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Papers - NOMURA Koji

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"Estimating Flexible Functional Forms using Macroeconomic Data"

W. Erwin Diewert, Koji Nomura, and Chihiro Shimizu

Empirical Economics (Springer) 2025.03

Research paper (scientific journal), Joint Work, ISSN 03777332

The paper estimates a flexible functional form for a joint cost function using US aggregate data for the years 1970–2022. There are four outputs (consumption, government,investment and exports) and six inputs (imports, labour, machinery and equipment services, structure services, other capital services and land services). Curvature conditions on the joint cost function are imposed without destroying the flexibility of the functional form. Various elasticities of supply and demand are estimated along with technical progress bias terms for each input. When using aggregate time series data based on the System of National Accounts, the paper shows that it is probably better to estimate a joint cost function rather than a gross output function or a GDP function. The paper also shows that assuming that an aggregate production function has constant elasticities of substitution is not appropriate for the US. Finally, the importance of including land as an aggregate input is stressed.

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"Energy Price Surge and Widening Real Price Differentials in the Post-Pandemic Era: A Comparative Analysis of Seven Major Countries" (in Japanese)

Koji Nomura and Sho Inaba

KEO Discussion Paper (Keio Economic Observatory, Keio University) ( 185 ) 1 - 44 2025.03

Research paper (bulletin of university, research institution), Joint Work

This paper aims to measure and analyze the changes in international price differentials in comprehensive final energy consumption accompanying the recent energy price surges across seven major countries (Japan, China, South Korea, the U.S., the UK, Germany, and France). For measuring international price differentials, we employ not only the Price Level Index (PLI) for energy but also the Real Price Level Index (Real PLI), which accounts for the price differentials of outputs produced using energy inputs. Real PLI is an indicator independent of exchange rate fluctuations. Our preliminary estimates from January 2015 to December 2024 reveal the following observations. First, the US has maintained an overwhelming advantage in real energy price differentials even before the pandemic, with the other six countries bearing energy price burdens 1.8 to 2.2 times higher than the U.S. Second, while energy prices surged similarly across major countries during the global economic recovery from the pandemic beginning in early 2021, the real price differentials relative to the U.S. also expanded in five countries (excluding China) during the same period. These differentials widened to 2.3–2.7 times at their peak and continue to persist at 2.3–2.5 times the U.S. level. Third, China has significantly suppressed energy price increases during this period, particularly for coal and electricity, maintaining its price differential with the U.S. at nearly the pre-pandemic level. As the second Trump administration pursues energy dominance by expanding the use of inexpensive fossil fuels, further widening of energy price differentials and loss of international competitiveness are inevitable if Japan and European countries continue their current decarbonization policies. The Japanese economy should consider shifting toward policies aimed at reducing these international price differentials.

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"How should companies face the GX (Green Transformation)?" (in Japanese)

Koji Nomura

SBI Research Review (SBI Financial and Economic Research Institute) 7 24 - 36 2025.02

Research paper (bulletin of university, research institution), Single Work

政府はGX（グリーントランスフォーメーション）によって産業競争力の強化を目指すが、その実現のための前提条件は満たされていない。現在、脱炭素技術は依然として高コストのままであり、主要国間の温室効果ガス排出削減の負担格差はさらに拡大しようとしている。この四半世紀のグローバルなサプライチェーンの深化の基底には、削減負担の大きい日本や欧州から負担の小さい中国などへ生産移転が進み、世界全体のCO2排出量は増加する、カーボンリーケージ（炭素の漏れ）が存在していた。2010年代後半からは先進国の脱炭素政策の加速により、弊害はエネルギー多消費製造業に拡大している。GXの創出するグリーン需要は一部の企業に一時的な恩恵を与えるが、持続的な実需とはなりにくい。政策創出需要が減退すれば、日本はさらなる空洞化とともに、高コスト技術導入による生産性低下が不可避となる。脱炭素政策からの転換に備え、企業はバランスのある経営戦略が求められる。

