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Thursday, August 25, 2005


Japan's population already shrinking

From the Financial Times yesterday comes further news of the industrialised world's pending demographic train wreck:

Number of Japanese falls ahead of expectations
By David Pilling in Tokyo

Deaths exceeded births in Japan by 31,000 in the first six months of this year, raising the prospect the number of people in the world's second biggest economy has started shrinking two years earlier than expected.

In the six months to June, the Health Ministry reported that the number of deaths totalled 568,671 against 537,637 births.

The ministry also said it was possible the full-year figure could fall. That would be two years before the population had been expected to peak, at 127m, in 2007.

Excluding the war years, when Japan suspended its population census, this was the first decline since records began. If current trends continue, the population will shrink for the rest of the century, with the severest estimates suggesting it could drop to 45m by 2100. The problems that a declining population may pose for Japan's pension system, tax base and labour market are emerging as an important theme of next month's general election. Immigration is negligible in Japan.

In an interview with the FT, Heizo Takenaka, economy minister, said changing demographics was Japan's biggest challenge.

"From now on, the total population of Japan will start falling," he said. "That means if we don't create a system in which the private sector can carry more responsibility, the burden on taxpayers and on the state will become unsustainable.

"Mr Takenaka, who is also minister for postal reform, said privatising the post office, the world's biggest financial institution, was a litmus test for whether Japan's citizens understood the urgency of the challenge.

"This is a choice between big and small government," he said, adding that in decisive moments of its history, such as after the war and following the oil shocks of the 1970s, Japan had shown a remarkable ability to embrace swift change.

The opposition Democratic Party of Japan has also stressed the population issue, saying a declining labour force that needs to support ever greater numbers of retirees will necessitate a root-and-branch overhaul of pension provision.

In its manifesto, the party proposes simplifying the pension system by merging several public schemes. It would also raise consumption tax - probably by three points to 8 per cent - to help pay for retired people. It is also proposing big cuts to state spending, particularly on public works.

The DPJ specifically addresses the task of encouraging couples to have more children. In parts of Tokyo, the birth rate has dropped to 0.7 children per woman, against 2.1 needed to maintain the population.

The opposition party is proposing a substantial increase in payments to families with children, regardless of income. It is also promising to improve funding for childcare, the scarcity of which is seen as a big obstacle to increasing births.

Last year, the number of Japanese men shrank for the first time, presaging a fall in the population as a whole.

(Emphasis added.)

You see, the Japanese were already expecting the population to shrink. It is merely shrinking earlier than expected.

Never mind Japan, the world's second largest economy...

Germany's population is already shrinking.

Russia's population is already shrinking, as well.

China, Italy, and Spain are facing similar issues. That is 3 of the 6 largest European economies, and the two largest Asian economies, and Russia... Russia will be big and empty, with not even enough troops to guard its massive borders with China and the Middle East.

Even the Middle East faces some demographic challenges.

The effects on pensions systems, tax structures, interest rates, property values, and share values cannot be underestimated.