The model was suitable for the business environment during the high-speed growth era, but because it had been so successful, many Japanese firms were slow to adapt the model when faced with the emergence of new markets and competitors in the 1990s.
In the 2000s, partly because the effects of the burst of the bubble had gradually subsided, productivity growth stopped declining and Japan’s productivity growth rate today in fact remains among the highest among advanced countries (Chart 5). However, the rapid aging of the population, at a pace that has no precedence around the world, started to significantly affect economic growth.