Region – Asia's dramatic demographics

Ageing doesn't seem to me to be the best way to summarise the dramatic demographic shifts under way across Asia. That's not because the increase in longevity isn't both big and important. But in theory, a population that lives longer should increase more quickly. That Asia's populations are instead rolling over is because of the fall in fertility, a phenomenon that is the result of two trends. First, much like the rest of the world, women in richer areas of Asia are marrying later. But second, unlike elsewhere, that shift isn't being accompanied by a rise in the propensity for births out of wedlock.

Because Japan has led these demographic shifts, and Japan has had deflation, it is common to associate demographics with falling prices. Even in theory, that seems debatable: a fall in the working population that cuts the supply of workers might well increase wages. That this hasn't happened in Japan is partly because of the big rise in participation rates in the years before the pandemic, which has allowed employment to rise even though the population was declining. Korea now looks to be following a similar path.

The BOJ feels that this rise in participation is now running out of steam. That seems reasonable, given participation rates are now so high, and that belief, in turn, underpins the bank's confidence about the nominal outlook. However, if demographic change is now becoming relevant for the economy via higher wages, it is also causing a counter trend. With the fall in Japan's population clearly accelerating since 2020, demographics are constraining aggregate consumption and so masking a recovery in spending that has become evident in per capita terms.

Across the region, one of the clear policy implications of the increase in longevity is the need to raise retirement ages. And across the region, governments are proving reluctant to do just that. This, of course, is understandable: politicians everywhere fear that raising the retirement age will damage their electoral prospects. It is worth noting though that this caution is even true in China, which is interesting not just because the CCP leadership doesn't face the same sort of ballot box worries, but also because requiring people to work longer would seem to be the very antithesis of the "welfarism" that Xi Jinping has so obviously criticised.

Chapters:

• 00:00 - Buckle Up: The Demographic Crisis in East Asia Awaits
• 00:13 - Japan at the Forefront: The Aging Giant
• 01:10 - The Two-Edged Sword of Population Dynamics
• 03:49 - Japan's Economic Puzzle: Deflation or Inflation?
• 10:41 - Retirement Age: The Clock's Ticking Faster
• 13:44 - China's Demographic Dance: Aging with Political Twists
• 20:06 - Consumption, Wages, and the Japanese Paradox
• 26:29 - Taiwan's Tech Titans: A Tale of Two Companies
• 33:39 - The Future of East Asian Economies Through a Demographic Lens
• 35:03 - Data: The Unsung Hero of Economic Analysis
• 40:02 - Wrapping Up with a Bang: Your Next Steps