Multi-product firms are pervasive in many industries. This study examines a multi-product firm’s choice among no entry, greenfield entry, and M A when considering entry into a new downstream market. We obtain four interesting results. First, the multi-product firm can reduce the input price by strategically entering a new market. Second, given the higher marginal cost of a new product versus the existing one, a higher degree of competition in the new market leads to higher profit for a multi-product firm. Third, if the market size of the new product is sufficiently large, then entering the new market may not be profitable for the multi-product firm. Lastly, the firm’s preferred entry mode depends on the competitive intensity of the new market: greenfield entry is favored when the new market is relatively less competitive, whereas acquisition becomes optimal as competition intensifies.
Solar radiation management (SRM) is increasingly discussed as a climate intervention strategy by reducing incoming sunlight, but its potential impacts on human well-being are poorly understood. We examine the mental health implications of SRM. Using nearly three decades of U.S. county-month data, we estimate causal impacts of anticipated long-term (climatic) and unanticipated short-term (weather) variations in sunlight and temperature—only the anticipated ones would be affected by SRM, making this distinction critical for evaluating its impacts. We find that sustained sunlight reductions significantly increase suicide rates, whereas climatic temperature effects are weak and negative. These estimates suggest that a 1.5 ^∘ C SRM scenario could lead to approximately 3.81 thousand additional suicides in the U.S. between 2030 and 2100 from reduced sunlight alone, rising to 16.32 thousand when including temperature effects, relative to no-SRM. These findings highlight the need to consider potential mental health risks when evaluating broader societal impacts of SRM.
We study the welfare effects of intensified competition, which we model as an increase in the number of non-innovative firms, in a Cournot oligopoly with a single cost-reducing R D innovator. The welfare impact can be characterized in terms of firms’ outputs, profits, margins, and investment responses. A linear-demand version of the model shows that welfare increases with the intensity of competition when the R D cost is sufficiently high, thereby generalizing Lahiri and Ono (1988) by endogenizing ex post cost asymmetry. We also show that the investment response to intensified competition can be non-monotonic. When the innovator’s R D cost is sufficiently low, tougher competition can stimulate innovation, and this mechanism plays a pivotal role in reversing the welfare effect.
Complex tax incentives, such as means-tested tax transfers, are known to distort labor supply decisions (Chetty Saez, 2013 ). This study conducts a randomized experiment to examine whether providing information about income taxation induces individuals to change their labor supply. The results show that tax information provision increases stated annual earnings by an average of 0.9
Three desirable goals of macroeconomic policy are: full employment, low inflation, and a low debt level with no Ponzi scheme. This paper shows that, when the natural real interest rate is persistently depressed, at most two of these three goals can be simultaneously achieved. Depending on the parameters of the economy, each of these three possibilities can be the preferred option, resulting in a non-trivial policy trilemma.
Based on a survey including an information provision experiment, this paper attempts to answer the following three questions: (1) Are Japanese households' long-term inflation expectations anchored? (2) Does the provision of information on inflation targeting (IT) policy cause long-term inflation expectations to converge to 2
This paper revisits long-term employment practices in Japan and provides new evidence on their evolution over 1982–2022, extending prior work to cover the most recent decades marked by the Great Recession and the COVID-19 pandemic. Using microdata from the Employment Status Survey, we estimate 10-year job retention rates by gender and educational attainment. Contrary to the widespread view that Japan’s long-term employment system has eroded since the 1990s, we find that job retention rates have remained highly stable over the past four decades. In particular, prime-age workers with at least 5 year of tenure (“core employees”) continue to exhibit consistently high retention rates, even during major economic shocks. Although job stability among young entry-level workers—especially college graduates—has declined significantly, cohort analysis shows that this early-career instability does not persist. Most workers eventually transition into stable, long-term employment relationships as they age. We also find no evidence of a decline in the overall share of core employees, although younger male cohorts exhibit temporary delays in accumulating long tenure. In addition, increases in mandatory retirement ages have contributed to higher job retention among older workers. Overall, our findings point to the resilience of Japan’s long-term employment system and suggest that policy discussions should be grounded in its continued empirical relevance.
This paper synthesizes recent economic research on climate change adaptation through land use and land management decisions. Climate change affects land-based activities by altering productivity, prices, and the frequency of natural disturbances, prompting landowners to adjust management practices to maximize land value. We develop a conceptual framework in which landowners choose management systems to maximize the present value of returns, highlighting how climate influences yields, land quality, prices, and disturbance risks. Adaptation occurs when landowners switch to management systems better suited to changing conditions, subject to transition costs. While the value of adaptation arises from these discrete adjustments, uncertainty about future climate creates the possibility of maladaptation. We review empirical strategies used to identify adaptation, including panel data approaches that distinguish short-run weather responses from long-run adjustments and spatial “space-for-time” substitution. Two applications—tree species replanting and prescribed burning—illustrate how adaptation can reshape landscapes, affect ecosystem services, and mitigate wildfire risk. A central insight is that privately optimal adaptation may diverge from socially optimal outcomes due to spatial externalities and public goods. As a result, adaptation may be under- or over-provided, highlighting the need for policies that better align private incentives with social objectives.
