JAPAN: DEFICITS,

DEMOGRAPHY, AND

DEFLATIONPresentation by: Robert Wensley

International Economy and Business July 18, 2011

HARVARD UNIVERSITY

AGING POPULATION

Japanese Population Forecast

Portion Aged 20-64 to 65 and over:

2000 – 3.6:12050 – 1.4:1

Smaller piece of the pie...

EFFECTS?

Increased debtLabor shortagesEconomic slowdownIncreasing costs of social programsShrinking savingsTrade surplus to deficitDrive industry overseas

Unsustainable Debt Levels

Debt = 234% of GDP

Non-Competitive Interest Rates

Less than 1% in 2009

Declining Savings Rate

Less than 4% in 2008

Solution?

DEMOGRAPHY!

Must either increase labor SUPPLY or EFFICIENCY

–Education

–Technology

–ManagementPractices

EFFICIENCY

–Increase Immigration

–Raise the Retirement Age

–Raise theFertility Rate from 1.3 to 2.1+

SUPPLY

Last year 60,000 foreign workers moved to Japan, the UN claims 600,000/year will be needed to maintain the workforce.

Spending Cuts

Source: World population prospects, 2008 Revision, United Nations.

WHO IS NEXT?

THANK YOU!