What happens when a country is disappearing right before our eyes?
Demographics are an issue that is starting to get a lot more attention in financial and economic arenas. A decade or so ago, there were still people touting the idea of overpopulation being a problem.
Now we are rapidly realizing that fertility rates around the world are plummeting. The developed world is facing the crisis first yet this is being reflected in most countries.
At the top of the list is Japan. They started in crisis a number of decades ago and things are reaching the stage where there is no going back.
This is important since we are discussing the third largest economy in the world. What will happen if this faces the economic contraction that is associated with demographic issues.
Under 800K - 10 Years Early
The problem we are seeing is forecasts and models that are being used are failing miserably. What was presented as a timeline is being obliterated. Unfortunately, this is on the dire side.
Elon Musk might be right: Japan could be disappeaing.
The Children and Families Agency was created to oversee child policies, including tackling child abuse and poverty, and comes after the number of babies born in the country in 2022 slid below 800,000, a level reached more than a decade sooner than the government had estimated.
This is a situation we see often repeated throughout the developed world especially.
At 799,728 births, the figure represented a 5.1 percent drop from the previous year and seventh consecutive annual fall. It marked the first year births had fallen below 800,000 since records began in 1899, according to preliminary government data released in February.
The last sentence shows the enormity of this statement. In over 120 years, this is the first time there were less than 800K births. There is no way to spin this as a positive.
Of course, there are calls for the government to do something. Unfortunately, if the trend is not reversed by the end of the decade, it might be too late.
The result is an aging population that is dependent upon social security and other forms of sustinence. When the working population shrinks, the economy cannot support the aging population.
Some believe only a radical transformation and new approach by the government will be able to avert the crisis.
Without such a drastic measure, the number of births in Japan is likely to continue to slide and fall below the 500,000 threshold in 2052, 20 years earlier than the government predicted in 2017, he said.
This is a dire warning that is keeping with the treds we are seeing. So why would anyone figure that another forecast will come true early?
Deflationary Spiral
In a time when prices are elevated, it is hard for people to grasp how devastating deflation is. Japan is one country that is facing a spiral. It is not alone.
The problem is this is taking place during a period when we are seeing acceleration of technology. That is also deflationary.
On one hand, this might seem like a good thing. The problem is deflationary environments make it difficult for societies to keep moving forward. Innovation requires investment. To garner this, we need expansion.
People tend not to invest during deflationary times. Essentially, the pie gets smaller, restricting investment. This shows up in innovation as less of everything is required.
For example, think of the loss taken by banks and families under these circumstances.
According to this article, there are now 10 million homes sitting empty. Do you think there will be a robust construction industry with circumstances as they are? Think of the tentacles to the economy that is now gone since we are looking at contraction.
The challenge rests in replacing lost consumption. While technology can help offset the loss of workers, the only way to consume is to export. This is a problem when most countries are facing the similar demographic issues.
Here is a headline from Financial Times:
It is a situation being repeated throughout the world. In the meantime, it is at the doorstop of Japan.
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