Japan is Dying

We all knew that it was a matter of time before Japan began to go into demographic decline, given the extremely low birthrate in that country, but it still comes as a bit of a surprise to learn that the process has already begun.

Japanese fertility rates have long been on the slide, but newly released figures from the Ministry of Health and Welfare confirmed that during the first six months of this year, deaths outstripped births and the overall population of Japan fell by 31,034.

If the same pattern continues for the remaining months of 2005, a demographic turning point — where the population is contracting on an annual basis — will have been reached two years ahead of official Government forecasts.

[...]

The Government bases its projections — and many of its economic models — on the findings of the National Institute of Population and Social Security Research, whose working prediction, until yesterday, was that the shrinking would not start until 2007. The research group had previously said that the Japanese population would reach a peak of 127.74 million next year before beginning a downward trend that would bring it to about 100 million halfway through the century.

Evidence that the turning point has been reached ahead of schedule will force Japan into a significant rethink of its welfare, pensions and immigration policies, none of which has been high on the agenda of Junichiro Koizumi, the Prime Minister.

Japan rethink immigration? Not on your life - it's just not going to happen, as the notion of nation as blood-related family is simply too strong over there to accommodate such a shift in thinking, so much so not even physically indistinguishable Koreans are accepted.

Comments

[David B]

Oh, pur-lease! Japan is one of the most densely populated countries in the world, with probably the most expensive housing. They need more population like a fish needs a bike. A gradual decline in population would be manageable and even beneficial. The costs of an ageing population are hugely exaggerated. Old people are, on average, much cheaper than children, and nobody minds much if they die a little earlier than they might have. In fact, I bet that attitudes to euthanasia will change dramatically over the next twenty years, just as attitudes to abortion changed in the 1960s and 70s. Nobody who has seen a parent decline into helpless dementia will want it for themselves.

[Abiola Lapite]

"Japan is one of the most densely populated countries in the world, with probably the most expensive housing."

This has little to do with its population density and everything to do with the fact that:

(1) Japan is a wealthy country located at the conjuction of three tectonic plates, so houses are built to withstand devastating earthquakes.

(2) The LDP does everything in its power to prop up the country's bloated construction sector, in return for generous financial support to its MPs.

"They need more population like a fish needs a bike. A gradual decline in population would be manageable and even beneficial. The costs of an ageing population are hugely exaggerated."

Have you examined the actuarials and the Japanese government's liabilities yourself, or is this just your gut talking? Of the industrialized nations, Japan already has by far the biggest amount of government debt outstanding as a percentage of GDP, even worse than Belgium and Italy, while having the longest lived old people in the entire world - and this is before taking off-balance-sheet liabilities into account. Either you know something all those economists interested in this issue don't, or you're allowing your intuition to mislead you.

"Old people are, on average, much cheaper than children"

In which universe is that true? Maybe you ought to look at how much end-of-life treatment costs in the last 6 months before repeating this canard elsewhere.

"and nobody minds much if they die a little earlier than they might have."

You've got to be speaking for yourself alone there - *they* mind a great deal, and thankfully, they also vote a lot more than everyone else. I say "thankfully" because I and most of the people I'm acquainted with find the idea of disposing of the aged "a little earlier" as if they were goods past their "sell by" date both frightening and morally abominable: Brave New World and Soylent Green were offered as dystopias, not as ideals to emulate.

"In fact, I bet that attitudes to euthanasia will change dramatically over the next twenty years, just as attitudes to abortion changed in the 1960s and 70s."

Even if people come to approve of the legalization of euthanasia, it does *not* mean they'll be rushing to embrace it as a means of balancing government budgets.

"Nobody who has seen a parent decline into helpless dementia will want it for themselves."

Most old people don't decline into dementia before dying, especially not in Japan.

I think you've been paying a bit too much attention to the likes of Paul Ehrlich, and not enough to the Julian Simons of the world. This view of people as primarily "burdens" of which we should be glad to have fewer lying about is one unsupported by the facts of history, and you'd be hard pressed to name a place in which depopulation has proven to be a good thing. What is more, such reasoning takes no account of the fact that all else being equal, relative population size is a factor in determining national might, and a nation whose population (and therefore GDP*) is in free-fall will be able to muster fewer potential soldiers and less money for arms, and Japan just so happens to be located in one of the more militarily tense regions of the world.

*Not GDP per capita: Luxembourg's high score on that scale doesn't count for much in international affairs.

