Fiscal Implications of Japan's Greying

Aging and Retirement: All retirement is fundamentally pay-as-you-go (pay-go)

Don’t read your ability to save into an entire economy’s ability to do so!

While individuals can save for retirement, a society cannot: with few exceptions goods and services must be consumed when they are produced.

Because retirees in Japan are increasing in absolute numbers and as a share of the population, the slice of output going to retirees will increase (else times for them will be grim and brief). The flip side is that those in the labor force must therefore reduce their consumption: the old can consume only to the extent that the young do not. At a societal level retirement is thus fundamentally, everywhere and always, a pay-as-you-go system.

Modest exception exist. Housing can be stored, but except as your own residence its value is uncertain.  Japan also has significant international assets, which can be drawn down to increase the consumption of imported goods. Neither change the qualitative analysis, because housing depreciates (lots of bad construction) while the share of trade in Japanese GDP (and assets relative to GDP) is small.

To rephrase, unless those working reduce their consumption, either through voluntary savings or involuntary taxation, retirees cannot increase their consumption. Furthermore, the three-generation household headed by a matriarch or (more rarely) patriarch is now a distinct exception in Japan. Instead most consumption will be procured directly by the elderly, using resources which they and not their children control.

Intrafamilial reallocation still dominates the provision for youth: in most cases (other than education, which is subsidized by the government) the goods and services children consume come from parents voluntarily reducing their consumption. At one time that was also true of the elderly (though for most of human history the share of individuals who “retired” was extremely low; people worked until death, even if they did not work themselves to death.  Hence the pity long held forth for the childless widow, the exemplar of which is the story of Ruth in the Hebrew scriptures, with her entreaties to be adopted into Boaz’ household.

The most important variable is thus the ratio of retirees to those working. The greater the (relative) number of retirees, the more that those working must tighten their belts in order that retirees maintain their standard of living. Note that the ratio of dependents to workers in Japan will not be at unprecedented levels, given the large share of young dependents in societies with rapidly growing populations such as Japan in the 1930s. This is an important reminder: there is  nothing intrinsically unsustainable about Japan’s grey future. It is the minimal role of that the family will play that is qualitative different from the (many!) high-dependency societies of the past.

Before looking at numbers, note four margins of adjustment. One (1) of course is to thrust retirees into comparative poverty. If nothing else, that represents noxious ethics: Japan’s baby boomers worked long and hard for a pittance while building the foundation of today’s prosperity. Nor are they retiring into riches -- Japanese public pensions are stingy. "Sharing the pain" may be politically important – but remember, though those over age 65 will be the most important part of the electorate. Back to ethics: why should workers today with a five-day work-week and homes full of the appurtenances of modern life not sacrifice a little? Plus tomorrow's retirees have been, well, promised retirement. So there is inequity to this in the burden the young will bear, but generational inequity is inevitable when the age structure of the population changes in the magnitude that Japan’s will.

Another (2) is to increase the participation rates of those of working age, specifically by facilitating the continuation of careers of women. Now that is already happening, as today’s young women (age 25-29) are either not marrying, or marrying but not quitting work, but older women are still largely relegated to part-time and other less-productive work. It is not yet clear whether that will continue as women in that cohort age – and because of low birth rates, each succeeding cohort will be smaller. This will be insufficient to offset aging.

Then (3) Japan can encourage immigration. However, the primary economic benefit of immigrants is that Japan will not have expended the resources for their initial upbringing and education. Once in Japan they would be less productive than the native born due to language, social and other barriers. So it probably will take at least 3 immigrants to replace 2 retirees. Furthermore, they will insist on marrying and raising families, further lessening their impact on the societal challenge of providing for dependents. Finally, they will themselves age and retire. So immigration is not a solution, though it can shift the time profile of the greying of Japan.

