What happens when a country is disappearing right before our eyes?
Demographics are an issue that is starting to get a lot more attention in financial and economic arenas. A decade or so ago, there were still people touting the idea of overpopulation being a problem.
Now we are rapidly realizing that fertility rates around the world are plummeting. The developed world is facing the crisis first yet this is being reflected in most countries.
At the top of the list is Japan. They started in crisis a number of decades ago and things are reaching the stage where there is no going back.
This is important since we are discussing the third largest economy in the world. What will happen if this faces the economic contraction that is associated with demographic issues.
Under 800K - 10 Years Early
The problem we are seeing is forecasts and models that are being used are failing miserably. What was presented as a timeline is being obliterated. Unfortunately, this is on the dire side.
Elon Musk might be right: Japan could be disappeaing.
The Children and Families Agency was created to oversee child policies, including tackling child abuse and poverty, and comes after the number of babies born in the country in 2022 slid below 800,000, a level reached more than a decade sooner than the government had estimated.
This is a situation we see often repeated throughout the developed world especially.
At 799,728 births, the figure represented a 5.1 percent drop from the previous year and seventh consecutive annual fall. It marked the first year births had fallen below 800,000 since records began in 1899, according to preliminary government data released in February.
The last sentence shows the enormity of this statement. In over 120 years, this is the first time there were less than 800K births. There is no way to spin this as a positive.
Of course, there are calls for the government to do something. Unfortunately, if the trend is not reversed by the end of the decade, it might be too late.
The result is an aging population that is dependent upon social security and other forms of sustinence. When the working population shrinks, the economy cannot support the aging population.
Some believe only a radical transformation and new approach by the government will be able to avert the crisis.
Without such a drastic measure, the number of births in Japan is likely to continue to slide and fall below the 500,000 threshold in 2052, 20 years earlier than the government predicted in 2017, he said.
This is a dire warning that is keeping with the treds we are seeing. So why would anyone figure that another forecast will come true early?
Deflationary Spiral
In a time when prices are elevated, it is hard for people to grasp how devastating deflation is. Japan is one country that is facing a spiral. It is not alone.
The problem is this is taking place during a period when we are seeing acceleration of technology. That is also deflationary.
On one hand, this might seem like a good thing. The problem is deflationary environments make it difficult for societies to keep moving forward. Innovation requires investment. To garner this, we need expansion.
People tend not to invest during deflationary times. Essentially, the pie gets smaller, restricting investment. This shows up in innovation as less of everything is required.
For example, think of the loss taken by banks and families under these circumstances.
According to this article, there are now 10 million homes sitting empty. Do you think there will be a robust construction industry with circumstances as they are? Think of the tentacles to the economy that is now gone since we are looking at contraction.
The challenge rests in replacing lost consumption. While technology can help offset the loss of workers, the only way to consume is to export. This is a problem when most countries are facing the similar demographic issues.
Here is a headline from Financial Times:
It is a situation being repeated throughout the world. In the meantime, it is at the doorstop of Japan.
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Thanks to the last 3 years, models probably did not consider it.
I don't know if there's any way to reserve the trend other than migration. People just seem very content not having kids these days plus society puts a lot of complexities into nurturing a child even when things are supposed to be a lot easier with technology
It’s heart breaking to see but I wonder if we can turn it around. Tax policies that benefit mothers are a good first step, one of the countries offers 100% income tax reduction (for life I think?) if a mother has 4 children, 75% for 3 and so on. Have a few kids, they grow up then work later in life tax free. Not a bad gig!
Let’s hope we can have this end up being cyclical, meaning this is a low and it swings on upward from here or soon after another low. Difficult to say..
I'm glad I happened to stop by. It's not the kind of content I usually consume, but everything that happens caught my attention. I really consider Japan a powerhouse in many ways, including economically. One thinks that changes don't happen quickly, but since my childhood I've been noticing how demographics have changed in various nations including my own. Interesting read my friend, good of you to share. Best regards!...
Every country has this to some extent and I wonder if it's more about mindset and working etc over family as it was before. I was checking out Chinas and in about 3-5 years they have a huge bubble going into retirement age. Low work force population.
The declining fertility rates and aging population in Japan and other developed countries are causing economic and social challenges. With fewer births and an aging workforce, there is a strain on social security and other forms of support. The economy may face contraction as consumption decreases and investment becomes restricted during deflationary times. The need for innovation and expansion becomes crucial, but it difficult to achieve in a shrinking population. Exporting to other countries to offset the loss of consumption is also challenging as many countries are facing similar demographic issues. Urgent and radical measures may be needed to avert the crisis and ensure sustainable economic growth.
Decreasing populations and exponentially developing artificial intelligence create an interesting future picture. AI agents will take over open job positions due to the dwindling population. Japan may be a pioneer in this regard due to its sympathetic approach to robots and its declining population. The debate about whether AI agents are conscious individuals (citizens) will flare up in a few decades. I think this will be the most important political problem of the 21st century.
The demographics has been an issue for a while and I remember seeing youtube videos about how the rural areas are dying off and there were puppets being put up to replace the humans. Well at least in appearance and it's an issue that we need to solve but I think robotics and technology will ease the difference by a bit.
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We see it everywhere in W. Europe. Many grey people wanting to be serviced in restaurants and hospitals but not enough young people to serve them or not willing to serve them. (They tend to be a little demanding these grey people)