Abstract
For Japan to grow sustainably in the face of a declining population, it is essential to enhance its potential growth capacity. Since the impact of population decline, intangible asset accumulation, and human capital investment on the economy are not short-term events, very-long-term analytical tools are required for their assessment. This study employs the Quantitative DSGE model developed based on Teramoto (2025) to simulate the very-long-term economic outlook. Specifically, we incorporate demographic decline and focus on two key drivers of potential growth: (i) the accumulation of intangible assets and (ii) human capital investment. Under multiple policy scenarios, we quantita-tively evaluate the effects of these policies.
Our findings indicate that future population decline will exert a significant negative impact on economic growth. For instance, if the fertility rate stagnates at 1.3, the very-long-term economic growth rate is projected to decline by approximately 2.1 percentage points. Conversely, policy measures such as intangible asset accumulation and human capital investment can substantially enhance long-term economic growth. As an example, continuous policy support for innovation is shown to potentially boost the very-long-term economic growth rate by approximately 1.5 per-centage points.
