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Japan’s labor productivity at 71% of US levels

The Cabinet Office sure has been providing us with plenty of material recently. This time, it’s a report showing that Japan’s labor productivity currently stands at 71% of the US level.

The Cabinet Office used data from 2005 to obtain the results, which it says have remained unchanged for 15 years. According to the report, Japan’s productivity in the manufacturing and information technology sectors, including computer software development, matched levels found in the United States. However, the service sectors, including distribution, transportation, restaurants and hotels, stood at 60 percent of the figure of the United States.

The service industry makes up 40% of Japan’s economy.

The Cabinet Office is attributing Japan’s weak figures to a delay in corporate restructuring in the non-manufacturing sectors and also to delays in the deregulation of various service sectors. The Cabinet Office also stated that it intends to announce by the end of this month a program to improve productivity that will put emphasis on speeding up the deregulation of non-manufacturing industries.

Here are some questions I’d like to pose to those with the data: If a 10% rise in Japan’s productivity can be reached within five years, will that be enough to offset the mass retirement of baby boomers? Would the establishment of such a goal (note that I said establishment, not achievement - we all know how realistic actually achieving that goal would be) render an increase in skilled foreign labor redundant? If so, when should we expect the politicians to say that more foreigners won’t be necessary if we can just get everyone to pitch in and work a little bit harder? (Before or after the July elections?)

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