from inefficiencies and regulations in the distribution sector on the other. The comparison between relative prices on a producer price basis and those on a purchaser price basis also allows for an examination of international differences in commercial and transport margin rates. The analysis consists of two distinct exercises. The first uses the underlying data compiled by Kravis and others for the United Nations' 1970 purchasing power parity index, estimating Japan-U.S. relative prices for outputs and inputs — covering capital, labor, energy, and raw materials — across 29 industrial sectors, and extending the estimates into a time-series covering the period from 1960 to 1985. The second estimates producer price-based relative prices for 163 consumer goods in 1985 and 1990, drawing on OECD data and the Japan-U.S. international input-output table. The estimation results indicate that Japan's price level in 1990 was considerably higher than that of the United States, demonstrating that the rise in input prices brought about by yen appreciation has not necessarily been offset by productivity gains.

This paper offers a new interpretation of the so-called "productivity paradox" — the observed phenomenon whereby total factor productivity (TFP) growth stagnates despite robust investment — through a dynamic input-output analytical framework. As the point of departure for the analysis, fixed capital stock matrices covering the period 1955–92 are estimated using the Double Benchmark method, disaggregated by ownership type (private and public enterprises), 43 industrial sectors, and 78 capital goods classifications, enabling a precise characterization of the time-series changes in capital coefficients. The results confirm that across virtually all industries, the composition of capital goods has shifted away from construction and civil engineering toward general machinery and electrical machinery. Building on these findings, the paper proposes two new concepts: "Static Unit TFP" and "Dynamic Unit TFP." The former aggregates, in static terms, the productive efficiency of all industries directly and indirectly involved in the production of a given commodity. The latter goes further, tracing the historical trajectory of capital accumulation through the Dynamic Inverse framework to construct an efficiency measure that incorporates changes in past technological structures. The estimation results indicate that conventional TFP measures systematically understate recent productivity gains. Dynamic Unit TFP reveals a clear acceleration from 1985 onward, reflecting the fact that productivity improvements driven by technological innovation in sectors such as electrical machinery, precision instruments, and telecommunications have propagated to other industries through changes in capital goods composition. The paper concludes that the productivity paradox is likely attributable to this underestimation in measurement.

This paper presents an extension of our previous study, "CO₂ Burden of Space Solar Power Satellites," and reports quantitative estimates of the CO₂ burden associated with a Space Solar Power Satellite (SPS) system based on the DOE/NASA Reference System, derived through input-output analysis applied to a series of simulations in which key parameters are varied from the baseline case. The simulations address three principal questions. The first concerns the type of solar cell to be mounted on the SPS, comparing polycrystalline silicon (poly-Si) with amorphous silicon (a-Si). Although a-Si has a lower conversion efficiency than poly-Si, its simpler manufacturing process and lower processing temperature result in a CO₂ burden approximately 62% of that associated with poly-Si. The second concerns the installation method for the rectenna, comparing three configurations: land-based, reclaimed-land, and offshore. Taking the land-based rectenna (6.45 million tonnes) as the baseline, the reclaimed-land type is shown to generate approximately four times the CO₂ burden (23.72 million tonnes), and the offshore type approximately nine times (59.42 million tonnes). In the reclaimed-land and offshore configurations, CO₂ emissions from dike construction and floating structure installation emerge as the dominant factors. The third concerns the construction methodology for the SPS itself, simulating a scenario in which the system is built in 18 sequential phases, with the electricity generated by completed units applied to the construction of subsequent ones. The results demonstrate that from the second phase onward, no electricity from existing power facilities is required, and that this self-powered construction approach reduces the CO₂ burden to approximately half of what would be incurred if only existing power sources were used throughout. Taken together, this paper establishes that the CO₂ burden of an SPS system varies substantially depending on technology selection and the methods chosen for installation and construction, and offers design-oriented guidance toward the realization of a low-carbon space-based power generation system.

A Solar Power Satellite (SPS) is a satellite in Earth orbit that generates electricity using solar panels and transmits it to the ground via high-frequency microwave radiation. The SPS has attracted attention as one potential clean, next-generation power generation system capable of replacing conventional electricity sources. Its construction, however, is expected to require enormous amounts of energy and to generate substantial CO₂ emissions. This paper presents a comparative analysis designed to determine whether, even after accounting for the environmental burden incurred during construction, the SPS nonetheless imposes a smaller overall burden than existing power generation systems. We collected and examined data on the goods and services required for each component of the SPS — space solar cells, rectennas, space transport vehicles, space stations, and the satellites themselves — and used these data together with an input-output table for environmental analysis to calculate the propagation of CO₂ burdens through the economy. The results indicate that the CO₂ emissions associated with the construction and operation of an SPS at the scale proposed in the reference system amount to 1.58 billion t-CO₂ (equivalent to 430 million t-C in carbon terms), while a system scaled to supply the entire 751.1 billion kWh of electricity sold in Japan in 1995 would generate 470 million t-CO₂ (equivalent to 130 million t-C). A comparison with other power generation systems further reveals that CO₂ emissions per unit of electricity produced by the SPS are 20 g/kWh — substantially lower than thermal power generation and slightly lower than nuclear power generation.

This paper presents a quantitative analysis of the feasibility of achieving CO₂ emission reduction targets under the Kyoto Protocol (COP3) and their economic impacts, using a multi-sector general equilibrium model of the Japanese economy. Drawing on the economic characterization of environmental resources as international public goods with externality properties, the paper focuses on carbon taxation as a market-based policy instrument to correct market failure. The analysis employs a general equilibrium model comprising 36 industrial sectors and 6 household age cohorts, with parameters estimated from a detailed database covering the period 1960–92. Policy simulations are conducted in two principal contexts. The first examines the effects of imposing a carbon tax sufficient to reduce CO₂ emissions by 60 million t-C relative to the business-as-usual (BaU) scenario. The results indicate that in the short run, real GDP declines by approximately 0.6% and cost burdens on industry and households increase, but that over the medium to long run, the expansion of energy-saving investment raises productivity and supply capacity, generating effects that support economic growth. The second set of simulations analyzes the consequences of nuclear power capacity falling short of the BaU assumption of 70 million kW by 2010, comparing the economic costs of compensating for the resulting increase in CO₂ emissions under various alternative tax policy instruments. The qualitative conclusions drawn from the model analysis are as follows: while the expansion of energy-saving investment imposes cost-increasing burdens on all sectors — industry, residential, and transport — in the short run, it carries the potential to sustain economic growth over the medium to long term through more efficient resource allocation and, by extension, the introduction of new technologies and competitive capabilities.