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Japan - Too Old To Grow?

Bruce Krasting's picture




 

 

The Japanese Social Security system has a report out on the aging problem in Japan (Forbes link). That Japan has a rapidly aging population is an old story, but the new numbers are worth considering.

 

Japanese Work Force

2010 = 82m

2025 = 71m (-13%)

2040 - 58m (-30%)

 

Japanese Total Population

2010 = 127m

2050 = 80m (-37%)

 

Japanese Aged Population

2010 - 11% of population is 75 or older

2025 - 22%+ will be >75 (Double)

 

I defy any economist to show me a road map for Japan that does not lead to crisis based on these numbers. I don't care what Abe says, or what the new head of the Central Bank, Kuroda, does. It will not matter. As a country, Japan is a long-term short.

Japan's pay-as-you-go Social Security system will rob future worker's paychecks. The cost of medical care for the +75 group is 5Xs that of younger citizens. Budget deficits to pay for all this will have to explode, the national debt with it.

There have been dozens of rallies in the Nikkei the past 23 years. With each rally, the bulls came out and proclaimed that the bottom had been set. The current rally is no different. The thinking by many is that a new golden age for Japanese stocks is upon us. I find that hard to believe. I don't care how much money Japan prints. Those printing presses can't offset the powerful force of demographics, at least not for long.

nikkei

 

 

There are always different views on Wall Street. There are plenty of folks who love Japanese stocks, believe that printing money solves all problems and that demographics don't really matter at all. Time will tell.

 

bloomberg

 

cnbc

 

bi

 

krugman

 

WSJ

 

bloombergII

 

bullbear.bk

 

 

 

 

 

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Wed, 04/03/2013 - 10:01 | 3402973 bnbdnb
bnbdnb's picture

Long tombstones...

Wed, 04/03/2013 - 09:23 | 3402793 lindaamick
lindaamick's picture

The economic future of Japan looks ruinous when viewed from the current economic models, however these models are no longer useful given the reality that earth resources are FINITE and now scarce.

Additionally, Japan has bigger issues than economic ones as the people continue to be radiated by the toxins from the nuclear meltdowns. 

Factually, the population of Japan could reduce more dramatically than predicted.  Factually, new economic models presupposing sustainability rather than infinite growth could produce different views and outcomes. 

Who knows?

Wed, 04/03/2013 - 08:25 | 3402597 HoofHearted
HoofHearted's picture

What has Kyle Bass been saying for years now? Sure, he's lost a ton on his position, but eventually that man is going to get PAID big time.

Wed, 04/03/2013 - 05:04 | 3402326 Cashcollateral
Cashcollateral's picture

Implement 60% estate tax.

Boom. Done.

Wed, 04/03/2013 - 05:05 | 3402325 Cashcollateral
Cashcollateral's picture

Implement 60% estate tax.

Boom. Done.

Wed, 04/03/2013 - 09:28 | 3402806 LawsofPhysics
LawsofPhysics's picture

Last time I looked, these people don't really have much of an "estate", unless you are referring to the 100 or 200 year mortgages.  -  FAIL.   A banker pushes a button and adds a few zeros, you, your children, and your grandchildren work for your entire lives to repay the banker.  Roll the motherfucking guillotines already.

Wed, 04/03/2013 - 08:11 | 3402556 Seer
Seer's picture

It's still the same pie.  Consumption exceeding production.  Energy problems.

Wed, 04/03/2013 - 03:21 | 3402238 MrNude
MrNude's picture

Import South Koreans before they are forced to accept the trash from the North and waste two decades reprogamming them and reunifying the country like Germany had to during reunification.

Plus the South Korean woman are more beautiful. 

Wed, 04/03/2013 - 02:57 | 3402222 lemarche
lemarche's picture

THE REAL TRADE PLAY IS IN THE YEN NOT THE NIKKEI, BRUCE... (TO INVEST IN THE NIKKEI YOU WILL GET A YEN EXPOSURE, THAT WOULD HAVE OFFSET MOST OF THE NIKKEI GAINS SINCE NOVEMBER)

Wed, 04/03/2013 - 01:59 | 3402178 tom
tom's picture

A lot of people are jumping on Bruce for things he didn't really say.

