Politics & Economics: Japan Sees Greater Productivity As Answer to Falling Population
TOKYO -- The decline in Japan's population could undermine the country's economic recovery unless workers perform more productively, and the new economy minister is taking aim at inefficient industries and workers.</br></br>Hiroko Ota, who took office in September, faces an economy that is back on track after more than a decade in a slump. Japan's big structural problems have mostly been fixed: The banks have cleaned up their bad loans, and prices have stopped falling. Japan's economy grew at an average of more than 2% a year from 2003 through 2005, and it is expected to grow another 2% or so a year in 2006 and 2007.</br></br>But long-term challenges remain. Japan's huge national debt amounts to 175% of gross domestic product, compared with 64% in the U.S. Cutting the debt gets harder with a falling population because Japan has fewer tax-paying workers. If production per worker increases more slowly than the number of workers falls, overall economic production will fall.</br></br>"Japan has escaped from its downturn," the 52-year-old Ms. Ota said in an interview. "We need to improve productivity more than the population declines."</br></br>Japan, like mature economies in Europe, is engaged in a major rethinking of its economy -- including how to pare down welfare states along with the job and market protections introduced during the years after World War II. These changes now are seen as barriers to growth.