Last, we (4) can cheat a bit by adjusting pension rules to force older Japanese to delay retirement. This clearly shifts the ratio of retirees to workers, or to put it another way, workers pay more years of taxes and collect pensions for fewer years. Now this is an implicit tax, forcing older Japanese to change their behavior in a manner that lowers their utility, hence my use of the word “cheat.” It may however be politically acceptable in a society that is more oriented to the production of services rather than goods, as long as there is a realistic attitude to allowing earlier retirement disabilities. And as a quick back-of-the-envelope calculation, with people working 40 years (ages 25-65) and retiring 20 years (ages 66-85), a one-year shift adds 2.5% to revenue and cuts 5% from expenditures. That is an overestimate, because it ignores the bulge of baby boomers who are now starting to exit the labor force, and the slow increase in realized longevity. Furthermore the experience of Europe suggests that the level of disabilities rises sharply in the face of such policy changes, in part because retirement seems to be a luxury good and today’s society is (thankfully) well enough to consider it as an option.  But there are those whose jobs involve physical labor or whose bodies otherwise wear out. My sense is that fiddling with the retirement rules is a likely component of any policy response.

We could do the same thing at the young end of the spectrum, restricting access to schooling to encourage youth to go to work. I don’t think that’s a policy option worth further examination, politically unacceptable, penny-wise but pound-foolish. Plus it would be offest by the steady decline in the number of youth.

But how big are the numbers, really? The easy part – assuming away changes on the above margins! – is to examine the ratio of retirees to the labor force: the actual age structure of the population is fairly clear, since all those who will be in the labor force in 2030 (and most of those in 2035) have already been born. Another challenge is the magnitude of consumption by those retired. While pensions are easy to estimate, health care costs include many imponderables. Data exist on all these, but collecting and then fitting them into a consistent framework is a task that far exceeds my own resources.  So let’s simply assume that retirees on average consume as much as workers. The ratio is then key.

At present there is roughly one retiree for every three persons of working age. That ratio will deteriorate to one retire per two people of working age circa 2030, and will peak circa 2055 at about one retiree for every 1.25 potential workers (after 2055 changes will moderate as the baby boomers die). Now the dependency ratio will not shift as much, because retirees are not the only dependents. The policy adjustments noted above would further mute the impact.

But we can at least grasp the order of magnitude. Using the shift from 3:1 to 2:1, the resources required on a per worker basis are thus likely to need to go up by 2/3rds. With close to 15% of GDP in transfers, that implies a 10% net shift in savings, taxes and expenditures.

With stable incomes, personal savings rates are unlikely to change much; indeed, the impact of low wages and unsteady jobs has probably been to lower savings. Some modest trimming of expenditures is likely, if only because it would be politically necessary, but the government has already pared public works 50%; modest cuts in support of agriculture, consolidation of schools and local government functions as the countryside depopulates – maybe 2% of GDP can be found.

That implies that most of the adjustment must come from "enhancing" revenues, on the order of 8% of GDP. Add in the 4% of GDP required for debt sustainability (see the blog post below) and you get a 12% of GDP tax increase. Some of this will be collected via a forced postponement of retirement; much must take the form of a shift in the consumption tax and other taxes. With current revenue at around 34% of GDP, that would boost aggregate taxation towards 46%. This is still well below the highest levels found in Europe, and so is not a prelude of economic Armageddon. It surely will pose a major political challenge.

Now other approaches can be used to estimate the cost of retirement, by examining pensions and healthcare costs by age and combining that with demographic projections. The bottom line seems, after much more effort that I've just expended, to also be around 10% of GDP. So I am fairly comfortable that I have the right order of magnitude – that the adjustments imposed by a greying population are large but not infeasible.

One final note: can productivity increases help? That depends on whether retirees' consumption can be held fixed in real terms, which is basically what they were promised, or whether they will be politically powerful enough to increase their consumption in line with society as a whole: they get the same slice of a bigger pie. My hunch is that the latter is closer to what would transpire: politically it would be more difficult to hold benefits in check and to mandate later retirement if wages are rising strongly. However, I do not believe that productivity will henceforth rise at the 2% rate seen across the more prosperous part of the OECD, as I’ve argued that already on this blog.

Debt Sustainability: No Crisis, but Complacency Ill-advised

The following is based on discussion in my Japan’s Economy class on Wednesday, 8 December 2010.

