Is Japan Falling on it's Sword?'

Is Japan Falling on it's Sword?'

June 18, 2016 in Economics by Rob Power
Written For Incasso Partners

Is Japan Falling on its Sword?

Why a Shrinking and Aging Population is Playing Havoc with the Economy

As long as I can remember I have been hearing people extoll the virtues of Japanese products, particularly automobiles. A belief solidified in my psyche having owned and extensively punished a Toyota Corolla over the course of fifteen years. I crashed it causing extensive damage, I drove across Europe, and I failed to put oil in for a couple of years when I was young and reckless. Still it soldiered on, reliably taking me where I needed to go without complaint. That longevity would be a virtue to Japanese industry is unsurprising considering it is a strength they boast as a nation. The Japanese have the longest average national lifespan in the world, with the men averaging 84 years and their female counterparts averaging an enviable 87. This is usually attributed to a combination of diet and genes among other factors, but of course these things are difficult to quantify. Long life spans alone are no cause for panic, economically speaking. However, when combined with another variable, the demographics of Japan are rapidly shifting to a place where urgent economic reforms will be required to maintain stability in a once prolific and robust economy.

The Birth Rate is Plummeting

There have been numerous studies lately into why Japanese people seem to be developing an indifference to sexual contact and relationships in general. While the root causes of this phenomenon are still unknown, with many interrelated theories in circulation, the figures these studies are revealing are quite surprising. First of all the number of single people has never been higher; a 2011 survey found that 61% of unmarried men and 49% of women aged 18-34 were not in any kind of romantic relationship, a whopping 10% higher than a survey a mere 5 years previous. A survey only this year on women aged between 16 and 24 found that 45% of them were “not interested in or despised sexual contact”. They even found that more than a quarter of men feel the same way. I haven’t done a survey but my instincts tell me that boys of that age in Europe would deliver a markedly different response. It’s worth taking into consideration that Japan was already a nation with a low birth rate; so these developments are certain to worsen what is already a bad situation, demographically. Consider this trajectory; in 1989, 11.6% of the Japan’ population was over 65. In 2006, it rose to 20%. In 2055, it is predicted to reach 38%. The most symbolic indicator of the currently state of play is that, in 2012, adult incontinence pants sold more than baby nappies for the first time. The older generation needs taking care of, and they have earned it, but without a sufficient birth rate, who is going to be there to do it?

An economy in crisis

So as the shrinking birth rate ensures the country struggles to find replacements for people who are retiring, the growing numbers of elderly are increasing dependence on a declining working population. Something has got to give. Milton Ezrati, writing for foreign affairs posits that there will be numerous long reaching consequences. Japan’s trade surplus is sure to fall victim to a population which no longer can produce as much as it consumes. Their highly regulated industrial sector will have to open up to new ways of doing things. They are likely to begin outsourcing to a much greater extent, which Ezrati concludes will cause the necessity for a more “hands on” foreign policy – “Though such a move goes against present Japanese instincts, no nation, including Japan, can afford to locate its production facilities abroad and not develop the capability to at least threaten to project power to protect those sources of wealth.” So it seems that this combination of aging population and reluctant lovers may lead to a complete shift in geo-politics in Asia at least. But what can be done moving forward?

Japan’s next move

Well it wouldn’t be Japan if technology wasn’t being used to present some outlandish suggestions on how to move through this crisis. Exoskeletons are being developed which would allow elderly people perform manual labour for years past the current retirement age. While this is unlikely to be the solution to the problem, maybe it will work in concert with many other initiatives to help Japan navigate this unknown territory. There are likely to be many unpopular changes to the social welfare system which cost the government 5.77% of its national income in 1970. In 2012 it was 31.34% and is most definitely rising. Again, somethings got to give. Another area of interest moving forward is one of immigration. Japan has a relatively tight immigration policy and occasionally earns rebuke from both within and without for being mono-cultural. Their country is highly attractive to young people who would be interested in immersing themselves in the culture and exploring the enigmatic nation.

Investing in Japan

While the current issues I have written about may point towards there being less disposable income in Japan in the near future, the probable change in immigration policy and business practices are likely to present opportunities for those interested in doing business in Japan. There is a huge amount to be gained from entering this marketplace. Not just from its own direct profitability but from what you can learn about the future of other regions, because the truth is, Japan is not alone in its demographical issues. Almost all developed nations are about to follow suit. Japan is about to begin to solve a problem that is on its way to many of our economies in the not too distant future. Japan has a very traditional business culture and as such can be difficult to negotiate for the new investor or entrepreneur. With this in mind we advise aligning oneself with an established international debt collection agency in order to ensure best business practises when entering a new marketplace, such as Japan.

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