His argument is that Japanese stocks are a long-term short based on demographics alone. He's basically right, except for the slim possibility that Japan might make up for its shrinkage with hugely successful exports. And it's also possible to lose money on a long-term short of the Japanese market by getting screwed by the exchange rate.

Can Japanese continue to improve their overall living standards while they shrink as a nation? Yes, they can, though the aging makes that a lot harder, as more resources have to be devoted to elderly care.

But unless they become far more successful exporters than they already are, Japan's big companies are going to shrink.

Wed, 04/03/2013 - 07:21 | 3402454 Seer
Seer's picture

As I noted/hinted above, this is probably a knee-jerk reaction from those who have been steeped in the "learnings/ways" of religious zealots and NWO-paranoids.

It's a good indicator that people would rather stick their heads in the sand than come to grips with the fact that this is a finite planet and, by extension, can only accommodate a finite amount of life forms, and that perpetual growth isn't possible.

"Can Japanese continue to improve their overall living standards while they shrink as a nation? Yes, they can"

Would you wish to provide some insight in to how you believe that this could happen?  I see contraction as unwinding "economies of scale," which can ONLY, IMO, result in a decreased ability to produce the things that we have, to-date, produced.  Shrinking factories down in order to scale down production is going to cost; it's kind of damned if you do, damned if you don't kind of thing: continuing to operate existing factories that are scaled for larger production outputs means greater per-unit costs; building new factories to handle lower volume production means spending a bunch of capital, and this capital will then be depreciated against the new production volumes and, most likely, will also mean increased per-unit production costs.  I would love for someone to be able to point out how this wouldn't be the certain outcome.  I'm just seeing margins continuing to be squeezed, and when that happens new P&E and R&D tend to bear the brunt of the accounting shears.

Wed, 04/03/2013 - 01:54 | 3402168 Peter Pan
Peter Pan's picture

Short of Hara Kiri, I cannot see them overcoming their debt/demographic problem. After all if they could not solve these problems while the population was younger and saving more, do they really expect to solve the problem now as the older portion of the population increases dramatically and savings rates have fallen off?

Even if they do somehow pull through, we can be sure it is going to be a very different Japan and a very different world.

Wed, 04/03/2013 - 05:31 | 3402343 JamesBond
JamesBond's picture

Japan is entering the euber tech phase of their society.  That will be their 'new' export.  Next generation robots, materials, patents, data, and smart (IT) everything (from clothes to bathtubs, to personal assistants).

Japan will be seeking construction materials and energy sources from under the oceans and in space. 

This county is not 'gonig away'...

 

jb

Wed, 04/03/2013 - 10:05 | 3402952 LawsofPhysics
LawsofPhysics's picture

Ah yes, the "technology will make us all prosper" meme.  Too bad such things require a tremendous investment of capital and resources and the earth has been mis-allocating and mal-investing such things for 30+ years.  Good luck.  Nothing changes until the bad debt is cleared and people at all levels of society are held accountable.  In order for technology to succeed, bad ideas need top be allowed to go bankrupt or fail so that good ideas can be recognized.  

Wed, 04/03/2013 - 07:08 | 3402436 Seer
Seer's picture

"Japan will be seeking construction materials and energy sources from under the oceans and in space."

I also seek free stuff from Craigslist!

EROEI, bitzes!

Know that entropy is always hard at work, look in the mirror...

Wed, 04/03/2013 - 01:53 | 3402166 q99x2
q99x2's picture

Nice references from the other side. I think those guys are all paid by GS to print that crap.

Wed, 04/03/2013 - 00:39 | 3402077 JamesBond
JamesBond's picture

I'll be in Tokyo on Friday.  Will do my upmost best to help solve this fertility problem.

 

 

jb

Wed, 04/03/2013 - 07:06 | 3402433 Seer
Seer's picture

And... you'll make sure that you follow up by being responsible for what you might "add?"

Be sure to check your flotation device, your life preserver...

Wed, 04/03/2013 - 01:49 | 3402160 ebear
ebear's picture

Hang out by the clock in Ropongi on friday night.  Lots of girls there whose date never showed up.  You should do OK.

Wed, 04/03/2013 - 02:27 | 3402197 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

and if you don't succeed you can always go to the vending machine and buy a pair of "soiled" schoolgirl panties...

Wed, 04/03/2013 - 01:31 | 3402143 Eireann go Brach
Eireann go Brach's picture

Who flung dung! Fuck the Japs!

