Is Japan Going Away?
The nation of Japan still wields the 3rd largest economy in the world. This makes it a very powerful nation. However, that does not mean it is without problems. In fact, Japan is dealing with an issue that is putting its entire future in jeopardy.
This is not the only country dealing with such a situation. Demographics are a part of the fate of many nations. When projecting forward, the forecast is dismal for the likes of China, Russia, and many of the EU nations.
Simply put, we cannot run away from the demographic make up of a nation. And this has profound impacts economically
Perhaps the lesson of Japan can be heeded by the rest of the world. Thus far, few solutions were devised.
The Major Super Power
If you are old enough, you remember when Japan was China.
By the end of the 1980s, many were projecting that Japan would surpass the US as the largest economy in the world. It has a very strong stock market and the most valuable real estate in the world.
Japanese companies were the standard for everyone else. They were even glorified in Hollywood films.
Unfortunately, on the way to becoming the major super power, the country collapsed. Demographic issues started to have an impact. Today, Toyko real estate is still 40% below its peak in the early 1990s. We see the Japanese stock market off by over 25%.
And now we can add the YEN collapsing to the equation.
Somewhere along the line, the country started to implode.
Fastest Aging Population
Many who are pessimistic about the future of China point to Japan as the example. The former is about to embark upon a time period where its population mirrors that of Japan. While larger, China is going to overtake its neighbor as the fastest aging population before this decades is out.
Last year, Japan lost 628K people (the difference between deaths and births). This is a significant number for a country of roughly 125 million people.
With so many passing on as compared to those being born, is it too soon to question whether Japan will even be around in a decade?
A great deal of what we see taking place, when extrapolated out can really affect the country going forward. As populations decline, it becomes harder to maintain the same level of economic output. Part of this is because consumption obviously drops in relation to the number of people as well as their age.
With Japan, the population is radically aging bringing even more issues to light.
The Lost Generation
Japan is confronted with another issue as explained in this video. There is a lost generation of workers who are basically not in the workforce.
Those who graduated in the 1990s were not able to get jobs due to the national recession along with hiring practices in the country. This pushed them to never secure stable employment, instead opting (out of necessity) to live at home with their aging parents.
Many of these individuals completely removed themselves from society. This is a situation some are facing in China also.
Obviously, as the population ages, the ratio of young to old is altered. The economic impact is strained enough with so many receiving benefits and not enough workers to provide tax support.
According to the video we have another 1 million people who are effectively not in the workforce. Sadly, this is a number that is growing and efforts to integrate them back into the workforce have not succeeded.
It is hard to project where things will stand in half a century or more. However, the present path means that it is viable to question whether Japan is going away?
Demographics are not easy to reverse and this is exactly what Japan needs to do. Unfortunately, there are a number of other countries who are going to face the same situation over the next couple decades.
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