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Japan's Aging Woes
Our Tokyo Bureau
31 DEC

Japan has seen it's GDP growth fall to below 1% growth over the last 10 years. The OECD countries have shrunk in size as compared to their contributions in the world economy, from over 45% in 1997 to around 38% today. At this rate, economists predict that the share could further decrease to about 30% by 2050.

Japan is finding itself hard pressed to keep up financing it's pension payments.The overall growth in living standards is also growing slowly and predicted to grow slowly in the future. These reasons are basically due to the growth of the aging population. The slowdown in the growth rate of the working-age population and, thereby, a shrinking labour force contributes to a general decline in potential economic growth rates in all regions.

The largest negative contribution to growth rate in living standards in all three OECD regions is consistently associated with the rise in the dependency ratio, as the output produced by the employed labour force is progressively shared amongst larger populations.

Accompanied by a fall in private saving, total national saving in most OECD countries are also declining, putting upward pressure on real interest rates which in turn lead to a slowdown in capital accumulation and growth, and ultimately slower growth in overall living standards. In such a context, it would seem prudent to introduce policies designed to raise national saving ratios in the years immediately ahead. The most direct way to achieve this would be to reduce public dissaving.



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