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Latest economic forecasts for Japan, the U.S., Europe, and China, etc
The Japanese population is already shrinking, having reached a peak in 2006. The economically active population has also been declining since peaking in 1998, and the decline in labor inputs over the next 25 years (2005-2030) will make a negative contribution to growth of -0.2% per year. Japan’s potential growth rate will decline from just under 2% at present to 1.2%. Furthermore, if labor productivity falls due, for example, to a higher proportion of the economy being accounted for by services, where productivity is low, or a decline in job satisfaction stemming from a rise in the national contribution ratio, Japan’s potential growth rate will fall further to 0.9%.
Growth in labor productivity leads to increases in individual living standards. In order to raise labor productivity, it will be essential to take steps to increase external openness, attract people, goods, and funds to Japan, and stimulate innovation. Policies that may cause considerable frictions in society, including acceptance of immigrants and inflows of foreign capital, will have to be considered, and it will be necessary to revise the social security system in order to build a society in which feelings of intergenerational inequality are eliminated and job satisfaction is enhanced.
In 2030, population aging will cause the household savings rate to become negative, prompting the trade balance to go into deficit. On the other hand, the balance of investment income from external net assets (accumulated in the past) will expand, and so the current account surplus will continue. Japan will move from being an immature creditor nation, as at present, to a mature creditor nation.
These demographic movements and changes in economic growth do not owe their origins to issues specific to Japan, but may rather be regarded as the typical outcomes of becoming a developed country, such as the establishment of generous public old-age security systems and lengthening life-spans. Emerging economies in Asia, such as South Korea and China, will also follow suit. Japan is in this sense an aging developed country, and by surmounting these various challenges, it can continue to achieve higher individual living standards.