Empowering elderly people in Japan’s aging society is the key to reviving and sustaining economic growth in the world’s third-largest economy, according to the head of a think tank unit of the Asian Development Bank.
“Demography is the biggest problem for Japanese recovery,” Naoyuki Yoshino, dean of the Tokyo-based ADB Institute, said in a recent interview with Kyodo News, pointing to the impact population trends, if left unaddressed, will have in stunting the economic recovery.
Yoshino wants the government to tap into the potential of the elderly as it promotes its growth strategy, one of the three pillars of Prime Minister Shinzo Abe’s economic package known as “Abenomics” that also includes massive fiscal spending and aggressive monetary easing.
Government data released in June showed that the elderly accounted for around 25 percent of Japan’s population of roughly 126 million. Japan has one of the world’s largest graying populations, with average life expectancies expected to further increase in the coming years.
“The Japanese problem does not come from monetary policy. The main cause of this recession in the past 20 years . . . is the aging population and demographics, and demographics cannot be handled by monetary policy,” said Yoshino.
Removing the elderly from the labor market can lead to a decline in consumption because they are forced to rely mostly on pensions, he argued.
One solution he proposes to address this structural problem is to postpone the retirement age to ensure that the elderly can work for as long as possible. This would not only boost productivity but delay payment of pensions, he noted.
An area where the elderly and young can cooperate is farming, where the elderly can allow younger farmers to use their land and get a share of the profits, Yoshino said.
He also called for local and foreign businesses to churn out more products targeting the growing elderly market. “I’m sure there are many, many needs for them,” he said. “If the Japanese market becomes bigger, then the same products may be sold in China, too.”
Japan’s robot technology will come in handy, said Yoshino, who sees benefits in making use of robots particularly in the health care industry, noting for instance the development of robots that can “communicate” with elderly patients.
Another source of economic growth, he stressed, is the use of so-called hometown investment funds to encourage startup businesses, which often having trouble getting loans from banks.
As for the central bank’s moves to pull the country out of deflation, Yoshino said he is confident the Bank of Japan will achieve its 2 percent inflation goal but hopes this will be due to increased demand and improved economic conditions.
Yoshino also has his eye on the U.S. Federal Reserve’s tapering of its large-scale monetary stimulus, which he says is a “good sign” for Japan and the rest of Asia.
Continuation by the Fed of quantitative easing and relaxed monetary policy would “definitely” push up commodity prices and oil prices, which should be prevented, he said.
Looking beyond Japan, the ADBI head said he hopes China will “adopt a market-friendly exchange rate” and “abolish capital controls.”
“Unless they introduce a market-oriented exchange rate policy, free trade agreement between China, Japan and (South) Korea will never be completed,” he said.