It is possible to run a small deficit forever, as long as the growth rate of total debt is below the growth rate of the economy.

Note that here “deficit” is based on the budget inclusive of interest payments on debt – which means that the current operating budget must be in surplus. I do not try to address the issue of sub-national debt here. Nor do I try to calculate the extent to which the netting out of government assets to move from gross debt (nearing 200% of GDP) to net debt (100%) is appropriate. For example, BOJ bond holdings are offset by money, and so aren’t owed to the public.

Conveniently, Japan’s net debt is (order of magnitude) 100% of GDP which makes the arithmetic straightforward. As long as the economy averages 1% growth, then the amount of debt can growth by 1% of GDP without the debt-to-GDP ratio (D/Y) deteriorating. Since D/Y = 100% then 1% growth of debt = 1% of GDP in additional debt. All Japan need do is lower its deficit from the current 9% of GDP to 1% of GDP.

Note that 1% growth is a pessimistic number, so I’m not “cooking the books” in favor of sustainability. However, if interest rates rise, then the budget surplus must as well. No sign of that near term!

In order of magnitude, half of that change will come from growth boosting (income) tax receipts. The other half (≈4% of GDP) needs to come from some combination of expenditure cuts and tax increases. Since Japan is in comparative terms lightly taxed, it is clearly possible to enhance revenues without large side effects. but the government is also small in size, so paring expenditures is likely more difficult though politically necessary (“cut waste” before raising taxes).

Now using gross debt instead of net debt doesn’t change this story much – in fact, the arithmetic means that with 1% growth you can run a 2% deficit and not see conditions deteriorate.

But in the background interest paid on debt also doubles, so it’s not a pleasant tradeoff: if interest rates were 3% then with 100% D/Y you need to run an operating surplus of 2% of GDP (hence a deficit inclusive of interest payments of 1% of GDP). With 200% D/Y interest payments double to 6% and so to keep yourself to “only” a 2% deficit requires that you run an operating surplus of 4% of GDP. Ouch. Furthermore, the impact on the budget and the deficits of a short-term spike in interest rates is amplified. With higher debt levels there is likewise less leeway to issue more debt in the face of a recession or a major natural disaster.

The more long-run debt the government issues, the less temporary changes in interest rates matter – my back-of-the-envelope calculation with 2009 data found an average debt maturity of around 5.5 years. Major disasters are to be expected: Tokyo suffers a major earthquake on average once in 50 years, but the last one was in 1923…

Furthermore, the above analysis is well recognized by both political parties (the DPJ and the LDP) and by the general (voting) public. There is however all too good a recollection of the disastrous timing of the last round of budget consolidation – reduced expenditures and a major tax increase all started April 1, 1997, and this was followed by a deep recession, a banking crisis and the onset of chronic deflation. To date this agreement in principle hasn’t been matched by an agreement on specifics, specifically timing.

Since 2011 doesn’t look like it will be a year of robust growth, and there has to be an election by summer 2013, my own judgment is that action won’t be seen until fall 2013. By that point (since tax increases won’t be instantaneous, part of the lesson of 1997) debt/GDP will rise another 20-25 percentage points.

Still, (i) there is no crisis and (ii) the numbers are in the range of political feasibility (raising the consumption tax to 10% will bring in an additional 2+% of GDP in revenue). instituting a tax ID system would close the remainder of the gap.

It helps that Japan is a large economy, has no debt denominated in foreign currency, and indeed has substantial foreign reserves and private foreign assets. Constituents of the European Monetary Union (and sub-national governments everywhere) face a different issue: while institutional investors may want to hold assets denominated in the currency of their debt, they don’t have to hold the assets of any particular sub-national entity (and the smaller the entity – Greece and not Spain – the less the need).

Hence I won’t start worrying until we get through the next election and the timing is still bad.

Productivity Growth: Why Japan's Will Remain Low

This is the initial sketch of a line of argumentation. I will return to it periodically over the next several weeks.

