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The US had 4% real GDP growth in the second quarter, whereas Japan just announced a 6.8% annualized decline in second quarter RGDP. So which country had the better first half? Over the entire first half US GDP rose by 0.475% (not annualized), whereas Japanese RGDP fell by 0.175% (not annualized.) So the US looks better.

But shouldn’t you adjust for different trend rates of population growth? Isn’t per capita GDP what matters? The most recent 6 month growth rate in working age population for the US was up 0.113% (not annualized), whereas it was down 0.64% (not annualized) for Japan. So in the first half of 2014 RGDP per working age adult rose slightly faster in Japan than the US.

Even so, there’s no sugar-coating the weak Japanese first half. I’ve consistently argued that the BOJ needs to do more to hit its 2% inflation target, and also that they should target NGDP, not inflation. If they target prices, they really need to do level targeting.

Given the rapid fall in the Japanese population, even a 2% or 3% NGDP growth target, level targeting, would be much better than the pre-Abe policy regime of falling NGDP. The NGDP growth rate should be at least high enough so that the Wicksellian equilibrium nominal rate is not negative (as it is today). Japan needs to raise the denominator of the debt/GDP ratio.