[Factory]

"Japan rethink immigration?"
I dunno, one could equally say the similar things about Japan before the Meiji restoration, but then again that was over a century ago, it's prolly an outlier event.
OTOH crisis has a wonderful way of making the most fervent idealists into pragmatists.
The realisation that one day there will be _no_ Japanese people or culture unless something is done about the population decline.

[Bruce Cleaver]

Sheesh, David B. is a troll, or his post is tailor-made for refutation. It might help him to adopt Julian Simon's view of people: fundamentally, they are *resources*, not liabilities - which is all too often how they are treated.

[Factory]

"Japan is one of the most densely populated countries in the world, with probably the most expensive housing."
Erm, 18th in the world by http://en.wikipedia.org/wiki/List_of_countries_by_population_density.
But that is not a very good statistic, Australia is far closer to the bottom of the list, and there are already ppl who wonder if 20 million is 'too many'.
Oh and the expensive housing is prolly because a third of the country essentially lives in one city, which does nasty things to real estate prices.

[Abiola Lapite]

Factory,

I think the following link is the one you meant to provide.

http://www.nationmaster.com/encyclopedia/List-of-countries-by-population-density

[Wayne]

"Old people are, on average, much cheaper than children, and nobody minds much if they die a little earlier than they might have."

Erk

A few words:

'Social security'
'Government pensions'
'Increasing lifespans or longevity'

[David B]

A few words:

childcare
education
pediatric medicine.

I'll admit I have not seen a detailed public expenditure analysis of the costs of children versus old people, but the cost of education alone - which now lasts on average about 20 years - is staggering.

Someone mentions the cost of health care in the last 6 months of life, but omits to mention that this is when the bulk of the costs of adult health care arise, and since everyone dies, the increase in life expectancy make little difference to the overall cost. People are living longer but also staying healthy for longer. (There is a good paper by Raymon Tallis on this subject, which you can Google up.)

Pensions are largely funded by the prior work of the recipient, whether explicitly by pension contributions or by the lifetime economic contribution of the individual concerned, so they should not be counted simply as a cost to current taxpayers. In contrast, children require to be fed, housed, and looked after long before they contribute anything economically. Moreover, old people (so long as they are healthy) can if necessary do useful part-time work, which is not in general true of children.

Senile dementia affects at least a quarter of people over 85.

This isn't the place to write an essay on the subject, but what I object to is the glib assumption that an 'ageing population' is a terrible burden. If we look at the total dependency ratio (ratio of people not of working age:people of working age), in most western countries it is at historically low levels, because there are far fewer children per adult than there used to be. The increasing number of old people only partly offsets this, so far, though the balance will shift in the next few decades.

[Abiola Lapite]

"Pensions are largely funded by the prior work of the recipient, whether explicitly by pension contributions or by the lifetime economic contribution of the individual concerned, so they should not be counted simply as a cost to current taxpayers."

Er, no, and that is *precisely* the problem. With the exception of a few countries like Britain which have dealt with the problem, in almost all of the developed world, pensions operate on a Pay As You Go basis.

"In contrast, children require to be fed, housed, and looked after long before they contribute anything economically."

But they *will* contribute economically in future, while pensioners represent a pure cost, with no prospect of a return on expenditure. In economic calculations it is the future return that matters, not the past.

"Moreover, old people (so long as they are healthy) can if necessary do useful part-time work, which is not in general true of children."

But what if they don't want to, and can (and do) vote more than anyone else? Look at the Social Security problem in the US and how scared every politician is to touch it.

"Someone mentions the cost of health care in the last 6 months of life, but omits to mention that this is when the bulk of the costs of adult health care arise, and since everyone dies, the increase in life expectancy make little difference to the overall cost."

The hidden assumption here is that the cost of end-of-life healthcare remains constant over time, which is clearly false. As new technologies have arisen, the cost of such treatment has ballooned, and there is every reason to believe it will go on doing so: the share of GDP consumed by healthcare in all developed countries is rising for a very good reason.

"Senile dementia affects at least a quarter of people over 85."

Affects a quarter of *American* or maybe *British* people over 85, but that figure does not necessarily hold everywhere. Dietary intake and activity levels have a major impact on its occurrence, and Japan differs very much from the West in these respects, especially with older cohorts.

