September 14, 2003


One in five Japanese 65 or older (The Japan Times, Sept. 15, 2003)

The number of Japanese aged 65 or older has reached a record 24.31 million, or roughly one out of every five people in the country. [...]

It is also the highest among industrialized nations. The latest comparable data puts the corresponding percentage at 18.2 percent in Italy for 2001, 17.1 percent in Germany for 2001 and 16.1 percent in France for 2003. [...]

The number of people in Japan aged 65 or older is expected to total 32.77 million in 2015, 26 percent of the total population, according to the National Institute of Population and Social Security Research, an organization under the Health, Labor and Welfare Ministry.

Looming specter of tax hikes (Japan Times, 9/15/03)
Simply put, the government is living far beyond its means. It may be likened to a family that is spending twice as much as its income from all sources and then covering the deficit by borrowing. Moreover, the family has a cumulative debt exceeding 10 times its annual income. Clearly, it cannot afford to continue such a reckless "borrow and spend" way of life. Sooner or later, it will go bankrupt.

The message for the government is equally clear: It cannot continue to run such a massive deficit. What is more, the nation's public debt -- the total amount of long-term debt owed by the central and local governments -- now equals between 130 and 140 percent of its gross domestic product. That is the highest ratio among the Group of Seven leading industrialized countries.

It can be said, indeed, that the government of the world's second-largest economy faces a fiscal crisis. The danger exists that its ballooning deficit will someday become unsustainable. It seems naive to think that the danger will disappear once the economy gets out of its slump. The debt crunch is Japan's economic Achilles' heel. It is here to stay for some time even if the problem of deflation is fixed.

It's quite remarkable to watch these industrialized nations commit suicide before your very eyes.

N.B.: By way of comparison, our total debt is less than 70% of annual GDP and if it were 10 times GDP would be $100 trillion, or as much as the entire world's current debt.

-Japan's Gray Tsunami (RYUTARO HASHIMOTO, NPQ)

Posted by Orrin Judd at September 14, 2003 9:16 PM

These demographic numbers have been floating around the media for 15 years and the Japanese have barely started to face them. Which is why the US needs to make changes to SSA and Medicare now, instead of 2015. Bush may have the only chance any President will ever get after the next election.

Posted by: jim hamlen at September 14, 2003 10:54 PM

Mr. Judd;

One wonders what kind of interest rate they're paing on that debt. At 5%, owing 10 times your income means debt service is 50% of income. It might be that any kind of inflation would push the debt service up to be larger than annual income, so they're doomed with inflation and doomed without it. Not the best economic planning possible.

Posted by: Annoying Old Guy at September 14, 2003 11:55 PM

They did go into negative interest rates for at least a while recently, so it must be low.

Posted by: oj at September 15, 2003 12:04 AM

Japan's debt is not 10 times it's GDP, but 10 times its "annual income" which I assume the article means its yearly tax revenues.

Posted by: Chris Durnell at September 15, 2003 12:22 PM

So ours would be $20 Trillion, instead of $100, thanks.

Posted by: oj at September 15, 2003 12:29 PM

I was reading last night in Huntington's "Clash" on one of Orrin's favorite themes, the demographic suicide of various countries.

I am a bit late in getting to Huntington. His book is now 10 years old. A lot of it does not hold up very well.

It turns out that demographic collapses count most in static economies. If productivity is rising quickly, then you can get buy, at least for a generation or so, which is further than anyone can see ahead anyhow.

Posted by: Harry Eagar at September 15, 2003 3:24 PM