Professor Fumio Hayashi of the National Graduate Institute for Policy Studies (GRIPS) in Tokyo makes a no-nonsense argument in the paper this week about why Japan has spun its wheels for the past 30+ years.
This is just “..what one would expect for any country experiencing a population aging as rapid as Japan’s.”. Moreover, his assertion is based on “..the finding of a negative association, across countries, between growth and aging.” and for China future progress is clear; “China’s GDP relative to U.S. GDP for 2050 will be higher than it currently is, but not by much.”.
If I may be permitted here, Ouch!
The Professor argues a lot of analysis on what’s happened to Japan has been of the ‘proximate’ (he references some of his own earlier work in the process) not ‘fundamental’ variety. Behind the womble about Total Factor Productivity declines and etcetera the simple fact of a rapidly ageing population is where Japan’s ‘fundamental’ problem has lain.
Just look at what happened over the last 60-years (below, for Japan follow the red dot).
China’s not the only country that has a problem with rising wrinklies. With reference to historic series he identifies the OECD’s other secular-stagnators i.e., most, ..
..and whilst, yes, China blasts past the U.S. in terms of total GDP by 2050 and will, at that time be the most awesomest economy on the planet (below), it’ll still lag massively in terms of per capita GDP and from that point have little hope of closing the gap much more.
We’d all, I’m sure, like the Professor to be wrong; but I think this is compelling if somewhat enervating analysis.
You can review the full paper via this link The Root Cause of Japan’s 30-year Stagnation.
Happy Sunday.