Japan's Aging Economics

Courtesy Reuters


Japan's population is aging faster than that of any other country in the world. The unprecedented increase in retirees relative to the size of Japan's work force will force radical change if the nation is to avoid a fiscal crisis, or worse. These seemingly innocent demographic changes will force Japan to shrink its famously high savings rate, reverse its proud trade surplus, send more industry overseas, liberalize its tightly controlled markets, and take on a more active, high-profile foreign policy. Ultimately, these changes will shift the balance of power in East Asia.

Japan's demographic problem has its roots in decreasing birth rates and longer lifespans. The former have begun to starve the country for young workers to replace those retiring, while the latter ensure that a growing population of retired citizens will be dependent on a diminishing working population. Although every industrialized country faces this problem, Japan's situation is by far the worst, not least because Japan has no hope of an influx of youthful immigrants to mitigate the problem. According to Japan's Ministry of Health and Welfare, in less than five years the country's demographic trends will give it a population profile like Florida's. By 2015, one in four Japanese citizens will be 65 or older. In about 2010, according to official projections, Japan will have fewer than half the workers per retiree it has today, a mere 2.5 people of working age for every pensioner. And since not all of working age choose to work or can find employment, it is likely that in the early 21st century Japan will have fewer than two people at work for every retiree.

Such a large proportion of pensioners is unprecedented in history and will place a heavy burden on Japanese society. The huge elderly population will redirect increasing amounts of the nation's resources into geriatric health care, but more generally, the strain will grow because retired people continue to consume even as they cease to produce in the conventional sense of the

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