"Indirect Steel Trade in the Postwar Japanese Economy" (in Japanese)

Koji Nomura

KEO Discussion Paper (Keio Economic Observatory, Keio University) ( 184 ) 1 - 28 2025.02

Research paper (bulletin of university, research institution), Single Work

Since the late 2010s, when the signs of a full-scale acceleration of global decarbonization policies began to emerge, steel production in Japan and Germany has declined almost linearly. While this decline is generally attributed to weak domestic demand, understanding changes in domestic demand within the steel industry, which primarily produces intermediate goods, requires identifying the sources of final demand. This study examines recent trends in steel production decline while measuring structural changes in Japan's direct steel trade and indirect trade through downstream products in the postwar economy.
In contemporary Japan, trends in domestic steel demand are heavily influenced by changes in indirect exports and imports, which are not readily observable in conventional statistics. Since the late 1980s, Japan’s indirect exports of steel have exceeded its direct exports. Additionally, the effective import dependence of steel (the sum of direct and indirect imports) has consistently increased since the late 1970s. Until around 1990, this rise was driven by an expansion in direct imports, whereas since the late 1990s, indirect imports have played a more significant role. If the acceleration of decarbonization policies further facilitates the offshore production of downstream products such as automobiles and machinery, the contraction of indirect steel exports and the expansion of indirect imports may lead to a self-reinforcing cycle of deindustrialization, exacerbating the decline in domestic production. Without considering indirect trade, such production decline risks being misinterpreted as merely a consequence of weak domestic demand.

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"Recent Steel Production Decline in Japan: The Interactive Effects of Carbon Neutrality Policy and Production Relocation" (in Japanese)

Koji Nomura

Economic Statistics Research (Keizai Sangyo Toukei Kyokai) 52 ( Ⅲ ) 1 - 22 2024.12

Research paper (bulletin of university, research institution), Single Work

本稿は、2018年末以降から現在まで続く日本の鉄鋼生産の急激な減退について、直接輸出入と下流製品に組み込まれる間接輸出入の両面から分析している。そうした生産減退は、欧州や日本を中心に脱炭素政策（カーボンニュートラル政策）が強化され、排出削減が困難であるという技術制約のある鉄鋼業においても従来以上の取り組みが求められるようになったdeep decarbonizationの模索・推進期とおおむね一致している。直近における鉄鋼の構造変化を把握する資料の利用には制約があるものの、近年の生産減退は、海外への生産移転が消極的に同意する環境規制と環境規制の強化が促す生産移転という、意図せざる相互作用とその循環構造によると評価される。現実を直視しない脱炭素政策の加速は、エネルギー多消費的な素材産業にこそ強みを持つ日本経済の産業基盤に対し深刻な影響を及ぼしている。

"Development of Industry-Level Productivity Account in Bhutan, 1990–2022"

Koji Nomura

(United Nations Development Programme) 2024.09

Research paper (conference, symposium, etc.), Single Work

This study constructs an industry-level productivity account for Bhutan's economy from 1990 to 2022, focusing on the impacts of hydropower development on economic growth and resource allocation efficiency. The analysis reveals that while hydropower has been the primary driver of Bhutan's economic growth, its contribution declined significantly post-democratization. Despite maintaining the region's highest capital investment, the economy shows a striking dichotomy between high labor productivity and low capital productivity, indicating fundamental limitations in Bhutan's hydropower-led development strategy.

"Estimating Flexible Functional Forms using Macroeconomic Data"

W. Erwin Diewert, Koji Nomura, and Chihiro Shimizu

TCER Working Paper Series (Tokyo Center for Economic Research) ( E-206 ) 2024.04

Research paper (bulletin of university, research institution), Joint Work

The paper estimates a flexible functional form for a joint cost function using US aggregate data for the years 1970-2022. There are four outputs (consumption, government, investment and exports) and six inputs (imports, labour, machinery and equipment services, structure services, other capital services and land services). Curvature conditions on the joint cost function are imposed without destroying the flexibility of the functional form. Various elasticities of supply and demand are estimated along with technical progress bias terms for each input. When using aggregate time series data based on the System of National Accounts, the paper shows that it is probably better to estimate a joint cost function rather than a gross output function or a GDP function. The paper also shows that assuming that an aggregate production function has constant elasticities of substitution is not appropriate for the US. Finally, the importance of including land as an aggregate input is stressed.

