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Snapshot for April 19, 2004.

On balance, Japan’s so-called “lost decade” not so bad

It is commonly asserted that Japan’s economic performance lagged in the 1990s, while the U.S. economy soared. The United States did grow 1.3 percentage points faster than Japan in the 1990s (as shown in the first set of bars on the graph below). However, between 1989 and 2000, Japan ‘s population increased only 0.3% per year, while the United State ‘s population grew by a much larger 1.1% per year. When corrected for these differences in population growth rates, the gap in the growth rate of output per person —1.5% in Japan and 2.0% in the United States — is actually a much smaller 0.5 percentage points. In other words, the smaller overall Japanese output growth was spread over a much smaller growth in population size.

Productivity in Japan grew 2.5% per year, much higher than in the United States, which saw only 1.4% annual growth. This contradicts the widely held perception that economic performance in Japan lagged over the 1990s. The U.S. figure cited here is for the economy as a whole (including services and government). The most frequently quoted statistics in the press are for the manufacturing and non-farm business sectors, where productivity growth has been relatively high. Japan achieved respectable per capita growth rates in the 1990s even while the total number of hours worked in their economy declined sharply (-0.7% per year). In fact, between 1990 and 2000 the average worker in Japan put in 191 fewer hours per year, or almost five full weeks less annually. Meanwhile, the average U.S. worker added 37 working hours per year, or nearly a full working week more.  

(For further information, see Fingleton, Eamonn (2003) Unsustainable:  How Economic Dogma is Destroying American Prosperity (revised edition),  New York : Nation Books.)

Sources: U.S. and Japanese income trends: IMF World Economic Outlook Database. Real output is measured in domestic currency units.
Total employment: Bureau of Labor Statistics.
Hours worked: Larry Mishel, Jared Bernstein and Heather Boushey, “State of Working America : 2002/2003.” Washington , D.C. : Economic Policy Institute. p. 425, Table 7.17.

Today’s Snapshot was written by EPI economist Robert Scott.