Japan's Demographic Time Bomb Keeps Ticking

Tyler Durden's picture

Via Daniel Mitchell of The Foundation for Economic Education,

When I warn about the fiscal and economic consequences of America’s poorly designed entitlement programs (as well as the impact of demographic changes), I regularly suggest that the United States is on a path to become Greece.

Because of Greece’s horrible economy, this link has obvious rhetorical appeal.

But there’s another nation that may be a more accurate “role model” of America’s future. This other country, like the United States, is big, relatively rich, and has its own currency.

For these and other reasons, in an article for The Hill, I suggest that Japan is the nation that may offer the most relevant warning signs. I explain first that Japan shows the failure of Keynesian economics.

…ever since a property bubble burst in the late 1980s, Japan’s economy has been in the doldrums, and its politicians deserve much of the blame. They’ve engaged in repeated binges of so-called Keynesian stimulus. But running up the national credit card hasn’t worked any better in Japan than it did for President Barack Obama. Instead of economic rejuvenation, Japan is now saddled with record levels of debt.

In other words, Japan already is a basket case and may be the next Greece. And all this foolish policy has been cheered on by the IMF.

I then highlight how Japan shows why a value-added tax is a huge mistake.

Japan’s politicians also decided to impose a value-added tax (VAT) on the nation. As so often happens when a VAT gets adopted, it turns into a money machine, as legislators start ratcheting the rate higher and higher. That happened in Europe back in the 1960s and 1970s, and it’s happening in Japan today.

And regular readers know my paranoid fear of the VAT taking hold in the United States.

But here’s the main lesson in the column.

The combination of demographic changes and redistribution programs is a recipe for fiscal crisis.

…the biggest economic threat to the country is the way Japan’s welfare state interacts with demographic changes. It’s not that the welfare state is enormous, particularly compared with European nations, but the system is becoming an ever-increasing burden because the Japanese people are living longer and having fewer children. …America faces some of the same problems. …if we don’t reform our entitlement programs, it’s just a matter of time before we also have a fiscal crisis.

To be sure, as I note in the article, Japan’s demographic outlook is worse. And that nation’s hostility to any immigration (even from high-skilled people) means that Japan can’t compensate (as America has to some degree) for low birth rates by expanding its population.

Indeed, the demographic situation in Japan is so grim that social scientists have actually estimated the date on which the Japanese people become extinct.

Mark August 16, 3766 on your calendar. According to…researchers at Tohoku University, that’s the date Japan’s population will dwindle to one. For 25 years, the country has had falling fertility rates, coinciding with widespread aging. The worrisome trend has now reached a critical mass known as a “demographic time bomb.” When that happens, a vicious cycle of low spending and low fertility can cause entire generations to shrink — or disappear completely.

Though I guess none of us will know whether this prediction is true unless we live another 1750 years. But it doesn’t matter if the estimate is perfect. Japan’s demographic outlook is very grim.

By the way, the problem of aging populations and misguided entitlements exists in almost every developed nation.

But I mentioned in the article for The Hill that there are two exceptions. Hong Kong and Singapore have extremely low birthrates and aging populations. But neither jurisdiction faces a fiscal crisis for the simple reason that people largely are responsible for saving for their own retirement.

And that, of course, is the main lesson. The United States desperately needs genuine entitlement reform. While I’m not overflowing with optimism about Trump’s view on these issues, hope springs eternal.

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beijing expat's picture

Duh, robots?

Everyone? Robots?

JamesBond's picture

Why the hell is ZH obsessed with the sex of Japanese??

jb

Croesus's picture

@ JamesBond:

007, it's because...Japan:

https://i.yomyomf.com/wp-content/uploads/2015/05/3305687_1.jpg

I saw a headline recently, that the ratio of men to women in Japan's porn industry is 70:10,000...

philipat's picture

They could of course allow immigration, but won't because that would destroy their culture. Oh, wait......

prime american's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

MalteseFalcon's picture

"Mark August 16, 3766 on your calendar."

Article seemed compelling until that.

Besides another article said that we would all be dead from global warming by April 1,  2984.

Nobodys Home's picture

Cause they're so cute and it's fun to watch doink doink doink doink!

Never One Roach's picture

I'll take the homogneous population of Japan over multiculturalism any day.

... but that's just me.

Son of Loki's picture

You won't like it there.

 

Beautiful women, safe streets, excellent food, clean safe malls, ....

 

..oh, wait a second...

old naughty's picture

last one standing in 3766, 3765, 3764...2020,

um, fuk-u-shima !

philipat's picture

Singapore has all of the above AND multiculturalism. Asian family values helps, but it also depends upon what cultures are imported, as Europe is discovering.

old naughty's picture

and ZH is going after Japan AV commercials...

Caught_Fish's picture

Fvck,

no seriously, this is the solution.

thunderchief's picture

Fukushima is going to wipe out future generations faster than a lack of births in Japan.