Tue, 04/02/2013 - 23:23 | 3401923 steve from virginia
steve from virginia's picture

 

@ Krasting:

 

"Japanese Total Population

2010 = 127m

2050 = 80m (-37%)

 

I defy any economist to show me a road map for Japan that does not lead to crisis based on these numbers. I don't care what Abe says, or what the new head of the Central Bank, Kuroda, does. It will not matter. As a country, Japan is a long-term short."

 

Good ol' planet Earth ... not only filled up with people but filled up with their super- resource guzzling MACHINES, the fucking metal boxes that have set out to destroy humanity and the rest of life down to microbes ... and they are doing a damned good job of it. The humans are enslaved to the machines and are too stupid to do anything about it.

 

I defy any economist ... good grief! Common sense says the planet is oversubscribed and set for a nasty bit of business ... on the road to 'true sustainability'. "Oh yea, too bad, some numbers on a computer screen are going to be messed up. How can we let something like that happen?"

 

Better import some Mexicans. Right?

 

 It's the analysts with their short-term fixations that have put all of us in this mess in the first place. In 20 years all of Japan's current seniors will be deceased. The population will drop to 20 million then 10 million. If the reactors can be kept from blowing up, 10 million is probably the amount of hairy meat that the island can support without them resorting to CANNIBALISM.

 

Good grief!

 

 

Wed, 04/03/2013 - 08:05 | 3402430 Seer
Seer's picture

Although your language is a bit ugly/harsh, the logic behind it is sound- green-arrow.

"It's the analysts with their short-term fixations that have put all of us in this mess in the first place."

The "analysts" are merely a cog in the machine.  The "machine" is growth.  The "machine" is incapable of introspection of itself.  The "analysts" don't know/understand "non-growth" (or [near] never-ending contraction) because they're gears in the "growth" machine, it's a programming that doesn't apply.  Since I cannot get inside anyone's head I cannot say for certain what they think/know, I cannot pull the "I was only following orders" defense.  Suffice it to say, garbage in, garbage out...

Humans are ill-equipped to deal with this ultimate moral dilemma.  PUNT.  Mother Nature/God/HigherPower receives and...

Tue, 04/02/2013 - 23:00 | 3401853 essence
essence's picture

Accolades Bruce for your Social Security coverage.
You not only have throughly covered the situation in the U.S, why... you've branched out to cover Japan too. Kudos.

Looking forward to your exhaustive exposure of the cartel that's behind the insanely, outrageously overpriced Medical industry in the U.S. After all, there's far more money being misallocated there.

Can't wait.

Tue, 04/02/2013 - 22:37 | 3401771 the grateful un...
the grateful unemployed's picture

who needs to grow? you think China is growing? (they're trying to grow two hundred years AFTER the industrial revolution) China is a second rate nation, late comer to the party, and lacking any cultural or political base. Japan rules Asia, like Switzerland rules Europe. are the Swiss too old? too few workers? size has NEVER mattered, Germany nearly ran the world a century ago (only the US bankers betrayed them, and we bought out their nuclear scientists) now they are going at it from a different direction. Abe will figure a way out of their deflationary cycle before Bernanke gets out of his.

Wed, 04/03/2013 - 09:35 | 3402833 LawsofPhysics
LawsofPhysics's picture

"deflationary cycle"  -   LMFAO!  What is fuel running in Yen now, compared with 5, 10, 15 years ago?  We sell a lot of different nuts to Japan.  The average prices paid in yen are well over 200% higher comared to ten years ago.  Yeah, there is no deflation, so long as you don't have to eat, feed a family, heat your home, or actually drive or transprot anything anywhere. I can't imagine trying to keep diesel tractors in Japan.  As I have stated before, long sharecropping...

Wed, 04/03/2013 - 06:57 | 3402421 Seer
Seer's picture

"who needs to grow?"

"Abe will figure a way out of their deflationary cycle"

There are only THREE states (please correct if you know of any more) of condition, of trending:

1) Stasis;

2) Growth;

3) Decline.

You're saying #2, growth, isn't necessary, then that leaves us with only two choices.  BUT!  The second sentence that I pulled from you says that #3 will be pulled from the list of trajectories.  This leaves ONLY #1, stasis.  I have always argued that stasis is only a brief moment that is but a demarcation point between growth and decline: it's why the status quo can never hold- change is constant (entropy is always in play).  Based on this logic it would appear that your statements are a bit lacking.  What you say?

