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Japan's Aging Economics

Courtesy Reuters

JAPAN'S DEMOGRAPHIC CRISIS

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

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