Negative Population Growth Negative Population Growth in Japan: An Economic in Japan: An Economic

CrisisCrisis

Ethan Cohen & Steven Feddick Ethan Cohen & Steven Feddick Environment 111 – Final ProjectEnvironment 111 – Final Project

April 14th, 2006April 14th, 2006

JapanJapan

Introduction: The Demographic Introduction: The Demographic TransitionTransition

Recently, the world has Recently, the world has experienced a massive experienced a massive demographic revolution. demographic revolution. Since the dawn of the Since the dawn of the 19th century, world 19th century, world population has increased population has increased many folds. many folds.

What had been a billion What had been a billion people around 1800 people around 1800 became 1.6 billion by became 1.6 billion by 1900, 2.5 billion by 1900, 2.5 billion by 1950, and then 6.1 1950, and then 6.1 billion by the year 2000. billion by the year 2000. (Engelman, Halweil, & Nierberg, 2002)(Engelman, Halweil, & Nierberg, 2002)

The Demographic TransitionThe Demographic Transition

IntroductionIntroduction In an effort to combat this In an effort to combat this

rapid population growth, rapid population growth, the Japanese government the Japanese government advocated the use of advocated the use of contraceptives as early as contraceptives as early as the 1970s.the 1970s.

Despite their efforts, Despite their efforts, however, Japan’s however, Japan’s population continued to population continued to rise, so the Japanese rise, so the Japanese began to alter their culture began to alter their culture even more drastically to even more drastically to favor families with fewer favor families with fewer children. children.

Children came to be seen Children came to be seen as an economic hindrance. as an economic hindrance. (Ausubel, 1998)(Ausubel, 1998)

IntroductionIntroduction In combination with the In combination with the

increasing business savvy increasing business savvy nature that became nature that became Japanese culture in the Japanese culture in the late 20th century was an late 20th century was an admittance of women to admittance of women to this intense business-this intense business-oriented way of life. oriented way of life.

This resulted in very This resulted in very effectively bringing down effectively bringing down the fertility rate in Japan the fertility rate in Japan as women began to as women began to marry and have children marry and have children much later, if at all. much later, if at all. (Ausubel (Ausubel et alet al., 1996)., 1996)

IntroductionIntroduction As a result, by the mid-1990s Japan started to experience As a result, by the mid-1990s Japan started to experience

catastrophic depopulation. catastrophic depopulation. In fact, based on the current numbers, Japan’s population is In fact, based on the current numbers, Japan’s population is

projected to shrink by approximately 14 percent by the projected to shrink by approximately 14 percent by the year 2050 year 2050 (United Nations, (United Nations, Highlights of the World Population ProspectsHighlights of the World Population Prospects, 2001), 2001)

Population AgingPopulation Aging

Population AgingPopulation Aging Today, Japan is the country with the oldest population Today, Japan is the country with the oldest population

followed by Italy, Switzerland, Germany, and Sweden.followed by Italy, Switzerland, Germany, and Sweden. In Japan, there are at least 1.5 persons aged 60 or above In Japan, there are at least 1.5 persons aged 60 or above

for every child aged 0-14. for every child aged 0-14. (United Nations, Highlights of the World Population Prospects, 2001 )(United Nations, Highlights of the World Population Prospects, 2001 )

Population AgingPopulation Aging The Oldest Old, people aged The Oldest Old, people aged

80 and above80 and above Japan currently has 4.8 Japan currently has 4.8

million people over 80 years million people over 80 years of age, and is expected to of age, and is expected to have over 10% of their have over 10% of their population over 80 by the population over 80 by the year 2050.year 2050.

Centenarians, people aged Centenarians, people aged 100 and above.100 and above.

By the year 2050, Japan is By the year 2050, Japan is projected to have the projected to have the largest number of largest number of centenarians with centenarians with approximately 1 million approximately 1 million people aged 100 and people aged 100 and above.above.

(United Nations, (United Nations, Highlights of the World Highlights of the World Population ProspectsPopulation Prospects, 2001 ), 2001 )

Population Aging: Life ExpectancyPopulation Aging: Life Expectancy

Economic Instability: A Failing Economic Instability: A Failing Pension PlanPension Plan

Failing Pension PlanFailing Pension Plan

Japan today is facing a Japan today is facing a national pension national pension emergency as their emergency as their elderly population is elderly population is now the largest in the now the largest in the world (its median age world (its median age is 43 years) supported is 43 years) supported almost solely by a almost solely by a significantly smaller significantly smaller working populationworking population (United Nations, Highlights of the (United Nations, Highlights of the World Population Prospects, 2001)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).

