Animation: Japan’s Aging Population
Japan’s infamous “Lost Decade” was supposed to refer to the stagnant economic period from 1991 until 2000, after the collapse of the asset price bubble in Japanese housing and stocks.
However, it seems the phrase was coined a little early, as now it seems even more ominous. The “Lost Decade” has turned into the “Lost Two Decades”, and many of the same economic problems continue to plague the nation today.
The most recent data from Japan’s Cabinet Office pegged Japan’s GDP growth in Q4 of 2015 at -0.3% compared with the previous three months.
That’s now two negative quarters out of the four in 2015.
Japan’s Demographic Headwinds
The problem is that the outlook isn’t getting any better with time.
In the background, and even more important, is Japan’s lingering demographic crisis. The country’s population is projected to fall from 127 million to 87 million by 2060, at which point more than 40% of the population will be older than 65.
Over the years, there have been many warnings that Japan’s population could begin to contract. However, this problem is now officially here, with the most recent census data showing that the Japanese population shrunk by nearly 1 million people between 2010 and 2015.
The working-age population could decline as much as 40% over the next 45 years. This would be coupled with a surge in the people dependent on social services, since Japan has some of the best life expectancy rates in the world.
By 2050, there could be just under 1 million Japanese that are 100 years and older in age.
Stopping the Decline
The urgency of Japan’s aging population is not lost on the public. In a recent Pew poll, Japanese respondents were asked if the next generation of children would be better or worse off than their parents. The overwhelming victor was “worse off” with a 72% share of the vote.
That’s why the current stated goal of the government is to keep the nation’s population from falling below 100 million by 2060. To do this, Japan is now working on “bold proposals” to find ways to raise the birthrate. The traditionally isolationist Japanese culture is even warming towards the idea of getting new blood through immigration.
However, even in meeting this audacious goal, the country’s population will still decline by 27 million people by 2060. It’s also unclear if or when economic growth could turn around, even in the best case scenario.
Japan was the first country to experience the cruel cocktail of economic stagnation, shrinking population, spiraling debt, and desperate monetary policy.
However, it won’t be the last.
Central banks around the world continue to take unprecedented action. QE, negative rates, the war on cash, and helicopter money are all coming to a country near you. No policy option is sacred anymore.
We must watch the Japanese problem closely, because we will need to have better solutions.
Original graphic by: Revolutions
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