I can't think of a more beautiful country, destroyed by crazy Abe and General Electrics nuclear doomsday pressure cookers. 

I guess all they need now is a war with China.  No need to worry about breeding stats then.

Diatom's picture

That and falling sperm counts...

Shit like this makes Bill Gates happy...

https://www.theguardian.com/science/blog/2012/dec/05/sperm-count-fall-is...

 

DingleBarryObummer's picture

You think it's bad now, wait till the effects from the radioation kick in.

silverer's picture

It's good for Godzilla. And what's good for Godzilla is good for Japan.

Davy Crockett's picture

Such bullshit.  Obviously the birthrates will change sometime in the next 1700 years, as economic conditions change and cultural attitudes towards children shift away from the present one, which is shoved down the throats of every 1st world country from the time they're kids.  "Children are hard, children are a burden, children interfere with your life, children limit your career, blah, blah, blah."  WIth all that negative brainwashing, it's a miracle that anybody has children.  But that will change when population drops to some point where people no longer feel this way. 

This is used as an excuse to bring in floods of immigrants, which always pisses me off.  You can bring in the immigrants in 500 years if you need to, and you can bring in only the ones you want.  There's no rush to get birthrates up, at the expense of your culture, especially given the trends towards more automation.

Donald J. Trump's picture

They're not taking into consideration the demographic black swan event.  Could go either way.  Default, Tsunami, Godzilla, Martians.  Either a demographic reset or e.l.e.

ds's picture

Yes. It is a trade off btw preservation of your culture and flawed immigration of dispruptive culture. Also the Singapore example is BS. It is a compulsory retirement scheme administered by one govet entity with no competition. The returns are pathetic when compared to credible private pension schemes and do not pace inflation. The humongous funds accumulated through the pension is once again channeled to the SWF for its foreign nvestments that are lackluster with almost no accountability for failures. This has suppressed domestic consumption. It is a rich country with poor People under a State controlled economy that is currently repressive. People are free to choose this model.

All the glitters are from yesteryear when it rides from a low base of development to latch on to global economic growth. All you have now are low productivity that cannot sustain wage growth, a rent seeking real estate economy (thus the high cost of living for the populace and business), high private sector debt (mainly in housing) to GDP and of course the usual poor Gini coefficient. The global headwinds are tearing in with no breakers. Kudos to the incompetent control freaks that are still micro managing and more concerned with the usual power preservation for the elite. 

It does not take much to get the real numbers beneath all the propaganda in the alternative news in Singapore.  Hong Kong is not a nationi. It is a SAR of China without all the needs of defense, etc. Its economy is largely dependent upon China. This article is lazy research. 

AGuy's picture

" You can bring in the immigrants in 500 years if you need to, and you can bring in only the ones you want. "

No one is immigrating to Japan. Nobody wants to spend a decade or more trying to learn their awful language. No body wants to live in a tiny flat and pay $20 for a McDonald (equivalent) meal. No body wants to immigrate to Japan.

"Obviously the birthrates will change sometime in the next 1700 years, as economic conditions change and cultural attitudes towards children shift away from the present one"

You mean to say when the Japanese culture dies out and something with a much higher fertility rate, like Islam replaces it?

" There's no rush to get birthrates up, at the expense of your culture, especially given the trends towards more automation."

No exactly since you still need young people to design. build, maintain automated equipment and not all jobs (aka the Carpenter, Plumber, Mechanic) can be replaced with automation.

The Nail in Japans coffin will be its energy imports. As energy become more expensive due depletion and exports decline (older populations buy less stuff) its difficult to see how Japan economy will make it. Its likely that at some point Japan economy will collapse and much of the country will end up as an abandoned waste land. Especially if more nuclear power plants meltdown from future earthquakes, age, and lack of proper maintenance.

ejmoosa's picture

Like every good economist whatever trend exists today will exist forever.

 

 

quesnay's picture

Exactly. They can not break out of their tiny linear thinking boxes.

all-priced-in's picture

They are working hard on lifelike robots to replace people.

 

 

Ms No's picture

Somebody knows and promoted the morphed system that will now self destruct.  People are aware that as people become unemployed then they can't buy things and then all the corporations die.  In the end the US has not only been deindustrialized, made dependent on globalism but also getting completely gutted of our economy.  If they succeed we will be dead in the water.  To make it worse they will harvest the top 5% who create jobs so that we cannot recover.  The world will become a sadistic feudal shithole and nobody will even remember what free market meant.  The .0001% will then laugh their asses off "mission accomplished".

People think it's just short term greed but of course it was designed and promoted to be that way. It's a feature not a glitch.  And now they try to tell us we have to import the third world to make things better. 

HRH Feant's picture

Jeez Ms. No! I thought I swam in the deep end of the doom porn pool but you make me look like I am wearing floaties in the 6-inch kiddie pool! Holy moly!

I could use a good stiff drink right now but am taking Flagyl and don't feel like puking up my dinner.

silverer's picture

Oh. Those scientists again. Is this the global warming crowd moonlighting for some additional income?

