Japan Real Time Charts and Data

Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Japan related comment. He also maintains a collection of constantly updated Japan data charts with short updates on a Storify dedicated page Is Japan Once More Back in Deflation?

Monday, November 26, 2007

Ageing and Japan's Fiscal Position

According to an article in the Japan Times (based on data from Japan's Internal Affairs and Communications Ministry) the over 75s now constitute 10 percent of the Japanese population. This figure was 1.3 percent in 1950, when the government first started tracking such data, and rose to 5 percent in 1991 before breaking the 10 percent mark this year.

As of Nov. 1, Japan's population is estimated at 127.79 million, with 12.76 million of these — 4.79 million men and 7.97 million women — aged 75 or older. The ministry compiled the estimates on the basis of the 2005 census and data on births and deaths in subsequent years.

Men aged 75 or older account for 7.7 percent of the male population, while their female counterparts account for 12.2 percent of all of Japan's women. Those aged 65 or older totaled 27.53 million, accounting for 21.5 percent of the population.

Those aged 14 or younger, meanwhile, totaled 17.28 million, down 140,000 from a year ago and making up 13.5 percent of the population. The ratio was 35.4 percent in 1950.

The latest figures show that the graying of Japan's population is progressing faster than earlier predicted. Based on the 2000 census, the National Institute of Population and Social Security Research had forecast that the 75-or-older age group would account for 9.7 percent of the population in 2007, and that those 14 and younger would account for 13.7 percent.

Given this it is very timely that Japan's top economic council - the Council on Economic and Fiscal Policy - is about to stress that the government needs to press on with fiscal consolidation efforts in light of the shrinking and ageing of the population, at least this is the gist of a press release from the Japan Cabinet Office today. (See this Reuters report).

The council is planning to call on the government to maintain its plans to curb rises in social security payouts and cut public works spending by 3 percent. According to a draft of the annual policy paper released by Cabinet Office today:

"The state of the country's public finances is extremely severe and it is apparent that future generations will be forced to bear a bigger burden as the population further shrinks and ages,"

The draft also states that the government should strive for "fundamental reforms in the tax system, including the consumption tax" to secure a stable source of revenue to cover growing costs of social security and the falling birthrate. Amongst other issues the government needs fresh revenue sources to finance a planned increase in its share of pension contributions which go up from the current 37 percent to 50 percent by fiscal 2009/10. Many analysts have said a rise in the sales tax would be the most likely scenario. But this is likely to be the subject of heated debate given the ongoing weakness of Japanese domestic consumption and key ruling party officials, including Prime Minister Yasuo Fukuda, have recently suggested the government would not raise the consumption tax next year. In principle the Japanese government is commited to achieving a balanced budget, excluding debt issuing and servicing, by fiscal 2011/12 through both spending cuts and increases in revenues, but this is a very unrealistic scenario to accept in the present political climate I feel.

Further details on and a fuller analysis of Japan's whole fiscal situation can be found in this post.