"Post-Pandemic Surges of Real Unit Energy Costs in Eight Industrialized Countries"

Koji Nomura and Sho Inaba

RCGW Discussion Paper (Research Center on Global Warming, Develpment Bank of Japan) ( 70 ) 2024.03

Research paper (bulletin of university, research institution), Joint Work, Lead author, Last author, Corresponding author

This paper develops a high-frequency indicator to assess real price and cost differentials for energy use across eight industrialized countries: China, France, Germany, Italy, Japan, South Korea, the UK, and the U.S. The study assesses the overall energy cost burden using the real price level index (PLI) and the real unit energy cost (RUEC). The real PLI, unaffected by exchange rate fluctuations, provides a stable measure of real energy price differentials, while the RUEC indicates the challenges facing the energy transition. An analysis of RUEC trends from the first quarter of 2015 to the fourth quarter of 2023 highlights a substantial post-pandemic surge, particularly evident in Germany and Italy, where levels spiked by about 80% compared to pre-pandemic periods. This surge in Germany has coincided with a 20% decline in output within energy-intensive manufacturing by the end of 2023. Asian countries, on the other hand, managed to curb the post-pandemic RUEC surge to less than half of this level through energy subsidies and government interventions. Nonetheless, the higher RUEC levels in China and South Korea underscore the formidable challenges they encounter in propelling their energy transition initiatives forward. In Japan, about half of the limitations on the RUEC surge are attributed to reduced energy consumption resulting from the hollowing out of its industrial sector. Without a fundamental reevaluation of energy policies to ensure economic growth, the current path of the energy transition remains precarious.

"Improving the SNA: Alternative Measures of Output, Input, Income, and Productivity"

W. Erwin Diewert, Koji Nomura, and Chihiro Shimizu

Review of Income and Wealth 70 ( 4 ) 1142 - 1189 2024.01

Research paper (scientific journal), Joint Work, Accepted, ISSN 00346586

The current System of National Accounts (SNA) Gross Domestic Product (GDP) concept does not measure the income generated by the production sector since it includes depreciation and excludes capital gains and losses on assets used in the production sector. The paper suggests an accounting framework that measures the income generated by the production sector of an economy and implements this measure using the Augmented Productivity Database (APDB) developed by Asian Productivity Organization and Keio University for China over the years 1970–2020. Real gross and real net income generated by the Chinese production sector are decomposed into explanatory factors including TFP growth using the framework suggested by Jorgenson and Diewert and Morrison. TFP growth is further decomposed into technical progress and inefficiency components using the nonparametric approach developed by Diewert and Fox. The APDB has estimates for the price and quantity of agricultural, industrial, commercial, and residential land used in China. The paper argues that changes in land use should be treated in the same manner as inventory change and added to the alternative output measures. It turns out that Jorgensonian user costs for land are frequently negative. The problems associated with negative user costs are discussed in the paper.

