Japan gets another reminder of its population crisis

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by Shaun Richards

As we start out journey into 2022 there are some factors which we have been noting for many years. A reminder of one has been provided by the land of the rising sun or Nihon today. The Japanese owned Financial Times is on the case.

A record low number of Japanese turned 20 last year as the country’s future workforce dwindles and a generation that has grown up with tepid growth, low inflation and a zero-interest rate policy reaches official adulthood.
The latest government figures show the number of Japanese who were aged 20 on January 1 2022 had fallen by 40,000 from the previous year to roughly 1.2m, the lowest since the survey began in 1968.

The subject reminds me of the work of the economist Ed Hugh who is sadly no longer with us. The more general demographics situation is shown below.

The decline reflects Japan’s persistent inability to reverse the falling number of births. The birth rate stood at 1.34 children per woman of childbearing age in 2020, with just 840,000 babies born in Japan that year.
Japan’s population had dropped to 126.6m by the start of last year, a continuation of a steady decline since its 2008 peak of 128m.

What the FT does not tell us is that the rate of decline has been picking up speed and on reading the piece I was wondering if when the latest figures are produced we will see another decline of the order of a quarter of a million in the total? Oh and I am not so sure where the FT’s population numbers as the Statistics Bureau tells us this.

Japan’s total population in 2020 was 125.71 million

The reason for the focus on your adults is that today is coming of age day and oy looks as though the concept of the “lost decade(s) has seeped into the national consciousness.

They don’t think the economy will get better in the future because the economy has been growing at a very low pace as far as they can remember. The number of students who want to become local public servants has increased recently as they want stability,” said Nakagawa.

There is something rather familiar as I note that the legal age of majority has gone from 20 to 18 thus flattering this year;s intake whilst of course reality is unchanged.

New Year’s Resolutions

The times they may be changing but one thing is extremely familiar.

Of the numerous exercises that Japan has set itself this year, four stand out. The first is Prime Minister Fumio Kishida’s so-called “Vision for a Digital Garden City Nation” — a wide policy dragnet focused on long overdue efforts to digitise the education and medical systems, and haul other key bits of bureaucratic infrastructure into the digital age.

Best of luck with that as the public-sector in Japan has resisted reform for quite some time. The next one sounds to be like an effort to shift some of the bulging balance sheet of the Bank of Japan onto overseas investors.

A second resolution is to push even harder to establish Tokyo as a talent-magnetising, fund-enticing and regionally dominant global financial centre.

If they bought more then the Bank of Japan might be able to offload some of the 36.3 trillion Yen of Japanese equities it has bought. This seems to be on theor minds as point three is really more of point two in my view.

The third, which has been in the works for a while, is the great reorganisation of the Tokyo Stock Exchange in April — an exercise intended to whip (via new standards) a sprawling paunch of 2,185 names currently listed in the First Section into a more investable, higher-quality six-pack of “prime” stocks.

Finally we have this.

A fourth pledge of national self-improvement is to establish what is tentatively being called the International University of Excellence and is a project aimed at putting Japan’s research universities on a par with global peers.

There is quite a change here from the sweeping ambition of Abenomics and its three arrows. Although the third arrow of structural reform continues or rather talking about it but not doing it. Oh and through the Abenomics period there was something that happened every year. The media would assure us that wages were about to rise and were full of businesses promising to do this. Then it would not happen. For example the wages index was set at 100 in 2015 and in 2020 it was 98.6 so all the reports of rises were if we are polite a mirage. That looks to have continued last year as the latest numbers ( for November 2021) show another 1.4% fall on a year before.

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Bond Yields

These are something which have been on the rise as 2022 gas started. For example the US ten-year has reached 1.8% this morning and the same maturity for Germany is on the verge of going positive at -0.03%. That would be significant as it has been a while.

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But Japan has Yield Curve Control and thus the ten-year yield has moved very little and is now 0.13%. If we return to point two of the New Years Resolutions it is going to be hard to get investors to buy Japanese Government Bonds when relatively they are getting less yield. So the Bank of Japan and its 521 trillion Yen holdings has created quite a false market here.

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We can take the false market issue wider because in round numbers the Nikkei 225 is some 20,000 points higher than when it became an objective of economic policy later aided by the 36.3 trillion Yen of purchases by the Bank of Japan.

The Yen

We can complete the financial market check with a wry smile. Since it is no longer a national objective the Japanese Yen has been falling. Oh Well! As Fleetwood Mac would put it. A UK Pound now buys 157 Yen although it has been rising generally recently. If we switch to the US Dollar it has fallen to around 116.


Just a reminder that overall there isn’t any as Japan yet again manages to be a global outlier in this regard.

 The consumer price index for Japan in November 2021 was 100.1 (2020=100), up 0.6% over the year before seasonal adjustment, and up 0.3% from the previous month on a seasonally adjusted basis. ( Statistics Bureau)

So maybe a small flicker and there is some domestic energy inflation as the category including it ( utilities ) is some 9.2% higher but the push is lost elsewhere in typically Japanese fashion.


The essential problem of the lost decade(s) era which has lasted since 1990 is lack of economic growth. We see international comparisons of the Covid-19 but they invariably omit the fact that the economy had lurched downwards before then due to the impact of the Consumption Tax increase. GDP fell by 14 trillion Yen to 543 trillion Yen in the second-half of 2019. So once this is over can Japan grow again?

There is a sub-plot as the shrinking population means that the per capita or person figures are better.

Another perspective is that in Japan you can get a job. The unemployment rate is 2.8% with the catch being the wages that are paid.

A clear and present danger is the rise in the price of energy for a nation which lacks natural resources and thus imports so much of it.

As a final theme Japan is signalling at least some of our future. Aging and declining populations with little or no economic growth. So perhaps we should plan for that as it does offer help for the green debates. Fewer of us would help.


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