This paper constructs a composite indicator, the Corporate Bond Market Functioning Index (CBMFI), designed to comprehensively capture the functioning of Japan’s corporate bond market by aggregating information on transaction prices, issuance and trading volumes, and liquidity conditions in both the primary and secondary markets. The CBMFI successfully identifies periods of severe deterioration in market functioning, including the Global Financial Crisis (2008–2009) and the recent episode of global monetary tightening (2022–2023), during which functioning in both the primary and secondary markets declined sharply. With respect to its link to the real economy, we provide empirical evidence that improvements in the CBMFI, particularly those related to primary market functioning, have significant predictive power for future business fixed investment. We further show that the divergent dynamics between the primary and secondary market sub-indexes since 2013 reflect the effects of the Bank of Japan’s (BOJ’s) large-scale monetary easing, including corporate bond purchases, which primarily supported the primary market. Overall, our results indicate that the CBMFI sheds light on the role of the corporate bond market as a key transmission channel of monetary policy.
This paper examines the effects of a regulation aimed at mitigating competition among municipalities to attract donations by offering return gifts under Japan’s Furusato Nozei program. While the cap is widely viewed as a competition-mitigating policy, we show that it may generate a significant unintended consequence in the form of a competition-promoting effect once municipalities’ participation decisions are taken into account. We develop a theoretical model in which municipalities endogenously decide whether to compete for donations. The main theoretical finding is as follows: when a cap is imposed on the return gift rate for donations, both regulated and unregulated municipalities reduce their return gift rates, thereby lessening competition. However, the reduction in return gift rates induced by the cap may incentivize municipalities that had previously refrained from competing to newly enter the competition, potentially intensifying overall competition. A comparison of descriptive data before and after the introduction of the regulation reveals that municipal responses are consistent with the theoretical predictions.
Collusion in public procurement remains a major challenge for governments. Even when direct evidence of communication is unavailable, coordinated bidding often leaves identifiable traces in auction data. Across several studies, several coauthors and I have developed screening tools using observed bids as inputs. These tools exploit the fact that colluding firms must coordinate their behavior and therefore generate bidding patterns that diverge from those produced under competitive forces. The tools are based on three principles: persistence of designated winners across rebid rounds, the absence of close losing bids, and the presence of rotation or market division patterns. This survey synthesizes the findings of my previous work emphasizing intuitive reasoning over technical detail.
How can high and rising public debt coexist with persistently low interest rates and subdued growth without triggering fiscal instability? This paper addresses this question by developing an endogenous growth model with financial frictions, in which the supply of liquid assets plays a central role in determining interest rates, growth, and fiscal sustainability. In our model, both low interest rates and slow economic growth arise from a common source: liquidity shortage. By expanding the supply of liquid assets, public debt can raise average returns on wealth, thereby promoting long-run economic growth. Applying the model to the Japanese economy, we show that the economy is currently in a scarce-liquidity regime, in which the insufficient supply of liquid assets gives rise to low interest rates and slow economic growth. Our analysis also explains why interest rates on public debt have declined persistently despite the increase in public debt. We apply our model to evaluate effects of fiscal policies aiming at positive primary surpluses.
The paper critically reassesses four common claims in policy discourse: demographic determinism, excessive concentration in Tokyo, disproportionate migration of women, and student-driven urban inflows. We find that each rests, at least in part, on a misinterpretation of the data. Using a simple growth accounting framework, the paper shows that population decline and aging account for only a small portion of Japan’s growth slowdown. Instead, weak productivity growth plays a more central role. The paper points out the importance of distinguishing between net migration and gross migration. Apparent overconcentration of population in Tokyo reflects declining gross mobility rather than increased one-way migration. The paper also reports preliminary evidence that population mobility is positively associated with economic growth. The results suggest that Japan’s demographic challenge may be better understood as primarily institutional, highlighting the importance of policies that facilitate mobility rather than restrict demographic adjustment.
