Already sluggish productivity growth has slowed even further since the pandemic, a disappointing result since Japan’s level of productivity remains much lower than in any other G7 economy. Two key issues contribute to this productivity gap. First, Japan has a higher proportion of less productive part-timers in its workforce and second, labour mobility is depressed by cultural preferences for lifetime employment. However, we still expect productivity growth to bounce back by the end of the decade as there is still untapped potential in existing technologies.
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