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OECD Economic Surveys: Japan 2008

image of OECD Economic Surveys: Japan 2008

This 2008 edition of OECD's periodic survey of the Japanese economy finds Japan experiencing the longest expansion in its post-war history.  Moving forward, this survey examines some of Japan's key challenges including bringing an end to deflation, achieving progress on fiscal consolidation, reforming the tax system, enhancing the productivity of the services sector, and coping with population ageing dualism.

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Assessment and recommendations

The economic expansion, the longest in Japan’s post-war history, continued through 2007, although at a slower pace of around 2%. This protracted upturn has reversed a decade of economic stagnation that reduced Japan’s rank in per capita income from the fifth highest in the OECD area in 1992 to nineteenth in 2002. Business investment and exports have been the main drivers of growth, accounting for about three-quarters of increased output since 2002. Corporate restructuring to reduce excessive levels of debt, production capacity and employment laid the foundation for a rebound in business investment, while buoyant export growth boosted corporate profitability and demand for additional capacity. Closer trade links with Asia, which now accounts for one-half of Japanese exports, have sustained export growth during this expansion. In 2007, exports expanded almost 9% despite weak demand from the United States. With exports growing strongly and corporate profits at record levels, the expansion is projected to continue through 2009, with growth rates of between 1½ and 2%.

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