This paper analyzes business cycles in Japan by applying Markov switching (MS) models to monthly data on the coincident indicator of composite index (CI) during the period of 1985/01–2025/05 calculated by Economic and Social Research Institute (ESRI), Cabinet Office, the Government of Japan. During the latter half of the sample period, the Japanese economy experienced major shocks such as the global financial crisis in 2008, the Great East Japan Earthquake in 2011 and the COVID-19 pandemic in 2020. CI fell sharply during these periods, which make it difficult to estimate business cycle turning points using the simple MS model. In this paper, the MS model is extended by incorporating Student’s t-error and stochastic volatility (SV). Since it is difficult to evaluate the likelihood once SV is introduced, a Bayesian method via Markov chain Monte Carlo is employed. The MS model with t-error or SV is shown to provide the estimates of the business cycle turning points close to those published by ESRI. A new method for evaluating marginal likelihood is evaluated. Bayesian model comparison based on marginal likelihood provides evidence that t-error is not needed once SV is introduced. Using the MS model with normal error and SV, structural changes in CI’s mean growth rates during booms and recessions are also analyzed and two break points are found in the both mean growth rates. One is 2008/10 and the other is 2010/02, during which the mean growth rate during recession falls and that during boom rises due to the global financial crisis.
This study investigates the out-of-sample predictive power for high-frequency returns of individual Japanese stocks and its implications for the price discovery process. Using 48 predictors across various look-back windows derived from high-frequency data, the analysis identifies trade imbalance, order imbalance, and past returns as the most important variables for forecasting. The magnitudes and signs of the standardized coefficients indicate that more recent look-back windows contain greater predictive information than earlier ones, and the momentum effect dominates the reversal effect. Employing an unconditional prediction strategy over all test periods yields average predictive performance inferior to that of the infeasible benchmark based on future average returns. When the forecasting strategy focuses on stable stocks with many observations where the estimated coefficients of the three key variables remain consistently nonzero and further limits the analysis to trading days that meet these criteria, it achieves a higher average out-of-sample R^2 than the unconditional prediction strategy and outperforms the infeasible benchmark. This demonstrates the existence of stocks whose high-frequency returns can be predicted at 5 s intervals. For the stocks with the highest number of trades and the highest trading volume, narrowing the look-back window further enhances performance in forecasting 5 second-ahead returns. However, the predictability disappears once the forecasting horizon extends beyond a few minutes. Our results suggest that, compared with representative U.S. large-cap stocks, Japanese large-cap stocks with lower liquidity and less frequent activation of informative signals may constrain short-horizon price discovery.
Japan faces rapid population aging, persistently low fertility, and an exceptionally high level of public debt. This paper surveys macroeconomic research linking demographic change and fiscal sustainability in Japan, focusing on the dynamics of government expenditures and revenues through the transformation of the fiscal system and the labor market. Since the 2000s, the main source of fiscal pressure has shifted to the expansion of age-dependent social insurance expenditures, including public pensions, health insurance, and long-term care, and we survey studies analyzing the roles of these policies. We also explore fiscal sustainability through labor market adjustments, focusing on research on elderly and female labor force participation, immigration, intra-household decision making, and family formation, based on empirical evidence and structural life-cycle and overlapping generations models. Fiscal outcomes are shown to depend on household responses to policy, and the literature emphasizes that stabilizing Japan’s long-run fiscal trajectory requires comprehensive reforms.
This paper proposes an investigation into the effect of income bipolarization on the recent decline in fertility in developed economies. We construct an empirically compatible three-period overlapping-generations model featuring endogenous child-bearing decisions of heterogeneous individuals under the Melitz (Econometrica 71(6):1695–1725, 2003) type of monopolistic competition in production, to examine the heterogeneous effects of skill-biased technical change (SBTC) on fertility decisions. Theoretical and numerical analyses reveal that the positive relationship between income and longevity shapes U-shaped fertility patterns, and the total birth decline occurs when skill-biased technical change enlarges markets and widens income inequality, if the initial income inequality is significant. Results suggest that redistributing income from high to low earners would be Pareto-improving because the redistribution increases the variety of goods supplied by children in the future, and high earners enjoy a wide variety of goods with a high probability in the future. For a complementary analysis, it also demonstrates how trade and lower trade costs reinforce the tendency toward declining fertility alongside SBTC, which has a similar effect on fertility decisions to SBTC.
We investigate the extent to which fiscal factors have contributed to inflation in Japan over the past four decades. Despite sustained fiscal expansion and rising debt since the 1990s, inflation remained low until recent years. Using the medium-scale DSGE model developed by Bianchi et al. (Q J Econ 138(4):2127–2179, 2023), we estimate the model with Japanese data and find that, in contrast to the U.S. case, unfunded fiscal shocks are not the main drivers of inflation in Japan. Instead, real demand and supply shocks, along with accommodative monetary policy, have played more significant roles in shaping inflation dynamics.
