Effects of Demographic Changes on Medium- to Long-Term Business Fixed Investment
July 26, 2024
CHIKAMATSU Kyosuke*, IKEDA Shuichiro, YAGI Tomoyuki
Research and Statistics Department
*Currently at the Personnel and Corporate Affairs Department
Abstract
In Japan, labor input is unlikely to increase significantly, based on the outlook for demographic changes. This paper analyzes effects of demographic changes on firms' fixed investment using microdata from the Tankan. The analysis shows that firms facing labor shortages tend to be active in making business fixed investment and replace labor with capital (machines). Given that labor market conditions are highly likely to remain tight, potential demand for labor-saving investment to address labor shortages appears to be large. For potential demand to materialize as actual investment, the following factors would be important: firms' medium- to long-term growth expectations being held up; training up highly skilled personnel with sufficient skills to develop and use labor-saving software; and human capital being allocated appropriately through increased mobility in the labor market.
Notice
The Bank of Japan Review Series is published by the Bank to explain recent economic and financial topics for a wide range of readers. This report, 2024-E-7, is a translation of the Japanese original, 2023-J-13, published in December 2023.
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