Professor Hugh Patrick, Director of the Center on Japanese Economy and Business at Columbia Business School, examines some of the pressing issues in an extensive new look at the Japanese economy. After more than a decade of very low growth, the Japanese economy is likely to accelerate modestly in the coming years, as business investment picks up and household savings rates decline. But the coming years will not be without challenges, in the form of high oil prices and domestic demand-side challenges that could crimp the pace of growth. Deflation remains a concern, and the 1% annualized growth for the quarter ending in June 2006 is a reminder that healthy growth is by no means guaranteed. Since 2000 the number of full-time employees has declined while the number of part-time workers has risen. However, companies are reinvesting excess cash, personal consumption has been increasing, and government demand is on the rise.