Paul Krugman previously noted that Japan’s equilibrium real interest rate had temporarily declined to around minus 4 percent.3 What is new about the arguments of Summers is that the equilibrium real interest rate has been declining for a long time, not temporarily, on a global scale, against the background of, for example, excess savings in countries with a current account surplus and the decrease in the nominal investment amount arising from declining capital goods prices.
Leaving aside the question of whether the equilibrium real interest rate has actually been declining in negative territory for a long time, it seems plausible that growth momentum in the global economy has declined somewhat more than in a typical cyclical pattern, reflecting the prolonged downturn in demand, the deceleration in labor input, and the slowdown in technological innovation.