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"A High-pressure Economy with a Sustainably Weak Yen is Desirable for the Japanese Economy" (in Japanese)

Koji Nomura and Koichi Hamada

Y. Harada and Y. Iida (eds.) What is High Pressure Economy (Kinzai) 43 - 65 2023.11

Part of collection (book), Joint Work, Lead author, Corresponding author

本稿は、戦後日本の経済成長の経験を振り返りながら、1980年後半以降の為替レートが多くの年で「過度の円高」であり、そして過度の円高が導く国内経済におけるコスト削減がどのように実現されたのかを解明する。見いだされることは、1980年代半ばまで「高圧経済」によって運営されていた日本経済が「低圧経済」へと移行してしまったことであり、それによる賃金抑制と生産性停滞こそが長期にわたり日本経済を苦しめてきたデフレ圧力の源泉となってきた。日本経済の復活に向け、高圧経済の実現への転換をいかにすべきかを論じる。

"The Growing Impact of ICT Productivity via the Cost of Capital: Evidence from the U.S. and Japan"

Mun S. Ho, Koji Nomura, and Jon D. Samuels

Telecommunications Policy (Elsevier) 47 ( 9 ) 2023.10

Research paper (scientific journal), Joint Work, Accepted, ISSN 03085961

We identify and measure two impacts of industry-level total factor productivity (TFP) growth on aggregate price change in the U.S. and Japan. The first is a standard effect from the definition of aggregate GDP. TFP change lowers aggregate prices ceteris paribus. The second is that a change in TFP in the production of investment goods lowers the cost of capital via lower investment prices. We call this the cost-of-capital effect and formulate an expanded growth accounting framework to capture both effects. We apply it to a harmonized dataset for the two countries and find that the standard effect has fallen since the peak around 2000 due to lower TFP growth and a diminished share of GDP. However, the cost-of-capital effect has risen in importance and offsets part of this decline in the standard effect.

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"Measuring the Output of the Education Sector in Japan, 1955–2019" (in Japanese)

Koji Nomura

Economic Analysis (Economic and Social Research Institute, Cabinet Office of Japan) 207 191 - 219 2023.06

Research paper (scientific journal), Single Work, Lead author, Last author, Corresponding author

Various methods have been considered in measuring non-market-produced educational services, but their proper evaluation requires the development of consistent measurements based on a common data foundation. This paper aims to approach price-quantity indices reflecting changes in the quality of education services using multiple approaches based on long-term time series data from the Education Services Production Database of Japan (ESJ) in Nomura (2020a), which is detailed crossclassification data on school education services in Japan, and the Extended Input-Output Table for Education Sector (EIOT) constructed in Nomura (2020b) based on the ESJ, covering 1955–2019. Four methods are applied: I. Unweighted output volume method, II. Output volume method, III. Input method, and IV. Hybrid method, in which the output volume method is applied to educational activities in a narrow sense and the input method to its auxiliary activities. In applying the Output volume method (II and IV), three output measures are defined: a. the number of students, b. total class hours of students, and c. total class hours of teachers. In Japan, where the number of students has been declining, applying the Output volume method based on the demand-side output indicators (a and b) is not necessarily effective as a quality-adjusted price/quantity indices. According to the measurement in this paper, IV. Hybrid method based on the supply-side output indicator (c) is evaluated as the most effective approach for capturing the quality changes from the point of view of the production account in the national accounts.

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"Secondary Products in Japan's Production System" (in Japanese)

Koji Nomura and Kozo Miyagawa

Economic Analysis (Economic and Social Research Institute, Cabinet Office of Japan) 207 86 - 120 2023.06

Research paper (scientific journal), Joint Work, Lead author, Last author, Corresponding author

Measuring benchmark production system, including secondary products, plays a crucial role in determining the accuracy of GDP. The purpose of this paper is to find a type of relationship between main activities (395 activities based on Japan Standard Industrial Classification) and secondary products (SDS 900 products) based on the Survey on Diversification of Sales (SDS) conducted in 201819 by the Research Institute of Economy, Trade and Industry. Understanding the production structure of detailed secondary products by main activity enables us to examine the accuracy of the benchmark production system in the Japanese System of National Accounts (JSNA). Our examination shows that 13.0 trillion yen of the domestic production of secondary products (6.3 trillion yen in GDP or 1.2% of GDP) is likely to be omitted in the 2015 benchmark production in JSNA.

