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Abstract

Vol. 50, No. 3, pp. 228-237 (1999)

“The Potential Growth Rate of the Japanese Economy”
Hiroshi Yoshikawa (Division of Economics, Graduate School and Faculty of Economics, The University of Tokyo)

This paper reviews several estimates of the potential growth rate of Japan during 2000-2025. Most studies draw the same conclusion, that a declining labor force lowers the potential growth rate. We deemphasize the role of a declining labor force for growth, and instead propose a new approach to growth. Our approach emphasizes growth of demand. The economy grows whenever it succeeds in creating new goods or industries whose demand enjoys high growth of demand. The future of the Japanese economy rests on her ability to create such sectors, namely the strength of demand creating innovations.