WHEN it comes to the economic impact of demography, Japan is the wizened canary in the world’s coal mine. It has become older faster than any other big country: its median age went from 34 in 1980 to 46 today, and will continue rising for decades. But it will soon have plenty of greying company, from wealthy countries such as Finland and South Korea to developing giants, including China and Russia. Economists generally agree that the ageing of populations leads to slower growth, because a country’s potential output tends to fall as its labour force shrinks. They also expect heavier fiscal burdens, with governments providing for more pensioners from a smaller tax base.
Until recently, though, there had been little research into how demography affects inflation. The Japanese example of persistent deflation over the past two decades was seen as evidence enough that prices fall when countries age and their growth slows. Shinzo Abe, Japan’s prime minister, has sought to disprove that, espousing massive monetary easing to get prices rising. With inflation slumping far below the Bank of Japan’s 2% target in recent months, it is tempting to conclude...Continue reading
No comments:
Post a Comment