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"Benchmark Measurement of Wholesale and Retail Outputs in Japan: Has the Use of Economic Census Improved GDP in the JSNA?" (in Japanese)

Koji Nomura and Kozo Miyagawa

Economic Analysis (Economic and Social Research Institute, Cabinet Office of Japan) 207 121 - 144 2023.06

Research paper (scientific journal), Joint Work, Lead author, Last author, Corresponding author

The benchmark measurement of wholesale and retail outputs in Japan has been based mainly on the Census of Commerce, but since the 2011 benchmark year, it was switched to be based on the Economic Census, which was newly conducted in 2012. Our study investigates five benchmark years since 1995, the changes in the measurement framework have significantly impacted the quality of the Benchmark Input-Output Table, and the current benchmark estimates of wholesale and retail outputs are underestimated. The GDP shortfalls are estimated at 15.8 trillion yen (3.2% of the aggregate GDP) in 2011 and 11.3 trillion yen (2.1%) in 2015. This underestimation bias is a side effect of the overly decentralized nature of Japan’s statistical system. More integrated development of benchmarks and annual estimates is required in the Japanese System of National Accounts (JSNA).

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"How Can We Improve GDP in the JSNA?" (in Japanese)

Koji Nomura

Economic Analysis (Economic and Social Research Institute, Cabinet Office of Japan) 207 1 - 21 2023.06

Research paper (scientific journal), Single Work, Lead author, Last author, Corresponding author

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"Improving the SNA: Alternative Measures of Output, Input, Income and Productivity for China"

W. Erwin Diewert, Koji Nomura, and Chihiro Shimizu

Vancouver School of Economics Discussion Paper (The University of British Columbia,) 23-04 2023.06

Research paper (other academic), Joint Work

The paper defines and computes alternative measures of output, input and Total Factor Productivity (TFP) for the production sector of the Chinese economy. The current System of National Accounts (SNA) input measure that corresponds to Gross Domestic Product (GDP) does not measure the income generated by the production sector since it includes depreciation and excludes capital gains and losses on assets used in the production sector. The paper suggests an accounting framework that addresses these problems with the existing SNA gross income measure and implements a net income measure using the Augmented Productivity Database (APDB) developed by Asian Productivity Organization and Keio University for China over the years 1970-2020. Real gross and real net income generated by the Chinese production sector is decomposed into explanatory factors including TFP growth using the framework suggested by Jorgenson and Diewert and Morrison. TFP growth is further decomposed into technical progress and inefficiency components using the nonparametric approach developed by Diewert and Fox. The APDB has estimates for the price and quantity of agricultural, industrial, commercial and residential land used in China. The paper argues that changes in land use should be treated in the same manner as inventory change and added to the alternative output measures. It turns out that Jorgensonian user costs for land are frequently negative. The problems associated with negative user costs are discussed in the paper.

"The Over-Valued Yen and the Low-Pressure Economy Repressed Productivity in Japan"

Koichi Hamada and Koji Nomura

International Journal of Economics and Finance (Canadian Center of Science and Education) 15 ( 6 ) 1 - 13 2023.04

Research paper (scientific journal), Joint Work, Accepted, ISSN 1916-971X

In the post-war economy of Japan, the high-pressure economy as defined by Okun and Yellen maintained its real exchange rate relatively low and kept the economy mildly inflationary. Not only did it encourage short-term employment but it also fostered a long-term productivity trend as measured by its total factor productivity (TFP). International pressure for a stronger yen after the Plaza Accord, coupled with the restrictive monetary policy of the Bank of Japan, created a large exchange rate gap and accordingly, the extreme Japan-U.S. output price gap, referred to as the price level index (PLI), in 1995. It further caused the squeeze of domestic wages and led to the deflationary pressure that plagued the Japanese economy for decades. In our opinion, the exchange rate also depressed domestic capital accumulation caused by the internationally low nominal rate of return on capital and that situation caused the TFP stagnation in Japan.