Wed, 04/03/2013 - 07:01 | 3402428 negative rates
negative rates's picture

I say your premise is wrong about the moment of demarcaton and you are now listing to starboard side as the life boats were all place on the left as your ship sinks.

Wed, 04/03/2013 - 08:04 | 3402537 Seer
Seer's picture

Not quite... I'm a fan of Mark Twain, who wrote:

"Whenever you find yourself on the side of the majority, it's time to pause and reflect."

I only briefly pause, then I "reflect" away from that side :-) (only to find that it makes no damn difference, as humans just can't find the balance point and their ship is pretty much going to take a tumble)

Tue, 04/02/2013 - 22:54 | 3401770 Mercury
Mercury's picture

Nonetheless, all demographics are temporary.

 

Eventually all those old people will die and Japan’s population will be much less lopsided.  Yes it could get very painful between here and there but once they actually get there they will most likely not have opened the immigration floodgates and will still be described as a well-educated, mono-cultural populace with strong traditions of filial piety and sense of shared purpose. Relief from this long period of hardship may spark a baby boom and prove to be additionally simulative in other and related ways – all together probably a better hand of cards than what the USA will have at that time.

 

Wed, 04/03/2013 - 06:47 | 3402412 Seer
Seer's picture

I agree that things will adjust/correct.

I have no idea how the Japanese are going to deal with declining resources (esp energy).  I do recall their govt promoting apprenticeships in farming (gee, promoting something that has to do with one of Food, Shelter and Water- how smart!).

The US, obviously isn't as mono-cultural.  This is both good and bad.  Good in that it's harder to manipulate everyone.  Bad in that tensions will tend to concentrate through racial/cultural channels/biases (racism): I suppose that it's a natural selection kind of thing- ideas/beliefs competing for survival into the future.

Total population sizes will ratchet down lock-step with declines in energy reserves.  It is highly improbable that population increase via "baby booms" can defy the constraints imposed by the energy equation.

Tue, 04/02/2013 - 21:55 | 3401681 smartstrike
smartstrike's picture

The problem with aging and declining population is that its no good for the bankers, especially bond traders. No more Ponzi and no financial-service workers bonuses! The Western financial psyche can't come to terms with it. Maybe you too can become productive like a Nipponese and start digging ditches around Fukashima rather than clip coupons and collect interest--- you're taking babies milk.

It's ironic that Western men who can't think and plan beyond tomorrow, are so wise when it comes to demographic trends in Japan 20-years into the future..

Wed, 04/03/2013 - 06:37 | 3402401 Seer
Seer's picture

You're pretty much indicating the death/end of growth.  It's amazing how many people are trying to solve a problem created by "growth" by trying to figure out how to increase growth!

Tue, 04/02/2013 - 21:40 | 3401652 Evil Bugeyes
Evil Bugeyes's picture

But Dr. Krugman says that printing will fix anything!

Maybe the clever Japanese will find a way to print up some new workers. Otherwise in 40 years Japan's only industry will be taking care of old people.

Wed, 04/03/2013 - 06:33 | 3402400 Seer
Seer's picture

Growth!  MOAR growth!  Growth IS the "solution!"

Tue, 04/02/2013 - 23:04 | 3401868 andrewp111
andrewp111's picture

The Japanese will build robots to take care of the old people -- and to provide day care for the young so the women will have babies at all.

This will be the 4th Industrial Revolution, and it will change everything.

Tue, 04/02/2013 - 21:05 | 3401551 IamtheREALmario
IamtheREALmario's picture

Japan needs to do what teh US is doing, systematically decreasing the future lifespans of its dependent population.

Tue, 04/02/2013 - 21:18 | 3401594 Not Too Important
Not Too Important's picture

Fukushima Daiichi will see to that. On both counts.

Wed, 04/03/2013 - 06:32 | 3402398 Seer
Seer's picture

"GE, we bring population reduction to life!"

Tue, 04/02/2013 - 21:04 | 3401546 lewy14
lewy14's picture

Bruce, if Japan is a long term short...

...then the trade has to be self-funding. A la Magnetar.

What's that trade?

