Negative Population Growth in Japan: An Economic Crisis

1. Negative Population Growth in Japan: An Economic Crisis Ethan Cohen & Steven Feddick Environment 111 – Final Project April 14th, 2006

2. Japan

3. Introduction: The Demographic Transition • Recently, the world has experienced a massive demographic revolution. Since the dawn of the 19th century, world population has increased many folds. • What had been a billion people around 1800 became 1.6 billion by 1900, 2.5 billion by 1950, and then 6.1 billion by the year 2000. (Engelman, Halweil, & Nierberg, 2002)

4. The Demographic Transition

5. Introduction • In an effort to combat this rapid population growth, the Japanese government advocated the use of contraceptives as early as the 1970s. • Despite their efforts, however, Japan’s population continued to rise, so the Japanese began to alter their culture even more drastically to favor families with fewer children. • Children came to be seen as an economic hindrance. (Ausubel, 1998)

6. Introduction • In combination with the increasing business savvy nature that became Japanese culture in the late 20th century was an admittance of women to this intense business-oriented way of life. • This resulted in very effectively bringing down the fertility rate in Japan as women began to marry and have children much later, if at all. (Ausubel et al., 1996)

7. Introduction • As a result, by the mid-1990s Japan started to experience catastrophic depopulation. • In fact, based on the current numbers, Japan’s population is projected to shrink by approximately 14 percent by the year 2050 (United Nations, Highlights of the World Population Prospects, 2001)

8. Population Aging

9. Population Aging • Today, Japan is the country with the oldest population followed by Italy, Switzerland, Germany, and Sweden. • In Japan, there are at least 1.5 persons aged 60 or above for every child aged 0-14. • (United Nations, Highlights of the World Population Prospects, 2001 )

10. Population Aging • The Oldest Old, people aged 80 and above • Japan currently has 4.8 million people over 80 years of age, and is expected to have over 10% of their population over 80 by the year 2050. • Centenarians, people aged 100 and above. • By the year 2050, Japan is projected to have the largest number of centenarians with approximately 1 million people aged 100 and above. • (United Nations, Highlights of the World Population Prospects, 2001 )

11. Population Aging: Life Expectancy

12. Economic Instability: A Failing Pension Plan

13. Failing Pension Plan • Japan today is facing a national pension emergency as their elderly population is now the largest in the world (its median age is 43 years) supported almost solely by a significantly smaller working population(United Nations, Highlights of the World Population Prospects, 2001) Graph depicting a comparison between Japanese and US median population ages from 1975 to the present as well as a projected continuation of these trends until the year 2024 (Source: http://www.gold-eagle.com/editorials_05/to081205pv.html).

14. Failing Pension Plan • “in the year 2020, there will be nearly 40 persons aged 65 and over for every 100 aged 15-64” (Jones, 1988). • Investment funds? • Domestic savings? • Will the elderly be able to retire?

15. Failing Pension Plan • Simply put, such trends indicate that there won’t be enough workers to support not only themselves financially, but not the extrapolated number of retirees either. • Even assuming that the pension eligibility age is raised to 65 years – as has been proposed by the Japanese government – Japan’s projected household savings rate is still projected to decline by as much as one-half during the next 40 years. • (Jones, 1988) http://gojapan.about.com/library/photo/bltokyo_stockexhange7.htm

16. Failing Pension Plan • Therefore, these decreased household savings combined with Japan’s resulting current account surplus, may very well lead sooner or later to an actual shortage of investment funds which could very easily spark national economic problems to surge through the world’s leading economies. • (Jones, 1988) http://www.fotosearch.com/CSK401/ks95850/

17. Economic Instability: Destruction of the Global Economy Ethan Cohen & Steven Feddick

18. Destruction of the Global Economy • The world’s leading economies are becoming more and more dependent on each other to sustain their massive national systems. • Marginalizing the distances between the world’s foremost economies. http://www.fotosearch.com/DSN006/1770589/