Japan's baby boomers are set to retire as they hit age 65 -- unlike Europe and the US, 77% of men below that age remain in the labor force (and 50% of men age 65-69). [see the post below on women's LF participation for the distaff side of the story] That will have many side effects, from the labor force (boosting the demand for younger workers) to capital markets (decreasing private savings with the potential to increase interest rates and exchange rates). These are perhaps best analyzed by focusing on the demand side. (I think that is best done with the assistance of a DSGE model to help highlight the multiplicity of channels for interaction, even if we should not rely on such models as more than loosely suggestive, they're simply to complex to be sure what assumptions matter, and in all cases force offsetting adjustments that are both too strong and too smooth to be credible because to solve them requires that they convergence to a steady state.)

Alongside such shifts are long-run supply-side trends. The obvious one is the shrinking size of the potential labor force, only partially offset by the ongoing increase in female labor force participation. Investment surely won't cease, and the likely rise in capital per worker means that GDP per worker will continue to rise. The net of the two will be a small number, perhaps 0. What happens to productivity is thus crucial to aggregate growth and important for per capita and per worker growth.

Among the better-off end of members of the OECD (the rich countries' club), that has converged strongly around 2% pa. Why should Japan be different?

I argue here that it will be significantly lower for two principle reasons. The first is that young workers will be a smaller share of the labor force, and that most of the gain in human capital comes at younger demographics. Part of that is the standard diminishing returns argument. However, I think that it is also difficult for those who are older to change. That is because at higher incomes the opportunity cost of learning (or retraining), which I believe to be a time-intensive process, is also higher. Can old dogs learn new tricks? -- I like to think so. But will they? -- I see lots of reasons why they would choose not to.

A second reason is that at the firm level higher productivity is realized only in modest part by organizations changing their structures and product lines in an organic manner. Instead the bulk of gains are via exit of those low in productivity and entry of new firms (or business units) that are high in productivity. Now in a dynamic, growing economy the two are only loosely linked: with growing demand, you don't have to have exit in order to have entry. The old order can simply fade into obscurity [wanted: an appropriate aphorism]. Not so in Japan today.

Let me use real estate and retailing as examples. In 2007 the local express train station in the Tokyo suburb where I lived continued to have a camera shop; so did a shopping street (shotengai 商店街) where I had lived 25 years before. But by then film cameras had been relegated to a small coterie of hobbyists; these two stores were less than busy. Why did they not exit? -- in a slowly growing economy (with a falling population) the opportunity cost of doing so is high. In a normal world, as we're used to thinking of things, you could turn your store to some other line of business, or sell it to someone who wanted an office or even house close to a station. In the Japan of 2010, such business sites have almost zero market value.

Now in this particular example the size of the shops is small, no bigger than the office in which I sit while I write this. Even in a world of small-scale retailers they are on the small end of the spectrum. Casual empiricism suggests however that the same issue affects retailing and office space as a whole, even if not as strongly. In a market that is moving about as fast as its aged residents (25% over age 65), the benefits of exit are sharply diminished. That however impedes the "churn" of new for old firms, particularly if the new need to invest in new structures and new locations and new types of capital. Inevitably they would be marginally better -- but the word "marginally" is the operative one. When the old refuse to retire, the young have less room to maneuver.

What I have sketched is an exercise in pure logic, not (yet) backed by data or models other than my informal prose one. The logic can surely be extended to other margins of adjustment, including capital investment. Of course many factors affect productivity independent of the above. My own sense is that they reinforce rather than offset the opportunity cost story above. One possibility is that the rise in contingent labor (part-time and contract work) among the young is a prelude to a "lost generation" who will not find positions as the "boomers" retire and so will not benefit from the to-date-normal process of human capital accumulation with tenure. Ditto the shift in schools, with the 5.5 day school-week giving way to "yutori" (feel-good!) education that will not position Japan's youth for a lifetime of learning. My sense is that health care has also entered an era of diminished returns, so that the needs of the boomers in that area will detract from the ability of the economy to provide goods and services to those who are younger, who will literally be a generation working to support their elders as much as themselves. But offsetting this are Japan's foreign assets, which will allow the country to run a (modest) trade deficit forever. To put it in an archaic manner, the Japanese economy in its senescence can clip coupons.

