McKinsey Japan has published a report on how Japan can regain growth and competitiveness in a new era. It estimates that Japanese companies can pursue five “shifts” to grow and generate approximately $1.7 trillion in additional revenue by 2040.
The report points out that Japan's per capita GDP has stagnated for more than 30 years amid five structural changes, including geopolitical uncertainty, population decline and rising capital costs. It says Japan must go beyond its traditional approach of incremental improvement.
The analysis found that the net productivity growth rate of approximately 10,500 Japanese companies was effectively zero from 2019 to 2023. To achieve growth amid population decline, it is considered important to increase the number of highly productive companies and reallocate resources to growth areas.
The five shifts for growth and stronger competitiveness are establishing strategic autonomy through industry restructuring; evolving into companies that lead entire systems; improving productivity across corporate ecosystems; creating an environment to foster startups that address social issues amid population decline; and building governance that encourages long-term investment.
Growth areas identified include semiconductors, robotics/physical AI and nuclear power. The report assesses their global growth potential and Japan's competitiveness, and indicates potential for approximately $1.7 trillion in additional revenue by 2040, provided resources are allocated to growth areas and infrastructure, institutions and human resources are transformed.