Morgan Stanley: How Much Capital Does Japan Need?
The demand side is relatively simple...Assuming a 1%/yr rise in the living standard and a drop in the population to 117 mln in 2030, the required level of GDP rises to Y640 trl...The level of capital stock needed to produce the required level of output depends on the amount of labor, on technology, and on the sensitivity of production to changes in labor and capital...[By 2030] the required capital stock jumps to Y1252 trl...[H]itting the target capital stock of Y1252 trl in 2030 requires capex growth of about 4% per year, just to offset aging. Note that this rate of growth would bring annual capex to about Y275 trl per year, or about 43% of the target GDP level of Y640 trl...Japan will need a very large amount of capital investment...It is irrelevant whether that investment comes in the form of machinery...or intangible capital...The key point is that the investments must be huge.
