Worthy Insights / Opinion Pieces / Advice

FT – How the west should judge a rising China – Martin Wolf 5/15

“Advanced countries are hobbled by their inability to manage their own affairs.”

Japan

FT – How Japan’s ageing population is shrinking GDP – Valentina Romei 5/16

“With a rapidly ageing population and a shrinking workforce, Japan is one of the world’s oldest societies. Now analysts fear that these demographics are hampering economic growth.”
“Japan’s economy contracted by 0.2% in the first three months of this year over the previous quarter, ending eight consecutive quarters of growth, Japan’s longest period of uninterrupted growth since 1989. It is now the only major economy to start 2018 with a shrinking economy.”
“With the second-weakest performance of major economies last year — Italy had the poorest — Japan is now set to be the slowest growing of the G7 economies this year.”
“Japan cannot keep up with the growth rates seen in other advanced economies because ‘Japan’s demographics weaken its GDP growth,’ said Rob Carnell, head of research and chief economist for Asia-Pacific at ING. ‘A rapidly ageing population and shrinking labor force are hampering growth,’ warned the IMF in its latest country’s report.”
“In a separate document, the IMF calculated that ‘the impact of ageing could potentially drag down Japan’s average annual GDP growth by 1 percentage point over the next three decades’.”
“Since Japan’s population began its decline in 2010, the country’s population has shrunk by about 1.3m people.”
“By 2065, the UN expects Japan’s population to fall by an additional 28m people, corresponding to a 22% drop. Over the same period, the population in advanced economies is expected to rise by 3%.”
“Not only is Japan’s population shrinking, but it is also ageing rapidly.”
“A shrinking population means a smaller domestic market with fewer people buying goods and services.”
“In 2016, there were about 2,300 fewer kindergartens than seven years earlier as the number of pupils dropped by 18%. Nearly 2,000 primary schools have been shut over the same period while the number of children of primary school age dropped by 8%.”
“Far fewer houses are being built as the population, and demand, falls.”
“The shrinkage in Japan’s population means that even with flat productivity growth there would be ‘steady declines in GDP output from one year to another,’ said Mr Carnell. Assuming all other factors remained similar, an economy with an expanding population would see positive GDP growth. ‘A better way of looking at Japan would be as per capita GDP,’ added Mr Carnell.”
“When looking at GDP growth rate per person of working age — which takes into account ageing trends as well as population shrinkage — Japan is in fact the second-best performing G7 country after Germany over the past 20 years.”
“Unless demographic trends are corrected, this is unlikely to be the last time Japan will see negative GDP growth, analysts say. But, given its shrinking labor force, its economy is performing strongly, they add.”