Let me end this initial draft with my own sense that, however speculative the line of argumentation, I will in fact be able to tie it to empirical indicators that will undergird its validity. But what of magnitude? My hunch is that Japan will be looking at productivity growth in the range of 1.0%-1.5%, that is, up to a full percentage point lower than other OECD countries. If other factors repress investment -- crowding out as falling savings meets still-large deficits -- then this implies that Japan will see average GDP growth decline to under 1% pa. Now today's young will face higher tax rates to pay for their parents retirement (surely a more equitable alternative than forcing children to provide directly for their parents, but that's a different issue...). So per worker output will not grow, per worker income will fall. Japan won't cease to be prosperous, assuming that the politics of governing this process don't go severely awry.

Ha Japan's sun already set?
As an economist, that's too bad, because Japan is in the vanguard of the aging world, and these sorts of issues cry out for analysis. Unfortunately economics as a field is however not immune to market forces, and with Japan out of the limelight it will be very difficult to marshal the resources needed to do that sort of work.

Mike Smitka

Female LF Participation

This is a data note linked to an ongoing discussion on the NBR Japan Forum. See the related post below (the oldest one on the blog).

Female labor force participation has been rising monotonically in the immediate post-schooling age brackets, beginning with the age 25-29 cohort and now very visibly extending to the age 30-34 cohort.

But let's not get too excited about this as a means to offset the rise in the number of retirees. [And as to that, the immediate post-WWII "baby boom" cohorts begin retiring en masse in 2012-2013: we haven't seen anything yet!] As the graph below highlights, while almost 80% of young women age 24-29 now are in the labor force, up 30+ percentage points from 1975, the total number of young women working is falling. Rising female LF participation is unable to offset the absolute fall in the size of the labor force, it can at most slow it modestly.

Starting salaries in Japan

Yomiuri Shimbun reports a survey of 496 companies on starting salaries, which for new college graduates averages ¥207,445 per month [not including the normal 4-odd months of bonus]. Two-year college grads start at ¥173,828; high school grads at ¥162,749. All three are essentially unchanged from the past year.

Now think of the normal opportunity cost calculation: how much is an extra year of schooling worth, relative to the pay you get? Jobs of course aren't identical, and neither are subsequent pay profiles. But if you have get-up-and-go, what decision would you make? Any implications for how you'd approach your educational choice? -- more later on what has in fact happened over the past 25 years. Or try to look it up yourself—data are not hard to find.

This snippet (maybe it shouldn't be called a "story") does not give information on variance; take my word that it is low. (Hunt and you'll likely find a breakdown of these 400-odd firms by industry.) Some offer a bit more than average, some a bit less, but no one is 50% above average. To my knowledge, this lack of variance continues to be the case until the first real promotion, typically around age 30.

Japanese GDP Data

Newspapers, including the NYTimes, picked up the news on the gap between the number of those over age 100 in official records and those who seem to actually be still alive. It's big: there clearly was little effort to check local household registries and to correct obvious errors. Not just here and there, maybe 230,000 people short. That discrepancy itself is not of much concern to economists, because a population census is done in Japan (and elsewhere) exactly because of the difficulty of maintaining and then appropriately aggregating local records, made more challenging by the incentives to overreport all along the way, from local governments to the Ministry of HWL, which might have suspected that its numbers were a bit high. I pick out three additional systematic data issues below, and then generalize at the end.

Collecting data in a timely and accurate and meaningful manner is hard. In this case, tax ID numbers would help reconcile records for those who change residences to a nursing home or an ash urn. [A modest death benefit such as many systems provide does wonders for getting elderly spouses and children to report deaths, helped because hospitals and doctors also records deaths by national ID numbers.] No economy's statistical system is without weaknesses. However I think people looking at Japan tend to overlook their magnitude.

