TOKYO -- The Japanese government plans to double productivity growth in the service sector to 2% a year by 2020 in a bid to boost gross domestic product, taking on an issue seen as a culprit in the country's long economic stagnation.
With a declining population expected to limit future growth, the government views a focus on improving productivity as a must. This is seen as particularly important for the service sector, which accounts for 75% of GDP but whose productivity is only about half that in the U.S. Labor productivity has roughly tripled since 1970 in manufacturing but improved only about 25% in the nonmanufacturing sector.
Annual growth in service-sector labor productivity has languished at 1% or so in recent years. To achieve the 2% goal, the government aims to help 10,000 companies boost productivity at least 10% a year by 2020. It will offer subsidies of up to 5 million yen ($44,000), mainly to small and midsize businesses, for productivity-boosting measures like those being taken by their larger counterparts. FamilyMart is accelerating implementation of self-checkout registers, while Colowide and other restaurant operators have installed touch-screen order terminals.
The cap on credit guarantees offered by the Japan Federation of Credit Guarantee Corporations will be raised from 280 million yen to 560 million yen.
The government will develop a system to let smaller companies in the service sector grade their own growth potential and productivity improvement and see how they measure up to industry averages. Regional financial institutions will use the framework to assess clients, encouraging growth-oriented reform at local businesses.
Government agencies will work together to clarify and ease regulations to promote the spread of new services using information technology, particularly in health care.
But whether these measures will serve their intended purpose is unclear. Some worry that companies that should exit their markets will stay in, crowding out new entrants. And demands continue for more extensive policies to promote free economic activity, such as sweeping deregulation and lower taxes.