There is a belief among the general public that employment volatility tends to be greater for firms with higher foreign exposure, but the relationship between the two is ambiguous in theory. This column uses firm-level data for Japan to compare the impact of foreign exposure on employment volatility for multinational, trading, and non-trading firms; for manufacturing and wholesale and retail trade; and for intra-firm and inter-firm trade. In manufacturing, the effect of exports on the volatility of employment varies, depending on the share of intrafirm exports to total sales. In wholesale retail, the effect of exports is generally insignificant.
Yoshio Higuchi, Kozo Kiyota, Toshiyuki Matsuura, 04 December 2016
Hisamitsu Saito, Toshiyuki Matsuura, 25 November 2016
Agglomeration’s impact on product quality has received much less attention than its impact on productivity, despite the importance of quality as a precondition for economic development. This column employs plant-product-level data from Japanese manufacturing to assess the effects of urban agglomeration on product quality. The findings suggest that state and municipal tax breaks, and other public efforts to attract enterprises, enhance economic competitiveness by improving product quality along with productivity.
Yoshio Higuchi, Naomi Kodama, Izumi Yokoyama, 11 November 2016
Studies have confirmed an increase in earnings inequality in Japan, but do not agree on how or when it increased, or which groups were most affected. This column decomposes changes in earnings data to show a recent decrease in the returns to general human capital of almost all Japanese workers, at the same time as an increase in the returns to firm-specific human capital among male workers with high wage rates. Gender-based wage inequality has persisted.
Kozo Kiyota, Keita Oikawa, Katsuhiro Yoshioka, 09 October 2016
The international competitiveness of industries has received much scholarly attention, but this research has tended to focus on Europe and North America. This column examines the competitiveness of industries in six Asian countries. Global value chain income is increasing in China, India, and Indonesia. And unlike workers in EU countries, workers in the Asian countries have benefited from this increased competitiveness.
Yoshihiko Kadoya, Mostafa Saidur Rahim Khan, 01 October 2016
Economists increasingly emphasise the role of financial literacy in explaining savings, investment, and retirement planning decisions. This column uses data from a nationwide survey in Japan to investigate the relationship between financial literacy and late-life anxiety. Financial literacy appears to reduce anxiety by making people both financially and psychologically prepared for old age.
Toshihiro Okubo, Tetsuji Okazaki, Eiichi Tomiura, 19 July 2016
In the context of increased global trade and accompanying competition, firms are increasingly engaged in industrial clusters. This column uses firm-level transaction data to analyse the impact of firms’ relationships with financial institutions on their networking within clusters. Firms participating in government-supported cluster programmes increase their transaction networks significantly faster than those not in clusters. The column also finds that firms with expanding networks are mainly financed by regional banks, not national or global ones.
Masayuki Morikawa, 10 July 2016
The service sector accounts for much of the output of many advanced economies, and maximising the sector’s output while also minimising regional disparities is an important policy challenge. This column analyses productivity in service sectors in Japan, focusing on economies of urban density. The higher the employment density of the cities in which service firms are located, the higher their productivity, but firms relocating to such cities negatively impacts regional disparity. Further, considerable differences in productivity improvements among sectors indicate there certain industries should be promoted in large cities, and others in smaller cities with lower employment density.
Nobuya Fukugawa, Akira Goto, 08 July 2016
Local public technology centres (Kosetsushi) in Japan have demonstrated notable success in fostering the development of regional industries. This column reports the results of the first branch-level survey of Kosetsushi, focusing on three areas: manufacturing, foods, and design. Kosetsushi are found to help clients through diverse, tailored technical consultations and, increasingly, by acting as a network hub for the transfer of symbolic and analytical knowledge. These findings have particular relevance for regional governments attempting to foster innovation through similar institutions.
Masayuki Morikawa, 23 June 2016
The shifting balance between manufacturing and service industries in developed economies has significant implications for long-term growth and international trade. This column uses Japanese firm-level data to analyse the impact of ‘factoryless goods producers’ on overall productivity. As these producers specialise in tasks in which advanced economies have a comparative advantage, it is anticipated that when combined with falling production costs and trade liberalisation, they will contribute to economic growth.