Tue, 04/02/2013 - 20:49 | 3401521 Bicycle Repairman
Bicycle Repairman's picture

The Japanese are not going to open up their doors to immigration.  They're not woried about growth, either.  These are American paradigms.  You have no idea what is actually important to the Japanese.

Wed, 04/03/2013 - 06:31 | 3402396 Seer
Seer's picture

Sounds like you have it all figured out...

"They're not woried about growth, either."

They don't believe in math, in the exponential function?

How about YOU tell us what is "important to the Japanese" and how this is going to save them in the face of declining natural resources?

If we just click our heels together... too many people are out of touch with reality, with the physical world...

Wed, 04/03/2013 - 08:40 | 3402652 Bicycle Repairman
Bicycle Repairman's picture

What is important to the Japanese is that Japan stays Japan.  They will endure whatever they have to endure to do that.

Are you an American?  If so, the concept is completely alien to you and I don't expect you to understand.  You can't.

Wed, 04/03/2013 - 08:00 | 3402526 Seer
Seer's picture

Shucks!  A down-arrow from another math-challenged person!

Tue, 04/02/2013 - 20:43 | 3401504 Stuck on Zero
Stuck on Zero's picture

I find this article incredibly distasteful.  The reduction in population can only make Japan a better place to live.  Why do they need more workers?  To bring drugs, poverty, welfare eaters, gang wars, and strange cultures? Immigrants require huge investments in infrastructure.  Studies show that it takes 2-3 generations before immigrants pay for themselves. 

If more people make a place better to live why doesn't the Author move to Calcutta. 

 

Wed, 04/03/2013 - 06:26 | 3402388 Seer
Seer's picture

Did Bruce actually PROMOTE population reduction?

Listen, just because you don't like the subject that doesn't mean that burying your head in the sand is going to make it go away.

FACT: the planet can only accommodate a finite number of people.  The IS a limit, and, whether you wish to acknowledge it or not, there are only two ways in which things will work out:

1) Humans manage to come up with a way of balancing themselves within the supporting structure of the planet;

2) The planet exerts its limits on human population sizes (just as it does for EVERY OTHER species).

I'm sure you'll read into this (just as the religious zealots and NWO-paranoids do) that I am somehow advocating a "solution," which would be a clear failure in comprehension.

I go with the flow that is driven by probabilities.  And in this case I see a higher probability that the constraining factor will be the planet, as, and much of this discussion backs it up, humans coming to any reasonable "solution" is of less probability.

Wed, 04/03/2013 - 06:39 | 3402402 Ghordius
Ghordius's picture

"FACT: the planet can only accommodate a finite number of people"

of course the planet is finite, the question is only: what kind of people? or, to use tree-hugger speech: with which "footprint"?

a couple of years ago the ratio was something like 1 American = 3 Europeans = 16 Chinese = 72 Bangladeshi

meanwhile the old dirtball is proving that currently it can sustain billions - but not all of them in the "SubUrbian Mode" of one detached house with garden = one nuclear family = several cars = miles and miles to drive to the mall and to the job

and note that even the "nuclear family" is nearly a thing of the past, we should start to talk about the atomized society of post-several-divorces singular individuals

Wed, 04/03/2013 - 07:59 | 3402520 Seer
Seer's picture

Native "North American Indians" used to have this notion of "Seventh Generation."  They tried to live according to what that future generation would require.  And then there was this quote (paraphrased):

"We do not inherit the Earth from our ancestors, we borrow it from our Children."

Good emphasis on "currently."  Way too many people look at a small time slice and treat it as though it can just be automatically expanded out, a view mostly influenced by what one wants things to be and not necessarily how reality/physics/logic would say.  Statis-quo-ism.

Wed, 04/03/2013 - 00:04 | 3402022 Unique Snowflake
Unique Snowflake's picture

Agreed. People need to get this idea that "Growth is everything" out of their heads. Immigration, as stupid an idea as it is, is just bank owned politicians' desperate attempt to grow debt.

 

Bring on the collapse. The phoenix will rise from the ashes and the world will be a far better place.

Wed, 04/03/2013 - 07:46 | 3402498 azzhatter
azzhatter's picture

Yep, there is nothing wrong with a country of 80 million and no reason it can't flourish. The idea that endless ponzi/growth is healthy is absurd

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