General Admission's picture

Not to worry.  Apparently we are all easily replaced with smelly Muslims with the equivalent of a 3rd grade education...

HRH Feant's picture

Not to mention generations of inbreeding.

Anonymous_Beneficiary's picture

It's almost as if all the goat fucking has ingrained itself into the arab's dna!

quesnay's picture

Because as history clearly teaches us, things never change and real-world systems operate in a purely linear fashion. /s

Why are people so against population decline? When population was going up people were like "OMG we're all gonna die from overpopulation!" When it's going down it's like "OMG we're going to die out!"

Sigh ...

Donald J. Trump's picture

Need to focus on quality not quantity.  Maybe when bankers stop running the world.

August's picture

Bankers will stop running the world only if large numbers of them are dealt with most severely.

all-priced-in's picture

They need a few million refugees - they can cut 1,725 years off that date.

 

 

fleur de lis's picture

There must be some inherent cultural flaw that is leaving them open to demographic danger.

Mena Arkansas's picture

The ticking time bomb they should be worried about is Fukushima.

SHEEPFUKKER's picture

That's as good a reason as any not to have kids....there are plenty of others. 

ghengis86's picture

I thought it already went off?

mary mary's picture

Same old baloney.  Wealth is resources, not workers.  Japan already has all the workers it needs.  Plus, Japan is going to make lots of robots.

Ms No's picture

People are going to have to save somehow for their own retirement and most of the rest of us will work for life.  That is still better than screwing all of our children and future with this perpetual growth model and constant clamour that if we import the entire third world we will all die.  Obviously we need a news system if that is the case.  Build the wall, kill the bank.

AGuy's picture

"People are going to have to save somehow for their own retirement and most of the rest of us will work for life."

Realistically its nearly pointless to save for retirement, unless your retiring soon. All of the pension plans and entitlments are going bust, and the gov't will "fix" it by printing money. I very much doubt PMs would work, simply because they will make private ownership illegal, or simply impose 200% taxes on PM transactions.

"Build the wall, kill the bank."

I don't think that matters at this point. retiring boomers are going to suck the life out of the already insolvent economy.

No_More's picture

Abe's push to get married women back into the workforce runs up against the acute shortage of decent childcare outside the home in Japan (gov't pay or private pay). Women with kids are on very long waiting lists and a lot of them who would go back to work just choose to stay home, even after the young'uns start school. 

If you're feeling entrepreneurial, you could go open private pay child care facilities in Japan and make some decent yen. If you get the Japanese gov't to help you, that's even better.

You've also got a lot of young people as poor as our millenials who are just choosing not to marry (young women who aren't all that well paid as OL or office ladies worry that most young men won't be able to support them + kid(s) at home because young men's pay is also stagnant. Most young men know this and figure why bother trying to find a wife much less have kids.)

So Japanese young people stay home, live rent free with mom & dad and maybe have a slightly nicer wardrobe & a few more grown-up toys than they could afford if they got married and had kids. They'll pay for this when they have 2 parents and up to 4 grandparents who need caregiving all at the same time, who will want to stay home until they die...at this point the shortage in care workers kicks in)

If you're feeling entrepreneurial, you could also open private pay home health care agencies (or maybe nursing homes that are more like Showa era Japanese homes and not so institutional) in Japan and make some decent yen. If you get the Japanese gov't to help you, that's even better.

My suggestions aside it's a hell of a demographic pickle. Especially if foreigners don't get to go there and help them.

fockewulf190's picture

Even if they did loosen immigration restrictions, the language itself is a bitch to learn, so the biggest problem you would encounter is trying to find qualified and motivated personnel who are fluent enough to get the job done and deal with the mandatory paperwork.

Robert Trip's picture

They don't fuck anymore because their country is saturated with radiation and microwaves.

Let's tell it like it is.

You walk in downtown Tokyo for a half hour and you can feel the microwaves from all of those towers that power all of their high tech devices just pulsing through your head.

The only people that fuck anymore in Japan are the 65,000 American military personnel stationed there because they have nothing better to do.

Bopper09's picture

https://www.youtube.com/watch?v=jaqpn65QAE4

 

Sorry, trying to reduce the need for youtube, such as going to websites instead of looking for them on youtube.  I'll get there, but please tell me of an alternative that is ran by at least half assed honest people.

 

Alternatives?  Any thoughts? 

http://www.makeuseof.com/tag/5-video-sites-alternatives-to-youtube/

HRH Feant's picture

Vimeo. Do I use it? Rarely.

AGuy's picture

"hey don't fuck anymore because their country is saturated with radiation and microwaves."

No, The majority of working men in Japan work 12 to 16 hours a day and don't have any time to screw around. The are also all worried about losing their jobs and feel insecure in being able to raise any children.

Spungo's picture

Who the fuck cares? Tell me when Japan has food shortages. That's when you know it's bad.