David Cashin, Takashi Unayama, 18 June 2016
Japan’s prime minister recently announced that a planned 2% VAT increase would be postponed from 2017 to 2019. This column explores how Japanese household consumption adjusted to a VAT increase that was announced in 2013 and implemented in 2014. Household consumption fell by around 4% upon announcement and 1% upon implementation, suggesting that most of the negative impact of a VAT rate increase occurs at the time of the announcement.
Masayuki Morikawa, 07 June 2016
The substitution of human labour by artificial intelligence and robots is a keenly debated topic. Some claim that a substantial share of jobs is at risk, while others argue that computers and robots will lead to product innovations and hence to unimaginable new occupations. This column uses a survey of Japanese firms to examine the impact of AI-related technologies on business and employment. Overall, firms expect a positive impact on business but a negative impact on employment. Firms with a highly skilled workforce, however, have a more optimistic view than firms with lower skilled employees.
Andrew Bernard, Toshihiro Okubo, 23 April 2016
Recent research has found that certain firms increase their innovative activity during periods of falling demand. This column investigates this puzzle by analysing how Japanese firms adjust their product mix over the business cycle. During transitions from recession to expansion, firm-level product churning – that is, simultaneously adding and dropping products – increases by 25%. The findings lend support to the ‘trapped factor’ model, in which negative demand shocks see the redeployment of underemployed resources towards innovation processes.
Sagiri agiri Kitao, 15 April 2016
Most countries with a generous pay-as-you-go social security system and ageing demographics will need to implement significant welfare reform, such as a major cut in benefits or a significant increase in distortionary taxation. Individuals’ uncertainty about when such a policy change will occur will cause precautionary saving and changes in factor prices, affecting aggregate welfare. This column uses evidence from Japan to show that delaying welfare reform will benefit the elderly, at a long-lasting cost to the young.
Julia Tanndal, Daniel Waldenström, 13 April 2016
Financial deregulation in the US has been shown to be associated with rising income inequality over the past four decades. This column looks at the income effects of financial deregulation in the UK and Japan during the 1980s and 1990s. As in the US, deregulation substantially increased the shares of income going to the very top of the distribution. These findings highlight the importance of financial markets in the evolution of income inequality in society.
Masayuki Morikawa, 11 April 2016
Forecasts of business conditions affect investment decisions. This column provides evidence that this is the case in Japan, using firm-level data collected between 2004 and 2014 covering several significant economic events. It also shows that the impacts of business condition forecasts on investment are similar across manufacturing and non-manufacturing industries.
Yukiko Abe, Beata Javorcik, Naomi Kodama, 27 March 2016
Gender inequality is greater in Japan than in other developed countries, and in response the country has implemented steps towards improving female employment. This column presents new evidence suggesting that foreign companies are an unexpected ally in promoting female labour market participation. Foreign direct investment has the potential to improve the allocation of talent and contribute to faster economic growth.
Shujiro Urata, 16 February 2016
A series of mega-regional free trade agreements are currently being negotiated. This column argues that Japan is in a unique position to be able to negotiate with due regard for consistency among these agreements. It should thus seek to bring negotiations to a successful end and to expand and integrate the mega-regional FTAs. This will help rebuild the world trade regime so as to pave the way for achieving economic growth for the entire world.
Ayumu Tanaka, 17 January 2016
Firms that engage in international markets tend to pay higher wages. This column provides new evidence on the wage premiums for exporters and multinational firms in Japan. The results show that wage premium for foreign-owned firms is far more important than that for exporters and domestically owned multinational firms.
Takanori Ago, Tadashi Morita, Takatoshi Tabuchi, Kazuhiro Yamamoto, 04 January 2016
There are common geographical differences in working hours between countries and regions. Working hours are longer in developing countries, as well as in more urbanised regions compared to rural ones. This column explains these differences with two key factors: production technology and urban agglomeration. Technological progress leads to a decrease in working hours, whereas urban agglomeration leads to an increase.
Yasuyuki Todo, 24 December 2015
The Trans-Pacific Partnership (TPP) agreement was reached in October following seven years of negotiations. This column examines how Japan can maximise the TPP’s effect on its economy, identifying several additional policies that will be necessary. These include support for Japanese small and medium enterprises seeking to expand operations overseas, and policies that encourage and ease incoming foreign direct investment.