Was Japan's level of investment in the 1990's excessive?

Abstract

In this paper a method for calculating the socially optimal level of aggregate investment is developed. That method is then applied to Japan. It is found that in the 1990's the level of investment in Japan was excessive, in the sense that it exceeded the socially optimal level. The degree of over-investment in Japan in the 1990's has averaged about 5.5 per cent of GDP per year according to the calculations in this paper.