It's pretty straightforward to deal with the trend, though.
You could mitigate the cost of a high ratio by investing in automation so that a smaller workforce can provide more goods and services to the population, and Japan is, in fact, the world leader in robotics and automation.
You could make child bearing and rearing cheaper so that the necessary generational decline in population is smoother. Japan is failing badly at promoting births, though. The economy is dominated by cartels that have been liberalizing their employment practices by reserving the high paying lifetime employment jobs to older incumbent employees and taking on younger workers as low-paid temps without benefits. Real estate taxes calcify the market and banking policy makes it even harder for young people to own homes. Social and government policy makes life very hard on working mothers. The result is young Japanese people that want babies find them difficult to afford. Japan has among the lowest birth rates in the world.
It's easy enough to stop providing government support to the industrial and banking cartels and liberalize real estate and school policies but the voters so far prefer national decline and bankruptcy to liberalization.
You could raise retirement ages or cut benefits so more people continue working longer. That's not popular either, for good reason.
You could promote immigration of younger workers, but then you stop being a Japanese nation and inflict an underclass on all your posterity. A wise nation would not do that.
Just like the way that the Jews, Irish, Italians, and Asians form an "underclass" in the United States?
All of the ethnicities you mentioned were, for decades, if not an entire century, the underclass. Racism against the Irish, Italians, and Jews was extremely commonplace until relatively recent history.
An when they stopped being demonized as minorities society find more, newer immigrants to vilify instead. Hispanics for one, and in our industry, Indians.
I'm all for immigration and diversity, but let's call a spade a spade. Immigrants are an underclass, and it takes generations for the stigma to fade - if ever! Jews are still frequently discriminated against.
Not to mention, politically, Japan is very high on the xenophobia scale. I'd be interested to see the effects of large-scale immigration on their society, though I suspect it won't be pretty. At all.
Japan doesn't have the same melting pot background as the U.S. It would take significant culture change for the Japanese to adopt an immigrant-inclusive culture.
More days off, more money, more kindergartens etc.
Various authors I read say no society has ever recovered from their (beyond) "lowest low" fertility rate.
Or another way to put it, 2030 is right around the corner.
The latter is not an unreasonable option. If worker productivity grew by an unimpressive 1% per year from 2010 to 2030 (the time frame given in this article), the 67.7 million Japanese workers of 2030 will do the work of 82.6 million 2010 workers, which is more than the 81.7 million workers in 2010's workforce.
The sky is not falling, and there is no need to mandate that Japanese women become brood mares, and no need to import huge numbers of immigrants from poor countries.
Former is not a bad idea either. How's the energy security of a rocky island with no petrol more or less right next to China? Oh they're shutting down nuclear plants too, you say? I hope they got lots of windmills and solar panels...
This is an interesting way to analyze their 2030 scenario, lets say they only have the population to run at 80% capacity, sounds bad, but what if they only have the energy available to run at 75% capacity anyway? Sounds like squirting out more kids would be the worst thing they could possibly do in that scenario.
Another "limiting reagent" analysis is that at least a decade ago Japan imported a bit over half its food. In other words they must import most of their food, or starve. Again, growing industrial giant to the west, hows that going to work out WRT food? Oh and at the same time as energy prices are going up / availability going down? Lets say they only have food to keep a mere 90% of the current population alive on a bland starvation diet, or certainly not as good as they currently eat now, anyway. Good luck talking them into squirting out a couple more kids to watch starve under those circumstances. "Well the bad news is, we're cutting the rice ration, but the good news is, we want more babies" hmm good luck.
"import huge numbers of immigrants" = as long as you can feed and energize them, sure. Which Japan is not going to be able to do, so its all kinda irrelevant.
Like another poster astutely put: create an underclass, and diminish their country's cultural heritage.
Really, do immigrants diminish a country's cultural heritage, or enrich it?
Freezing culture in stone sounds like a great idea for stagnation.
Woah woah woah. Careful there, this line of argument has been used in the past.
Ditto with a previous mention of immigration making the country "less Japanese", which has shades of certain groups making a certain country "less German".
Bad kids/people cost more than no kids/people.
