1. Home
  2. REPORT
  3. Quarterly Journal of Public Policy & Management
  4. Japan’s Shift toward a High-Value-Added Economy

2018 Vol.1
Japan’s Shift toward a High-Value-Added Economy

2018/02/20

The Japanese economy is said to be experiencing an economic recovery that has lasted longer than the Izanagi boom (1965–1970), but the recovery is persistently weak. This paper examines the state of the Japanese economy with the view that it is in a process of shifting toward a high-value-added economy. A high-value-added economy is one that grows by increasing the value of output rather than its quantity. The latter is what Japan experienced during its period of rapid economic growth. After this growth ended in the early 1970s, the country found it difficult to maintain the expansion of production and exports, both of which had relied on domestic and overseas demand. Since the collapse of the bubble economy and the 2008 financial crisis, it has become even more difficult to expand the quantity of output, forcing firms to seek increased value as the source of growth.
In a high-value-added economy, a substantial expansion in output quantity is not expected, and the rate of economic growth is low. Efforts to increase the value of output, however, should be made steadily, and such efforts give rise to a resilient economic foundation. Also, a high-value-added economy does not get overheated and prices are stable. In corporate management, greater emphasis is placed on profits than sales. Therefore, increased profits do not necessarily result in increased investments in facilities and equipment or increased wages. As a result, profits diverge from general economic conditions.
Increasing the value of output by making substantial efforts in research and development and in gathering specialists leads to growth of a high-value-added economy. As Japan faced the collapse of its bubble economy and other economic crises, wages and investments in facilities and equipment were reduced first, but now the country’s economy is becoming a genuine high-value-added economy. Increasing the economy’s growth potential requires not only increased value added, but also creation of new value. To create new value, it is necessary both to gather people who can appropriately be called front runners in value creation and to adopt different ideas such as distribution of profits based on proper performance assessment.

Report