19. Destruction of the Global Economy • As in the GIS map before these developed nations have come to comprise much of the world wealth, as much as 70% by some estimates, and are further connected through the NYSE (New York Stock Exchange) and other such global enterprises. • (http://en.wikipedia.org/wiki/Distribution_of_wealth) ArcGIS generated map of the world displaying the concentration of per capita Gross Domestic Product (GDP) by country/region. Accordingly, the countries in green – those in the higher GDP group – have come to be denoted as the world’s developed nations, whereas those countries that remain gray are commonly denoted as the world’s developing nations (Source: Cohen & Feddick, ArcGIS, 2006)

20. Destruction of the Global Economy • Japan “accounts for more than 60% of the value of all the goods and services produced in Asia” thus, the ramifications of an economic collapse in Japan would hurt the entire continent. Moreover, as many foreign investors from North America and Western Europe have made lucrative profits by investing in Japan’s regional economic prowess, they too will fall hard when Japan’s economy collapses. • (Mitchinson, 1998) Bell Laboratories-Lucent Technologies

21. Solutions • International migration, perhaps the most widely used technique of the current negative growth populations around the world, has been shown to help balance out population and then stimulate an increase in fertility rates. • (United Nations, Highlights of the World Population Prospects, 2001)

22. Solutions • Recently, the United States, in a similar position after slumping to a fertility rate of about 1.7 in 1976, has managed to remain nearly constant at about a 2.1 fertility rate throughout the 1990s, largely due to a set international migration quota that they have met every year since. (Ausubel, 1998) • If Japan were to adopt a similar attitude toward international migration that could significantly help their labor shortage, overall economic structure, and low fertility rates.

23. Conclusion • Undoubtedly, Japan’s negative population growth rate is a very real and very imminent problem. Few can discount the figures leading Japan down a path to a disappearing population in the not too distant future. At the forefront of Japan’s concerns are its economics. Today Japan’s economy is the second largest in the world with several of the world’s largest investment banks and insurance companies based in Tokyo. Thus, considering Japan’s major role in globalized economics, an economic crisis in Japan has the potential not only to destroy Japan’s own economy, but to filter out economic instability to many other of the world’s leading economies causing a worldwide economic crisis of tremendous proportions.

24. Conclusion • Graph of the correlation between population aging and economic loss [CAGR is the compound annual growth rate, which is the year-over-year growth rate of an investment over a specified period of time – assuming that the investment is growing at a steady rate] (Source: http://www.gold-eagle.com/editorials_05/to081205pv.html)

25. Conclusion • As Japan's most widely read daily paper, Yomiuri Shimbun, commented in the late 1990s, "Is the Japanese economy destined to share the fate of the Titanic?...unless some effective measures are taken, Japan...could even trigger worldwide economic chaos“. With international migration policies looming on the horizon as a feasible solution to many of these problems, Japan’s leaders in every area – national government, private business, and local domestic government – must act quickly and decisively, without deviation or hesitation, to affect significant change thereby achieving a sustainable future. • (Mitchinson, 1998)

26. Works Cited • Ausubel, Jesse H. Reasons to Worry About the Human Environment. COSMOS (Journal of the Cosmos Club of Washington, D.C.) 8:1-12, 1998. The Program for the Human Environment, The Rockefeller University, New York. <http://phe.rockefeller.edu/reasons-to-worry/> • Ausubel, J.H., Marchetti, C., & Meyer, P.S. Human Population Dynamics Revisited with the Logistic Model: How Much Can Be Modeled and Predicted? Technological Forecasting and Social Change 52:1–30, 1996. Elsevier Science Inc., New York, NY. < http://phe.rockefeller.edu/poppies/> • Cobo, Felipe P. Solutions to the Social, Political, and Economic Crisis Facing Japan Nowadays. Business Management and Practices in Japan. Osaka. July, 2003. <http://www.casaasia.es/pdf/302051753351107449615840.pdf> • Distribution of Wealth. Wikipedia Online Encyclopedia. January, 2006. http://en.wikipedia.org/wiki/Distribution of wealth • Edwards, Linda N. Equal Employment Opportunity in Japan: A View From the West. Industrial and Labor Relations Review, vol. 41, No. 2, January 1988. Cornell University. <http://www.jstor.org/view/00197939/di009055/00p00073/0> • Engelman, R., Halweil, B., & Nierberg, D. Rethinking Population, Improving Lives. Chapter 6, State of the World. 127-148. WorldWatch Institute, 2002. < http://globalchange.umich.edu/globalchange2/index.html> • Fougère, Maxime & Mérette, Marcel. Population Ageing and Economic Growth in Seven OECD Countries. 1998-2003. Economic Studies and Policy Analysis Division Department of Finance, Canada. <http://epe.lac-bac.gc.ca/100/200/301/finance/working_papers-ef/1998/1998-03/98-03e.pdf> • Gladwin, T. N. “Global Change II.” University of Michigan, Ann Arbor. 31 Mar. 2006.

