2021 OECD Economic Surveys: Japan 2021

image of OECD Economic Surveys: Japan 2021

The COVID-19 pandemic hit the economy hard, provoking a marked downturn. Economic activity tumbled as sanitary restrictions restrained consumption and investment. Workers and households with weaker attachment to employment tended to be most affected. However, robust government support and the reopening of the economy led to a partial bounce back. Growth is on course to regain momentum, supported by macroeconomic policies and progress in vaccination. Fiscal consolidation was knocked off course by the crisis and debt has risen even further. A combination of fiscal consolidation and structural reforms is needed to ensure long-run sustainability in the face of demographic headwinds and the costs of meeting more ambitious environmental policy objectives. Pursuing the digital transformation may help boost productivity growth and secure fiscal sustainability. Japan is well placed to benefit from digitalisation, enjoying good infrastructure and skills, though complementary investments are needed. Policies need to facilitate diffusion of new technologies and investment in intangible assets. They also have to ensure that changing demands for skills are met by requisite education and training.



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