Japan’s Quest for Growth: Exploring the Role of Capital and Innovation

 
Author/Editor: Syed, Murtaza H. ; Lee, Jinsook
 
Publication Date: December 01, 2010
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: As labor input in Japan shrinks with population aging, capital accumulation and productivity gains will drive growth over the medium-term. At the same time, a changing global landscape calls for a shift in export-oriented investment toward new markets and a new generation of products, as well as increased investment by domestically-oriented firms. What policies could be adopted to help firms adjust to the imperatives of the post-crisis global economy and boost medium-term growth? Using disaggregated data, this paper investigates the determinants of investment and R&D spending by Japanese firms. The results suggest that policies could usefully focus on four areas. First, raising the return on investment, including through reforms to the tax code. Second, decreasing uncertainty through improved risk management by firms and by bolstering the business climate. Third, improving SME access to finance, notably by encouraging venture capital investment in innovative areas and more risk-based lending. And fourth, reducing excess leverage and supporting corporate restructuring to enable new investments to flourish.
 
Series: Working Paper No. 10/294
Subject(s): Capital | Economic growth | Economic models | Industrial investment | Japan | Manufacturing sector | Productivity | Services sector

Author's Keyword(s): Japan | Investment | Capital | Innovation
 
English
Publication Date: December 01, 2010
Format: Paper
Stock No: WPIEA2010294 Pages: 20
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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