Japan and China Look Old Age in the Eye

Japan's relatively stable stagnation will continue for another 5-10 years before the combination of bad demographics and excessive debt causes the country to collapse into a crisis from which it may never recover. Its long history of domestic consensus and tranquility notwithstanding, Japan may well become a failed state. _Benzinga

The Land of the Setting SunJapan's fertility rate has been below replacement levels for over 30 years. Japan is aging very quickly. Once a population ages to the point that a relatively few fertile females remain, the point of no return for that population may have passed.

Fewer people means fewer customers to sell to. It means fewer innovators pushing at the boundaries of current technology. And in the modern welfare state, it means fewer people to pay for the pensions and health care needs of the elderly.

Regrettably, John Maynard Keynes was right. Without a continually growing population, the capitalist economic system starts to fall apart.

Of course, Japan's demographic woes are not just about shrinkage. It actually gets worse. Populations are not just a number; the composition of the population matters too. Japan's is changing, growing older at an alarming rate... _Benzinga

As you can see, sometime after 1975, Japan's total fertility rate dropped below replacement. Too many things would have to change in today's Japanese culture for that trend to reverse itself meaningfully. As Japan's population declines, Japanese industry will have to rely more and more upon export markets, which will put it in direct competition with a soon-to-be-aging China.

Japan’s population of 128 million now accounts for 2% of the world population, but with the global population on the rise the ratio is expected to reach 1% around the year 2050, according to another government survey. This has an array of implications, including forcing Japanese companies—from food makers to insurance companies—to go outside Japan to seek a bigger slice of the market share through mergers and acquisitions. _WSJ

With it's "one-child policy", China's fertility is similar to that of Japan. Although China's population is still growing as a result of sheer momentum, the nation's people are aging rapidly, with all the dire economic consequences that Japan is already beginning to experience.

China has reached a turning point. Demographic conditions are becoming unfavorable as the "baby bust" generation comes of age - entering and progressing through the working ages.

Currently, the "baby bust" is pushing down the number of people in their early 20s. In another 10 years, the number of people in the 20s and early 30s will be in decline. With each passing year, a larger share of the labor force, too, will be in decline.

The aging population is growing and will continue to grow very rapidly. The speed of aging will depend primarily on whether the fertility rate recovers from its currently low level or declines further as has been the case in South Korea and Japan. If China's total fertility rate begins to recover from its current level of about 1.5 to 1.6 births per woman, about 34 percent of its population will be 60 years or older in 2050. But if the total fertility rate declines to lower levels, about 39 percent of its population will be 60 years or older by then.

...The speed of aging will depend primarily on whether the fertility rate recovers from its currently low level or declines further as has been the case in South Korea and Japan. If China's total fertility rate begins to recover from its current level of about 1.5 to 1.6 births per woman, about 34 percent of its population will be 60 years or older in 2050. But if the total fertility rate declines to lower levels, about 39 percent of its population will be 60 years or older by then. _Xinhuanet

Japan was already rich when its people began growing old. Unfortunately, the bulk of China's vast population -- already beginning to age -- is still quite poor. Even worse, with China's one-child policy, individual Chinese tend to have no brothers, sisters, cousins, aunts, or uncles. The potential for alienation without family is quite severe. And with a growing imbalance of males to females in the population, family life in China is apt to grow somewhat more rare. What will all these excess males -- no relation to each other -- do with all their spare time?

Across both the province and China as a whole, the disaffected are lashing out. “There is a growing sense of a country in danger of pulling itself apart at the seams,” as Hong Kong journalist Will Clem put it yesterday. Poor migrants in Guangdong have yet to start a full-scale insurrection and it’s too early to speak of “blood laptops” and “conflict handbags,” but these days they are in the mood to fight. _Forbes_Gordon_Chang

China's government is likely to turn to nationalistic saber-rattling and border wars, if for no other reason than to secure natural resources and to give the population a reason to rally around the flag. Excess young men, of course, can be given uniforms, and something to do.