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"Energy Input and Economic Growth: What Can We Learn from the Japanese Economic Experiences?" (in Japanese)

Koji Nomura

Economic Analysis (Economic and Social Research Institute, Cabinet Office of Japan) 206 24 - 53 2023.03

Research paper (scientific journal), Single Work

What can we learn from the experiences of sustained energy productivity improvement (EPI) in the economic growth and structural change of the postwar Japanese economy to guide ap-propriate energy and environmental policies? This paper aims to derive implications for policy by discussing the structural factors contained within the macro-observed EPI gross indicators, es-pecially the factors behind the acceleration of the EPI since the late 2000s. The measurements in this paper show that there has been no policy-driven acceleration in the sustained realization of the EPI in the postwar Japanese economy, but rather a significant diminution in the speed of improvement over the past half-century until the late 2000s. The acceleration of the EPI in recent years has been accompanied by a shift of energy-intensive goods to overseas production, and domestic industries that are required to curb consumption have been forced to lower their capital and labor productivity. The evaluation, including price changes, shows that the real unit energy cost facing the Japanese economy rose sharply in 2021–22, increasing its vulnerability to energy price hikes. In an energy transition that will take decades, it is necessary to ensure economic efficiency during the transition period without obsessing over poor domestic emission reductions.

"Development of High-Frequency Indicators of Real Unit Energy Cost in Japan” (in Japanese)

Koji Nomura and Sho Inaba

RCGW Discussion Paper (Research Center of Global Warming, Research Institute of Capital Formation, Development Bank of Japan) ( 68 ) 2023.03

Research paper (bulletin of university, research institution), Joint Work, Lead author, Corresponding author

While carbon neutrality toward 2050 may provide growth opportunities for Japanese companies with advantages in energy-saving and other technologies, the impact of the increased cost burden on the competitiveness of the Japanese economy must be carefully monitored during the long-term transition process. In a Japanese economy that has had to face relatively high energy prices for a century and boasts a highly energy-efficient industrial structure, the costs of additional energy savings have already multiplied significantly. In addition, after more than a decade of policy support by the Feed-in Tariff (FIT) program, the expansion of renewable electricity has significantly increased the price of electricity in Japan, and the burden on households and industry has grown to several times what was assumed when the FIT program was introduced in 2012. It is increasingly important to observe the impact of energy price hikes on Japanese industry and households, as well as the cost burdens required for the energy transition, in near-real time. This paper introduces the development of monthly estimates of the Real Unit Energy Cost (RUEC) and its components, an indicator that comprehensively assesses the resilience of the domestic economy to energy price hikes, and reports preliminary figures through January 2023, the most recent month available.

"Half a Century of Experience with Labor Input and Productivity Growths in the Vietnamese Economy" (in Japanese)

Koji Nomura

Okayama Economic Review (Economic Association of Okayama University) 54 ( 3 ) 37 - 59 2023.03

Research paper (bulletin of university, research institution), Single Work

This paper aims to analyze changes in productivity over a half-century by measuring quality-adjusted labor input (QALI) in the Vietnamese economy for the period 1970–2020. The biggest barrier to the construction of productivity account for the Vietnamese economy is that compensation of employees (COE) is not estimated in the Vietnamese System of National Accounts (VSNA). The time-series estimates on hours worked and hourly wage rates, which are cross-classified by gender, education, age, and employment status, are constructed based on fragmentary available data in Vietnam. The constructed data enables to development of not only the QALI but also the COE and labor share with a micro foundation. In August 2022, the VSNA based on the 2008 SNA was released, resulting in a significant upward revision of GDP. Based on the new VSNA, which extends back to 1970 in this paper, the labor quality improvement has accelerated from 0.6% per year in 1970–2000 to 2.0% per year in 2000–20 (mainly through improvements in education). This acceleration explained 65% of the increase in QALI and 14% of the increase in labor productivity over the same period. This paper also finds that total factor productivity in the Vietnamese economy started to improve later than in the previous analysis, becoming more pronounced in the second half of the 2010s.

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