The Economic and Social Research Institute published "Economic Analysis No. 210 (Special Planning Issue) - Feature: Future Prospects Using New Long-term Projection Models" in July 2025, a collection of papers on the development and application of new models for analyzing ultra-long-term future prospects of the Japanese economy.
This issue features the results of new model development that enables ultra-long-term economic analysis, moving from conventional short- and medium-term analysis-focused models to address long-term challenges facing the Japanese economy including population decline, technological innovation, and climate change.
Takuma Kawamoto et al.'s paper "Policy Simulations Using New Quantitative DSGE Models and Their Implications" reports specific policy simulation results using the developed model. The analysis shows that if the birth rate stagnates at 1.3, the ultra-long-term economic growth rate could be reduced by approximately 2.1 percentage points, while continuous innovation promotion policies could boost the growth rate by approximately 1.5 percentage points.
Key simulation findings include:
- Demographic decline scenarios showing significant economic impacts
- Innovation policy effectiveness in offsetting demographic challenges
- Importance of sustained policy interventions over time
- Quantified relationships between population dynamics and economic outcomes
The simulations provide crucial insights for understanding how Japan can maintain economic vitality despite demographic headwinds. The results emphasize the critical importance of policies that promote innovation, productivity growth, and human capital development as essential strategies for sustaining economic growth in an aging society.