One component, discussed previously on NBR*, are sometimes seemingly minor conceptual and administrative differences. We need to remember that unemployment data are collected on a different basis in Japan, the UK, the US and the various countries of the EU. Those differences in methodology make inter-country comparisons potentially useless, absent a careful comparison of the nitty-gritty of data collection. The OECD makes a few cursory adjustments but their data remain nevertheless low in comparability, because countries simply do not routinely do supplemental surveys using the methodology of other countries that would allow systematic comparison.

GDP is an important example. The IMF has a study detailing efforts for certain types of data (e.g. GDP) across many economies; Japan has significant gaps (the Japan-specific portion runs about 200 pages...). And Japan's various statistical staff are all targets of [proposed] budget cuts, so we should worry about having any reliable numbers...they have neither staff / budget nor (as I argue below) expertise to do extra work. One of the biggest holes is the lack of consolidated data on government activities. Basics (at least to me) such as revenues and expenditures are only available 2 years after the fact, and in summary form rather than with programmatic detail. It's easy to overlook; I was always frustrated that certain GDP numbers weren't available on a quarterly basis, but I hadn't stopped to think about the implications, that no one had good consolidated government data on anywhere near a current basis. It was only when I tried to put together numbers for a couple things this summer that it dawned on my how large the gap is even with the US, which has its own data issues. [I can't speak of the EU end of things because I look at such data but once in a blue moon; my understanding however is that Japan remains very much an outlier.]

Detailed data can be worse. I wanted to know health care expenditures. Not part of GDP. I checked individual ministry sites, and the MOF budget site. While it is probably possible to put together the bigger items, the most recent consistent compilation of health care expenditures that I could find (realized, as opposed to budgeted) was for 2007, and it was only posted in the past month. The lack of consistent, timely government statistics and the very small number of categories available for consumer expenditures on a GDP basis means for example that a consistent health care share of GDP number cannot be produced on a timely manner, if at all. Instead various government accounts and the household consumption survey (kakei chosa) need to be patched together, with little assurance that there aren't both categories missed and categories that include double-counting. I was flabbergasted, because it seemed to me that in Japan of all places having a good grasp of health care expenditures would be a real priority. [To be fair, most expenditures seem to be in a couple big programs -- but those programs are administered locally, and the what- we-actually-spent numbers come out only long after the fact.]

This problem is a general one for data on services -- but Japan as with other "developed" (OECD) economies is a service economy. There are mountains of data on agriculture and fisheries, mounds of data on manufacturing, but only sparse data on services. For retailing, only a few categories are available, and they badly lag structural change in the sector. Of course at a detailed level that's an insurmountable problem, you can't ask about categories until they exist, and then you are constrained by the extent of recognition of those categories by the people who fill out the surveys or otherwise collect data. For example, in the US case there was a 1+ percentage point shift in the consumer price index in the month that Walmart was first incorporated in the set of stores from which price data were collected. But Japan is worse.

Efforts seem to be particularly constrained by the small number of staff, and by the fact that some of them are there not because of any speciality or experience but merely as a function of periodic ministerial, prefectural and city government personnel rotations.

In short, in something that is highly technical, there is a shortage of professional skills among those actually assigned to statistical functions. My observation it that the expertise issue is pervasive in Japanese government units, central and local (and in national universities, for example how IT is handled). It is thus not unique to economic data -- it's not odd that a regulator knows nothing of the industry they're supposed to regulate, whatever the ministry. MOFF staff get rotated from field extension for a particular crop [in the case I have in mind, their college specialty was just that sort of agronomy] to supervising the audits of financial management of local nokyo [not to their taste, not in their skill set, and not at their level of clout to begin addressing the slipshod practices they encountered by people in technical functions similarly removed from their past experience ... though more nefarious explanations sometimes came to mind].

It's not that the numbers are fabricated, or deliberately skewed. [Indeed, as Arthur Alexander pointed out on NBR, neither are the quarterly data unusually slow in publication or large in their revisions.] They're just, well, not all there. So we see large revisions in GDP data [with a significant change in methodology now being rolled out -- so much for comparability across time]. That's an inconvenience, for someone who tries to argue based on data.