27. Works Cited (cntd.) • Henry K. Demographics Do Matter. Vronsky and Westerman. August 12, 2005. http://www.gold-eagle.com/editorials_05/to081205pv.html • Highlights of the World Population Prospects: The 2000 Revision. Population Division Department of Economic and Social Affairs United Nations New York, NY 10017. February, 2001.<http://domino.un.org/UNISPAL.NSF/561c6ee353d740fb8525607d00581829/79804d1a04ed96de85256a03006e4646/$FILE/population%20report%20highlights.pdf> • Imai, Takashi. Issues for Japan in the Twenty-First Century – The Political and Economic Situation in Japan. Keynote Statement to the 36th Japan-U.S. Business Conference. Ritz-Carlton, San Francisco. Monday, July 12, 1999. < http://www.keidanren.or.jp/english/speech/spe021.html> • Jones, Randal S. The Economic Implications of Japan’s Ageing Population. Asian Survey vol. XXVIII, Issue 9, p. 958-969, September 1988. <http://www.jstor.org/view/00044687/di014465/01p01976/0?frame=noframe&userID=8dd378fa@umich.edu/01cc99334100501c2e836&dpi=3&config=jstor> • Kosai, Saito, & Yashiro. Declining Population and Sustained Economic Growth: Can They Coexist? The American Economic Review, vol. 88, No. 2, Papers and Proceedings of the Hundred and Tenth Annual meeting of the American Economic Association. p. 412-416. May, 1998. < http://www.jstor.org/cgi-bin/jstor/printpage/00028282/ap000002/00a00780/0.pdf?backcontext=page&dowhat=Acrobat&config=jstor&userID=8dd378fe@umich.edu/01cce44035350c109e017af11&0.pdf> • Mitchinson, Phil. Sun Setting on Japanese Miracle: The World’s Second Largest Economy on the Verge of Collapse. May, 1998. <http://www.marxist.com/Asia/japan.html>

28. Works Cited (cntd.) • Statistical Handbook of Japan.Statistics Bureau and Statistical Research and Training Institute. Ministry of Internal Affairs and Communications. Ch. 2 Population. Ministry of Health, Labour and Welfare. < http://www.stat.go.jp/English/data/handbook/pdf/c02cont.pdf> • Taeuber, Irene B. Japan’s Increasing People: Facts, Problems, and Policies. Pacific Affairs, vol. 23, No. 3. p. 271-293. Sep, 1950. < http://www.jstor.org/cgi-bin/jstor/printpage/0030851x/dm994495/99p0120r/0.pdf?backcontext=page&dowhat=Acrobat&config=jstor&userID=8dd378fe@umich.edu/01cce44035350c109e017af11&0.pdf> • http://www.traveladventures.org/continents/asia/japanesepeople09.shtml • http://www.fotosearch.com/CSK007/pr80815/ • http://gojapan.about.com/library/photo/bltokyo_stockexhange7.htm • http://www.fotosearch.com/CSK401/ks95850/ • http://www.fotosearch.com/DSN006/1770589/ • Bell Laboratories-Lucent Technologies