It may be the start of a New Year, the start 2015, but that doesn't seem to usher new life into the Land of The Setting Sun. Just after Christmas in 2014, we penned down the sheer demise of the Japanese economy as prices slipped yet further, but we revealed the real stunner to be real wage growth, or in Japan's case, real wage shrinkage. Readers should know by now how we feel about Japan, and how utterly deep the country has been digging into quicksand. It is on one hand a little sad to see a once great imperial nation slip into the shadows, but it is sheer comical to see its central planners (Abe, Kuroda et al) engage in fancy polices which are but a nostrum.
We thought the string of surprises would end there for 2014, but it didn't. Those cheeky Japanese had to pull one last hare out of its hat, and on New Year's Eve of all times. That was technically no surprise to us because it was to be expected. It just proves the title of this piece, that Japan is literally dying, day by day. Not an economic death, but a mortal death.
Highest Number Of Deaths; Lowest Number Of Births
Japan's Health Ministry reported on New Year's Eve that the country saw 1.001mn births and 1.27mn deaths in 2014. Births were 9,000 lower than in 2013. Even taken by themselves, these 2 statistics are significant in highlighting a key nail in Japan's coffin: its population is shrinking. If a country experiences a shrinking population, not because of migration or a plague, but because of a demographic trend, it is indeed very safe to say that the country is in decline.
When we look at data, we never look at a single set. So when taken into proper context as the following chart highlights, we realize that at 1.001mn, 2014 had the lowest births of any year so far; and at 1.27mn deaths, Japan had the higher number of deaths on record. This means the birth-death gap is not only negative, but by the largest negative in history. The trend in both directions shows no sign of turning, so continue to expect the expected going forward.
There are no shortage of extrapolations, all of which paint almost the same picture of a greying population without the ability of a productive demographic to reproduce at the current replacement level. As aging baby boomers slip into retirement and eventually pass on, the onus of a shrinking population and an economy with little competitiveness to the table should be enough to make one shrivel in cowardice, even when being some 35 years ahead of those predictions.
The current Administration of Shinzo Abe inevitably takes this age old problem into account when campaigning and winning over the population's popularity. Japanese politics is quite literally a game over which party spins the nicest and fairest tale on the fate of Japan's demography. But whatever jawboning politicians may utter from the start of 2015, the hard and cold facts don't change.
Home prices although in a 25-year bear market, have failed to stimulate child bearing by younger families. Tokyo remains one of the world's most densely populated cities. We feel it first hand being in Singapore, which is also extremely densely populated. Home affordability has always been an issue for young families in these cities. However, effects are more pronounced for Japan because of its fragile economy, always teetering on the edge of recession (4 recessions in the last 5 years and currently in one).
Lower child bearing rates are a secular trend amongst the developed nations and isn't exclusive to Japan alone. Countries like Germany, Britain, Singapore, Switzerland, and to some extent America are reeling from the effects of the general unwillingness to bear children. People are getting married at older ages, even so they tend to wait longer before choosing to conceive a child, and even tent the number of conceptions averages lower than the long term historical averages.
Without delving too far off topic, here are some of the commentary from news sources. The BBC was first to break the story:
The story doesn't improve with the Financial Times coming up with pretty depressing extrapolations. Such are the facts that the surmounts the nation:
More Than Just Demographic Issues
We want readers to understand that japan is not only facing a long-term demographic problem, but also structural issues, some of which are more immediate than others. Although we have laid down a very comprehensive primer on the issues Japan faces, albeit almost 3 years ago; the relevance of said 3-year-old content proves how prevalent these problems are to Japan. Not all chickens have come home to roost yet, and we suspect what has been a slow trickle in the past will subsequently escalate into a more sizable flow and ultimately unleash the torrent of malaise that has been kept being the dam for more than years now.
As much as we wish to write another missive about the state of affairs in Japan, we just do not have the time to revisit topics that have been already been extensively covered in the past. New meat on the same old bones, as they say. What we can tell our readers with good confidence, is that as long as the BoJ and the Japanese government remain predicated on fixing leaking pipes and a sealed pressure cooker with duck tape, problems will not be fixed and will all come cascading down once enough time has elapsed.