Intangible Expansion and Capital Quality: Implications of the 2020 Benchmark Revision in Japan

Productivity Research Notes (PRN Series), No. 2613.
Japan's 2020 benchmark revision of the national accounts substantially expands measured intangible investment, with software investment alone accounting for roughly 1.5 percentage points of the 2.7% upward revision to 2020 nominal GDP. The adjustment is concentrated in the post-2015 period and markedly revalues the capital stock—software net stock rises by about 75% by end-2023. Because intangible assets carry higher depreciation rates and user costs, the revision raises the growth of capital services more than that of capital stock, widening the divergence between the two measures. In a Jorgensonian growth-accounting framework, this divergence—interpreted as capital quality—implies that a larger share of measured output growth is attributable to capital input rather than to residual total factor productivity. The revision therefore reframes Japan's recent growth performance as more capital-driven, with implications for both domestic analysis and cross-country comparisons.