After calculating the sources of economic growth for Australia, I turned my attention to Japan. Looks a lot less promising.
Using the same methodology as the previous post I calculated that growth of potential GDP was a minuscule 0.02% a year...not great at all. And it's pretty easy to see why. Apart from TFP (which at an annual rate of 0.55% is saving the day) it looks pretty ordinary on the Labour and Capital Fronts.
The reduction in capital hurts a bit, but it's the labour hours that is the real story (which in 2012 are at 1963 levels!) Even with all the bluster about reducing their currency and chasing an inflation target of 2%, at the end of the day, I can't see the Japanese story improving until their Labour Force gets sorted out.
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