Leading Regional Economist Gives Timely Insight into Aging & the Economy

1
Aging and its Impact on Economy
--- What is going on in Japan and what Korea faces to
April 26, 2013
Kosuke Motani
Chief Senior Economist, Economist
Department
Japan Research Institute, Limited
kosuke@motani.com

2
Silver Tsunami, or Aging Baby Boomers, in Japan
Age15-64 43.0 Million
Age65&Over
3.4 Million

3
Many Were Born under Political Encouragement
Many Were Born with Survivors’ Joys for Peace
Age65&Over
4.1 Million

4
Angry Youth Protested to Conservative
Government, with Unconscious Fear that
Many of Them Would not Get Jobs.
Age65&Over
5.4 Million

5
Baby Boomers Joined Labor
Market, Contributed to Export
Boom, and Brought Japan’s “Rapid
Growth.”
Age65&Over
7.3 Million

6
Baby Boomers Forming Young Families
Enlarged Domestic Demands, Giving
Japan “Steady Growth. “
Age65&Over
10.7 Million

7
Baby Boomers, Being Twice More than Their
Parents, Eagerly Bought New Houses and
Brought House-Construction Boom.
Age65&Over
14.9 Million

8
BB Juniors Entered
Labor Market under
Recession, Increasing
Employment and
Unemployment at the
Same Time. Age15-64 87.2 Million
Age65&Over
18.3 Million
Reached Maximum.

9
Aging Baby Boomers
Started Consuming Less.
Age65&Over
22.0 Million
Started Decreasing

10
Rapid Increase of Late-
Seniors Makes Social
Welfare System
Malfunctioning
Retiring Baby Boomers
Consume Even Less.Rapid Decrease of Working Age
Population Brings Inevitable Shrink
of Domestic Demand
Many BB Juniors’
Suffering from Low
Wages of Unstable
Jobs Makes Their
Consumption Weak.
Age65&Over
29.5 Million

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Dramatic Decrease of Working
Age Population, Even Though the
Prospects Assumes Record-high
Inflow of Foreign Immigration.
Aging BB Juniors Will
Start Consuming Less. Ultra Rise of
the Late-Seniors
Age65&Over
36.1 Million

12
Age65&Over
36.9 Million

13
Age65&Over
38.7 Million

14
Age65&Over
37.7 Million

15
Age65&Over
34.6 Million

16
Silver Tsunami is also Hitting Korea
Age65&Over
1.0 Million

17
Age65&Over
1.5 Million

18
Age65&Over
2.2 Million

19
Age65&Over
3.4 Million

20
Age65&Over
5.4 Million

21
Age65&Over
8.1 Million

22
Age65&Over
12.8 Million

23
Age65&Over
16.7 Million

24
Age65&Over
18.3 Million

25
Age65&Over
18.2 Million

26
Age65&Over
0.07 Million
Migration does not Count in Aging Singapore

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Age65&Over
0.12 Million

28
Age65&Over
0.17 Million

29
Age65&Over
0.29 Million

30
Age65&Over
0.50 Million

31
Age65&Over
0.93 Million

32
Age65&Over
1.50 Million

33
Age65&Over
1.77 Million

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Age65&Over
1.70 Million

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Foreign Immigrants Can be a Solution?
Population level
as if those had
lived in Singapore
in 1990 have got
older for next 20
years, without
going out of the
country nor
becoming dead
Increase due to
foreigners’ inflow

36
Increase due to
foreigners’ inflow
Foreign Immigrants Ends in more Seniors
Population level as if those had
lived in Singapore in 1990 have
got older for next 50
years, without going out of the
country nor becoming dead

37
China: Dynamic Emerging and Maturing
Age15-64 457 Million
Age65&Over
35 Million

38
Age65&Over
47 Million

39
Age65&Over
63 Million

40
Age65&Over
86 Million

41
Age65&Over
111 Million

42
Age65&Over
167 Million

43
Age65&Over
233 Million

44
Age65&Over
317 Million

45
Age65&Over
331 Million

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Japan: Already Aged and Still Aging

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Korea: Not Yet Aged but Will Age Rapidly

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China: Not Yet Aged but Will Age Rapidly

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Singapore: Not Yet Aged but Will Age Rapidly