In any case, this is a bit of a contradictory point for you to be making in light of your assertion about the ability of older people to work, isn't it? The fastest growing portion of the retiree population is exactly those who are aged 85 over.

"If we look at the total dependency ratio (ratio of people not of working age:people of working age), in most western countries it is at historically low levels, because there are far fewer children per adult than there used to be."

This is just plain false. The dependency ratio is *rising* throughout the West and has been for some time, and I know for a fact that it started rising in Germany way back in the 1980s, which is when it touched historical bottom there. As for Japan, take a look at the following graph and tell me it corresponds to your assertion:

http://www.imf.org/external/pubs/ft/fandd/2001/03/images/muhl-c1.gif

I suggest you visit the IMF website and read a few of the very many papers available there about the aging issue, or better yet, contact Edward Hugh, the guy who runs the "Fistful of Euros" site. If you think you've discovered a loophole all the economists have missed, you're very much mistaken.

[David B]

Even in a totally tax-funded pension system, it is absurd to count the *total* cost of pensions as a cost to current tax-payers. People are only willing to pay taxes under such a system on the understanding that they will receive a pension themselves in due course. It can be regarded as an indirect or disguised form of pension fund. It is only any surplus to current pensioners as compared with their previous actuarial expectation that should properly be counted as a cost to current taxpayers.

As for the trend of the dependency ratio, it depends on the time scale you choose. In the UK, it was around .6 in 1901 but only about .53 in 2001. In the century between these dates it fell to a low point in the 1930s, with the falling birth rate, then rose again from the 1950s to the 1970s, with a combination of rising birth rates and falling death rates, then it fell again from the 1970s to the end of the century. It is probably rising again now, but I stand by the statement that it is 'historically low', by which I mean 'lower than usual in the past'. The reason is simply that in most traditional societies there are as many (or more) children than adults alive at any point in time. Moreover, the proportion of women who are 'economically active' is now relatively high, because they are not all looking after children.

Please don't assume you know more than me, just because I don't give all the information at my disposal in a few throwaway comments. I may post on this subject in more detail on GNXP. But returning to my original point that children are mnore expensive (as a public cost) than old people, my rough estimate is that per head children cost about 3 times as much.

[David B]

Incidentally, I only gave a figure for senile dementia because someone suggested it only affected a small proportion of people. I don't think it is inconsistent with my general argument. The figure is for people *over 85*. Most people aged 65-75, say, are quite healthy and capable of working part-time if they wish to.

[Abiola Lapite]

"Even in a totally tax-funded pension system, it is absurd to count the *total* cost of pensions as a cost to current tax-payers."

And why not? It is an obligation, just as a mortgage is an obligation, and as with a mortgage its net present value can readily be calculated using standard financial techniques.

"People are only willing to pay taxes under such a system on the understanding that they will receive a pension themselves in due course."

What people are politically willing to do and what is economically sensible aren't one and the same thing. People want all kinds of economically impossible things all the time - just look at today's Germans who want plenty of jobs without giving up their leisure or their expensive work contracts.

"It can be regarded as an indirect or disguised form of pension fund."

No it most certainly cannot. Pension funds make *investments* which are calculated to make a positive return, while governments use social security contributions to fund current expenditure which goes to all sorts of things, from road maintenance (which is *not* an investment) to weapons to welfare payments to agricultural subsidies. Would you call someone blowing his wad in Vegas or on a Mercedes Benz an "investor?"

"Please don't assume you know more than me, just because I don't give all the information at my disposal in a few throwaway comments."

When you give erroneous information and show no grasp of the principles of investment, why *shouldn't* I make the logical conclusion? The fact is that the position you maintain is in opposition to everything I've seen coming from mainstream economists, and I certainly don't see any evidence of an acquaintance with elementary financial concepts from what you've written here.

"But returning to my original point that children are mnore expensive (as a public cost) than old people, my rough estimate is that per head children cost about 3 times as much."

Again you indulge in an economic fallacy. Children are an investment in the future, while old people who no longer work are pure cost. The former sort of expenditure pays for itself in the long run, while the latter obviously cannot. Equating past and future costs as you have done twice now is nothing but the Sunk-Costs Fallacy.

[Abiola Lapite]

"Most people aged 65-75, say, are quite healthy and capable of working part-time if they wish to."

Putting aside the fact that no government seems to have the courage to ask them to do so, they also happen to be a shrinking proportion of retirees, and we can expect their share of that population to decline ever faster with advances in medicine.