The Impact of Recent Economic Structural Changes on Business Fluctuations

Over the long term, the trend of the economy has been declining and inventory investment and capital investment have become less volatile. This is due to changes in the structure of the economy, such as the shift of the economy toward services, globalization, digital transformation, and increased investment in research and development. While there was a divergence between the Business Cycle Index (coincident index) and real GDP developments near the peak of the 16th cycle (October 2018), this was largely due to the fact that the pace of decline in external demand was not rapid enough to cause the economy to cool down all at once. In addition, in the labor market, more people, especially women and the elderly, entered the labor market amid the population decline, supporting the em-ployment income environment. After the Corona shock, the momentum of wage increases has strengthened. It is necessary to pay close attention to how structural changes in the labor market will proceed and how they will affect the business cycle. Given these changes in the characteristics of business cycles and the underlying changes in the structure of the economy, in order to properly assess the business cycle, it is necessary, first to continue to be sensitive to turning points in the business cycle, but, second, to also monitor a broader range of indicators without overemphasizing industrial production, and, third, to also pay some attention to the development of real GDP as well from the perspective of assessing overall trends in the economy.