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0% 10% 20% 30% 40% 50% 60% 70% 80%
Senior Age Population ÷ Working Age Population
0%
20%
40%
60%
80%
Junior Age Population ÷ Working Age Population
China
South Korea
Japan
Junior age: 0-14yrs old / Working age: 15-64yrs old / Senior age: 65yrs old and ove
Source: World Population Prospects: The 2008 Revision, United Nations
Figures include foreign residents数字には在留外国人を含む
Decrease of Children and Increase of Senior Citiz
1970-1980-1990-2000-2010-2020-2030-2040-2050年
1970
1980
1980
1970
1990
2000
2000
1990
2010
2020
2020
20502040
2050
1970
1980
1990
2000
2030
20502040
20302020
2010
20402030
2010
Korea, China and Japan: Time Difference

51
Americans Also Aging But Dying Earlier
0% 10% 20% 30% 40% 50% 60% 70%
Senior Age Population ÷ Working Age Population
0%
20%
40%
60%
80%
Junior Age Population ÷ Working Age Population
Singapore
USA
South Korea
Europe
Japan
Junior age: 0-14yrs old / Working age: 15-64yrs old / Senior age: 65yrs old and ov
Source: World Population Prospects: The 2008 Revision, United Nations
Figures include foreign residents
Decrease of Children and Increase of Senior Citi
1970-1980-1990-2000-2010-2020-2030-2040-2050年
2040
2030
2020
20502040
20302020
2010
2000
1990
1980
1970
2050
2050
2050
1970
1980
1990
1970
2010
2040
20302020
1980
1990
2010
1990
1970
2050
2020

52
Japan’s Working Age Population Peaked in 1995

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In Japan, Change in Working Age Population
Decides Change in # of Those Employed

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Decreasing Employment in Japan

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Working Age Population affects Economy

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Disparity between Income and Consumption
Increasing Exports Ended in
Increase of Personal Income
of Senior & Rich Investors.
Increasing Retirement of
Senior Workers Enhanced
Factories’ Productivity and
Ended in Export Increase .
Under Decreasing Working Age Population and Increasing Retirement,
Increased Personal Income Did Not Trickle Down to Domestic Retail Sales.

57
☆ Modern Machineries with IT substitute human
labor in factories, increase labor
productivity and keep production level.
★ Decreasing working age population ends in
decreasing # of workers and less amount of
gross wages, reducing the amount of
commodities needed.
☆ Stable production and decreasing needs result
in price drop and less demand.
★ Seniors who own 83% of $14 trillion personal
financial assets do not consume as much
materials as youths do, but just enjoy saving.
Declining Working Age Population
Decreases Demand, not Supply
Not a General Theory, but a “Inconvenient Reality” in Japan

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Social Security Expense and Aging
Total Expense: Exact Correlation to Late Senior Age Population
Government Spending: Rapid Rise due to Working Age Pop. Decline
Equivalent to
Annual Tax Income
of National
Government

59
Medical and Care for Aged Expense
Total Expense: Exact Correlation to Late Senior Age Population
Government Spending: Rise due to Working Age Pop. Decline

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Medical and Care for Aged Expense
Total Expense: Increasing Faster than Late Senior Age Population
Government Spending: Rocket Rise due to Wrkng Age Pop. Decline
Equivalent to Half of Annual Tax Income
of National Government

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Unemployed Female would Save Us
Senior Citizens in Japan Do Not Consume as They Did When Young
3,409
827
1,682
855
1,655
869
Full-time Worker
Part-time Worke
Unemployed
House Workers
Students
Others
0 1000 2000 3000 4000 5000
Female
Male
Source: National Census
# of Labors in Japan
2005, Including Foreingers
Ten Tousands→

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☆ Let younger generation get the financial
assets; through accelerated inheritance with
tax incentives, promoting consumption of rich
seniors by innovative product development, and
raising wages by cutting off dividends.
★ Let more women work, while raising their
wages.
☆ Let more foreigners come to Japan, not to
work as cheap labor but to travel around, stay
in, live on and consume.
★ Reforms of the systems of pension, medical
and care for senior citizens look urgent. Do
not blame neither economy nor government,
since the initial cause is the aging of all of
Four Suggestions I wrote in my Book

Leading Regional Economist Gives Timely Insight into Aging & the Economy

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