There are several factors explaining this slowdown in labor productivity growth, which can further be decomposed into the growth of total factor productivity (TFP) and the contribution of the change in capital-labor ratio.
Firstly, TFP growth slowed because technological catch-up opportunities were exhausted, the illusory TFP growth of the bubble period evaporated, 5 and information and communication technology failed to improve the productivity of Japanese firms, unlike the case for firms in the United States.