Japan as a country needs to run a consumer oriented advertising campaign: "Buy stuff from us instead of China, it will last 10 times as long!" They also need to find a way to make their stuff available again in US (and other) commercial outlets.
Did you know that iPhones, Xboxes, ThinkPads (the only laptop certified for use on the International Space Station) and loads of other quality electronics are made in China? I wouldn't say "made in China" automatically implies it's crap.
Stuff made in China might be half price from what things used to be, but it's hard to find any alternatives now.
also china isnt 'a little' cheaper than japan. its a lot cheaper, so they would need to make stuff a lot better.
Tell that to Apple.
If you then say that consumers aren't buying enough and there isn't enough demand, then that could also be a problem (recession). But too much consumption and not enough consumption can't both be problems at the same time.
What if the the problem is that the demand is for things that Japanese companies have a hard time producing? E.g., oil/energy (which of course actually is a big problem in Japan), iphones, etc...
I'm not on the side of doom and gloomers WRT Japan because they're basically the USA in 1970 without a 3rd world nation to the south (no Australia jokes please...). Every year for the median USA worker has been worse, etc, but its not that bad, the rich keep getting richer, its just not the end of the world.
As a thought experiment, reread the whole article substituting in the USA in roughly the early 70s for Japan.
The USA has a lower number of employed people every year, lower fraction of population with jobs, increased fraction of old people, reduced economic outcome for all but the top one percent, blah blah. Only difference is we've been doing it longer, and we have illegals to boost the population and govt expenses.
I've sometimes thought that I should just bet against all seemingly persuasive investment articles like this one on the principle that the market will essentially over-indulge in said advice and have to correct in the opposite direction. (Would be interesting to test that theory with historical data.) Case in point: I bought a few silver ETF shares a while ago on the theory stated (by lots of people like SeekingAlpha and the like) that quantitative easing will cause inflation and people will rush to precious metals. (Well, that and I probably have a thing for silver/gold.) Since then, it's dropped over a third. Now I'm a little more cautious about betting on macro-economic trends...
My dollar cost averaging long term for silver is about $5 per oz and for gold is about $550 per oz...
You select your profit when you select your purchase price. Real estate is kinda like that too.
Imagine inflating by printing money and distributing equally among all citizens. Domestic price increases would be offset by the extra cash and the real debt would decrease accordingly. Why would that not work?
"distributing equally among all citizens."
good grief, what a dangerous idea!
From an essay by Paul Krugman (I think from the late 90s):
>So why doesn't the Bank of Japan just go out and print lots of money? The best theory I have heard is that the bureaucrats at the Bank of Japan and the Ministry of Finance are still mesmerized by the memory of the "bubble economy" - the wild speculation of the late 1980s, which pushed the prices of stocks and real estate to crazy levels (remember when the grounds of the Imperial Palace were supposedly worth more than the whole State of California?). They believe that loose monetary policy created that bubble - which may be true - and that the bursting of the bubble caused the slump of the 1990s - which may also be true. And so they are afraid to increase the money supply now for fear of repeating the experience.
http://web.mit.edu/krugman/www/nikkei.html
Japan did some quantitative easing in the 2000s, but as I understand it it was too little too late.
I have no idea who Mauldin is, or whether he can be expected to give a balanced view of an issue I don't know much about.
John Mauldin seems to have a spotty track record. He correctly called the summer 2008 rally as a bull trap.[1] However, he failed to call the 2009 low, and has been calling a top for the past few years.[2][3]
Eventually I'm sure he'll get it right, and there will be another market crash. But if you listened to him in 2009 [3], you would have missed out on a 250% increase in your portfolio over the past 4 years.
Based on 4 year boom/bust business cycle, I actually think the market is overdue for a serious correction to 1200-1400 S&P in the next year, but I don't see any doomsday scenario playing out in the next 5 years.
[1]http://www.businessinsider.com/prepare-now-there-is-so-much-... [2]http://www.investorsinsight.com/blogs/john_mauldins_outside_... [3]http://www.businessinsider.com/henry-blodget-just-a-suckers-...
Of course- als always- timing is everything.
http://delong.typepad.com/sdj/2013/05/the-washington-super-w...
