Japan’s demographic Crisis (part 1)

With the devastating effects of the earthquake and tsunami still raging and the full economic impact is far from being clear I instead focus on the much longer term and potentially more damaging problem facing Japan, its aging population.

Japan’s economic growth after WWII is rightfully regarded as one of history’s success stories. Between 1960 and 1990 mean GDP per capita increased by 372% or 5.2% a year, making Japan one of the wealthiest countries on Earth. Following the crash of 1989 Japan has suffered through one crisis after another: the recession of the early 90s, the Kobe earthquake, the Asian currency crisis, the dot-com bubble, the 2001 global ‘slow-down’ and the 2008 financial crisis and world recession. Between 1990 and 2009 the mean GDP per capita has increased by an average of just 0.7% per year.

What is the cause of Japan’s economic stagnation? The effects of the multiple crises are surely partly to blame but Japan was able to rise from the aftermath of a significant military loss and through the oil crisis of the 1970s better off. During the second half of the 20th century the composition of Japan’s population changed significantly, initially driving it to incredible economic prosperity and now preventing it from escaping what is effectively a 20 year recession.

In part 2 I will show how Japan’s demographics are undergoing great change and what implications that may have on its economic future.

Sources: World Bank


About Michael M.

Final year undergraduate Economics student at the University of Birmingham.
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