Japan has a big problem, and it's one the United States is about to face, too.
The Japanese population is aging rapidly. Each year, the number of working-age Japanese, those between 15 and 65, falls by about a million, while the share of the population that is elderly grows. The country has been slow to seriously address the fiscal and economic problems this demographic shift creates, said Professor Masaaki Shirakawa, former head of the Bank of Japan, the country's central bank.
During a recent visit to the Federal Reserve Bank of Atlanta headquarters, Shirakawa discussed numerous topics with guests and staff. He and Atlanta Fed research economist Toni Braun also recorded a podcast interview that is featured in the Bank's 2015 annual report, The Graying of the American Economy.
Aging and Japan's economic anomaly
In a talk the Reserve Bank cosponsored with the Japan America Society of Georgia, Shirakawa cited an illuminating statistic. For the past 15 years, Japan has led the developed world in economic growth per working-age person. Yet because its working-age population is shrinking, Japan's overall economic growth has been among the weakest in the developed world in the 21st century, as measured by per capita gross domestic product (GDP). That is GDP divided by the total population.
"This shows how serious the impact of rapid aging is," said Shirakawa.
Hosting such distinguished visitors is important for the Atlanta Fed because it allows economists and other staff members to exchange views with leading figures in the global economy.
In Shirakawa's case, he is deeply concerned about the economic implications of aging and hopes to bring public attention to the issue, said Braun, who also has researched the fiscal implications of aging in Japan. In fact, he and Shirakawa both presented at a conference on the subject at Japan's Keio University in 2014.
During his Atlanta visit, Shirakawa pointed out that many countries, including the United States, will soon wrestle with the issues arising from an aging population. He stressed the urgency of correcting the fiscal imbalances that aging will create in social insurance programs for retirees, such as Social Security and Medicare.
The Bank's annual report examines the impact of aging on the U.S. economy. The podcast featuring Braun and Shirakawa is in the first of the annual report's three phases. Parts two and three of the annual report will post online in late April and late May, respectively.