The author argues that expanding demand is fundamental to the productivity debate and distinguishes between productivity at the business level and across the economy as a whole. Going beyond the conventional focus on adjusting only the denominator, the author emphasizes the importance of policies that increase the numerator and the need to expand domestic demand.
Japan's productivity debate tends to focus on improving the “denominator,” through measures such as greater corporate efficiency and cost-cutting. This analysis aligns with the textbook definition that economy-wide productivity is determined by the aggregate value of output (price × quantity). The author clearly distinguishes between microeconomic and macroeconomic productivity and argues that genuine growth in the numerator is essential.
The microeconomic factors cited include delays in IT investment, long working hours, weak management, the large number of small and medium-sized enterprises, excessive quality, and low labor-market mobility. However, the author points out that these are merely “symptoms” of the macroeconomic environment of insufficient demand and cannot be resolved by improving the denominator alone.
The author states that policies to increase the numerator must include proactive expansion of domestic demand and sustained growth in nominal GDP. In an economy where incomes are rising and demand is shifting toward higher-value-added goods and services, output value increases, making productivity more likely to improve.
In conclusion, productivity cannot be raised sustainably through effort alone; it is naturally pushed higher when the economy is expanding. Accordingly, policy should take as its starting point the current reality that “improving the denominator, no matter how much, has limited significance” and focus on expanding domestic demand and output value.