I've not "lived on the inside" and suspect there are mechanisms to help compensate for the general bias I see towards, well, a lack of professionalism. When I was in a Japanese bank rotations were kept to about 40% a year, and the non-formalized nature of job assignments meant that low-status but experienced staff were delegated work far beyond what their title suggested, while some of the grunt work got done by purportedly senior people [or sometimes no work at all]. But basically, banking isn't that hard, and bankers shouldn't be too bright or skilled or a bank can get into trouble trying new things... [I've heard bankers claim that in the old days US banks didn't hire anyone with a stellar GPA – using themselves as examples.] A statistical agency however can't function if only a handful of staff at any given time know what they're doing. And that's true of lots of other government functions. If I'm accurate, then they are at the same time both systematically overstaffed and underperforming, and not due to laziness or ineptness, but because the staff are too new to be able to work efficiently and so stuff just doesn't get done....

Original post on NBR: September 14, 2010

* First published on the NBR Japan Forum online discussion list

maintained by The National Bureau of Asian Research

archived at http://nbrforums.nbr.org/foraui/list.aspx?LID=5.

Readers might be interested in Landefeld, J. Steven; Seskin, Eugene P; Fraumeni, Barbara M. "Taking the Pulse of the Economy: Measuring GDP." Journal of Economic Perspectives, Spring 2008, 22:2, p193-216. It is available to students at W&L under the library's subscription to journal database Business Source Complete.

Note: subsequent to my writing this the following (Japanese-language) working paper came out.
ESRI Discussion Paper Series No.249 "On Improving the Estimation Method of Japanese Quarterly GDP"

The abstract actually is translated into English; it notes that the focus is on improving the seasonal adjustments and investment data component of GDP to decrease the magnitudes of the revisions between the first "flash" release and the second revised data [and the subsequent final report]. The article itself is filled with matrix algebra, and with considerations of data sources and the treatment of inventories, changes of which are one component of investment. Additional background can be found in two working papers of the authors on the University of Tokyo Center for International Research on the Japanese Economy, as well as links to many other recent papers. (The Japanese-language portion provides details on graduate workshops, including recent and upcoming presentations, with PDFs of many of the papers -- most of which are in English.)

FYI the title, authors' names and abstract follow:GDP 速報の推定法の改善について
国友直人、佐藤整尚

内閣府が定期的に公表しているGDP速報の推定法における改善可能性について議論する。特にGDP公表の1次速報・2次速報において用いられている設備投資系列、在庫投資系列および季節調整を巡る扱いについて考察し、統計学的立場より若干の改善方法を提案する

Female LF Partcipation

In response to Joyce Gelb's query on the NBR Japan discussion forum, women's LF participation has evolved quite markedly in the past 20 years. As she notes, this does not mean they face equal opportunities -- and it says nothing about whether they are full-time regular hires or part-time or contract workers. But it does reflect very significant changes in behavior among younger women. Now the participation rate for women in the 20-24 year old bracket is flat, but during this period the proportion of women pursuing post-high-school education (and among them, the proportion choosing a 4-year over a 2-year institution) has risen markedly. That pulls the average down. In the data the participation rate of the 25-29 year old bracket is now the highest. That is even more stark if we compare it with 1973 -- I deleted most of the age brackets for visual clarity -- when the 25-29 participation rate was lower than any age bracket other than the one that included high school students, and women age 60 and above. Note too that the participation rate of the 30-34 year old bracket is now rising at about the same rate -- more and more of them continue to work.
In the background women are marrying later and once married are having children at later ages (if at all!). I put in the "M-Form" graph at the bottom, below the other graph. The US and most of Europe no longer have the "M" drop during peak child-rearing years. But I won't put in marriage age graphs. You can however pull the underlying data from the National Institute of Population and Social Security Research [clink for link], which has the 130-odd page Population Statistics of Japan 2008 available for download as a pdf as well as excel files for all the tables. (The Japanese-language site links to more recent data -- the English site may as well, I don't use it.)