Failing Pension PlanFailing Pension Plan ““in the year 2020, there will be nearly 40 persons aged 65 in the year 2020, there will be nearly 40 persons aged 65

and over for every 100 aged 15-64” (Jones, 1988).and over for every 100 aged 15-64” (Jones, 1988). Investment funds?Investment funds? Domestic savings?Domestic savings? Will the elderly be able to retire?Will the elderly be able to retire?

Failing Pension PlanFailing Pension Plan Simply put, such trends Simply put, such trends

indicate that there won’t indicate that there won’t be enough workers to be enough workers to support not only support not only themselves financially, but themselves financially, but not the extrapolated not the extrapolated number of retirees either.number of retirees either.

Even assuming that the Even assuming that the pension eligibility age is pension eligibility age is raised to 65 years – as has raised to 65 years – as has been proposed by the been proposed by the Japanese government – Japanese government – Japan’s projected Japan’s projected household savings rate is household savings rate is still projected to decline by still projected to decline by as much as one-half during as much as one-half during the next 40 years. the next 40 years.

(Jones, 1988)(Jones, 1988)http://gojapan.about.com/library/photo/bltokyo_stockexhange7.htm

Failing Pension PlanFailing Pension Plan Therefore, these Therefore, these

decreased household decreased household savings combined with savings combined with Japan’s resulting current Japan’s resulting current account surplus, may account surplus, may very well lead sooner or very well lead sooner or later to an actual later to an actual shortage of investment shortage of investment funds which could very funds which could very easily spark national easily spark national economic problems to economic problems to surge through the surge through the world’s leading world’s leading economies.economies.

(Jones, 1988)(Jones, 1988)

http://www.fotosearch.com/CSK401/ks95850/

Economic Instability: Destruction of Economic Instability: Destruction of the Global Economythe Global Economy

Ethan Cohen & Steven Feddick

Destruction of the Global EconomyDestruction of the Global Economy

The world’s leading The world’s leading economies are economies are becoming more and becoming more and more dependent on more dependent on each other to sustain each other to sustain their massive national their massive national systems.systems.

Marginalizing the Marginalizing the distances between the distances between the world’s foremost world’s foremost economies.economies. http://www.fotosearch.com/DSN006/1770589/

Destruction of the Global EconomyDestruction of the Global Economy

As in the GIS map As in the GIS map before before these these developed nations developed nations have come to have come to comprise much of the comprise much of the world wealth, as world wealth, as much as 70% by much as 70% by some estimates, and some estimates, and are further connected are further connected through the NYSE through the NYSE (New York Stock (New York Stock Exchange) and other Exchange) and other such global such global enterprises.enterprises.

(http://en.wikipedia.org/wiki/(http://en.wikipedia.org/wiki/Distribution_of_wealth)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)

Destruction of the Global EconomyDestruction of the Global Economy

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

(Mitchinson, 1998)(Mitchinson, 1998)

Bell Laboratories-Lucent Technologies

SolutionsSolutions International International

migration, perhaps the migration, perhaps the most widely used most widely used technique of the technique of the current negative current negative growth populations growth populations around the world, has around the world, has been shown to help been shown to help balance out balance out population and then population and then stimulate an increase stimulate an increase in fertility rates.in fertility rates.

(United Nations, (United Nations, Highlights of the Highlights of the World Population ProspectsWorld Population Prospects, 2001), 2001)

SolutionsSolutions Recently, the United States, in a similar position after slumping to 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 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 constant at about a 2.1 fertility rate throughout the 1990s, largely due to a set international migration quota that they have met due to a set international migration quota that they have met every year since. every year since. (Ausubel, 1998)(Ausubel, 1998)

If Japan were to adopt a similar attitude toward international If Japan were to adopt a similar attitude toward international migration that could significantly help their labor shortage, overall migration that could significantly help their labor shortage, overall economic structure, and low fertility rates.economic structure, and low fertility rates.

ConclusionConclusion Undoubtedly, Japan’s negative population growth Undoubtedly, Japan’s negative population growth

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

ConclusionConclusion

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

ConclusionConclusion As Japan's most widely read daily paper, Yomiuri As Japan's most widely read daily paper, Yomiuri

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

(Mitchinson, 1998)(Mitchinson, 1998)

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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