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Every year, a dwindling pool of working-age Japanese people is forced to support an expanding pool of gray-haired consumers. This is why Japan’s living standards are falling behind rich countries with growing populations. This means more adults are forced into spending hours doing elderly care, more taxes to pay for pensions and health care, and lower living standards for the elderly.

21 Comments

Noah Smith, a Bloomberg columnist and former assistant professor of finance at Stony Brook University.

© Bloomberg

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Utterly flawed narrative. Japan's GdP per capita is basically in line with OECD norms. What's more the scourge of unaffordability hasn't hit Japan, as it has Australia, UK, Canada, Singapore, much of the US. Only millionaires can have middle-class lifestyles in Toronto, Sydney, Vancouver, London, New York, and scores of other developed cities, as numerous surveys have found. A colleague recently happily returned to Tokyo from Vancouver, calling the latter "unlivable" from a financial perspective.

As MMT has proven, funds for social security don't come out of tax revenue: they come out of an economy's resources, ie ability to produce. Japan' has been producing: housing and infrastructure have improved markedly. In many other western countries with lots more billionaires, the opposite has occurred.

Wages is a problem for Japan. But that's due to greedy and short-sighted private-sector employees, who have adopted neo-liberal business models that shift more income to shareholders and other "stakeholders" and less to labor. Sorry, but this is NOT due to demographics or the social security situation.

-2 ( +9 / -11 )

Noah Smith clearly needs to realize that for many Japanese that retirement is not an option, retirement doesn’t exist for the large number of aged here.

What is handicapping Japan is the lack of support for innovation and entrepreneurship.

Or, how about the pitiful amount spent on the young for their education?

A system that has teachers that don’t reward creativity but stifle it not allowing free thinking?

What about an immigration policy that would allow Japan to become more diverse?

How about the lack of fluency in international languages which hinder companies from accessing international markets?

There is a lack of will to tap the vast geothermal energies under Japan.Reliance on dangerous nuclear power and blinkered thinking to still adopt fossil fuel power plants are holding back reforms for free and limitless power.

There is also a vast number of homes in Japan without residents -law reform is needed to free up these resources.

Taxation reform which allows non taxable incomes to rise to mirror other advanced countries is sorely needed.

Lastly, politicians need to be age limited to 60 years of age to ensure that a Japanese policies are formulated by clear thinking individuals (clearly not the case at present)

14 ( +14 / -0 )

A couple of excellent points above, well except for the “What about an immigration policy that would allow Japan to become more diverse?” part. Why?

Anyway, my (non-professional) addition to this would be the lack of competition in some sectors of the economy and the obvious price fixing agreement between the major corps. I understand the difference in demographics but still can’t wrap my head around why, let’s say a power tool, a fixed/plunge combo Router, made in China, is double the price here of what I can buy in the US.

8 ( +10 / -2 )

One thing Japan is hugely lacking & is really hurting everyone from the people, through businesses & govt are LABOUR ISSUES!!

Japan needs a massive overhaul in this regard too many issues in this area to cover but overall employees need better protection & ENFORCEMENT of laws already on the books. Business need to pay MUCH BETTER wages!! And changing jobs should simply be a THING!!!

9 ( +9 / -0 )

I really don't want to see population growth as the answer to these problems. Sooner or later you'll have a bigger problem down the road and a never ending population problem, using up more and more resources. A doubling of the population in Tokyo is the last thing we need.

2 ( +4 / -2 )

I kind of half agree with the comments above and half agree with the original quote by Noah Smith.

On the one hand, yes the quote offers way to simple a narrative for what is a very complex issue. In many respects the quality of living in Japan is quite a bit better than in other countries. As JeffLee notes, stuff is actually affordable here even in big cities. I bought my own house four years ago here in a major urban centre on a salary that wouldn't have allowed me to enter the housing market in a similar sized city in most other developed countries to cite one example.

On the other hand though, the guy is right that demographics are a drag on the standard of living here. Its not too bad now because we're still in the relatively early stages of the greying of the population, but its getting worse year by year and these costs will be borne by the generation who are still children today. And even today, if you live in a big city you don't notice it because its not a big issue, but if you go to the countryside and see the situation in small towns - the standards of living there are really nosediving as a result of the demographic decline.

9 ( +9 / -0 )

Not only do the elderly in Japan all work, but their pensions are dropping rapidly, despite having paid into the scheme their entire lives.

6 ( +6 / -0 )

This is why Japan’s living standards are falling behind rich countries with growing populations

That's a big statement. What is it based on? What percentage of a nurse's salary goes on rent in Tokyo, San Francisco, London, Sydney, Paris? Tokyo is likely to be at the lower end. Japan could be better on many fronts of course, but some of the "living standards" it scores well on are things people take for granted, access to clean air and water, low crime level, health care, infrastructure that works, and very low private debt (cough, cough mortgages, students, cars on leases). Air pollution kills people, hampers development of children, and makes you more susceptible to diseases like Covid-19. It's going to be more important than the price of cheese.

In countries with high real-estate inflation, everyone under forty is now paying double or more (vs. wages) for the same house their parents had. That is a huge fall in the standard of living.

I think retirement schemes in most countries, Japan included, are Ponzis. I expect money printing to stop them blowing up, possibly for ever, but decent pension payouts for many will prove to be a historical anomaly enjoyed by the postwar generation but not by later ones. Like zero interest rates, I suspect Japan has simply got there before other countries inevitably do.

4 ( +4 / -0 )

The government could impose a tax on stock market transactions, increase the rate of corporate tax on large companies, and levy taxes on companies' accrued but un-reinvested profits. They could also introduce a luxury tax, and a wealth tax, and withholding tax at source from gambling winnings. But they won't.

5 ( +6 / -1 )

I have been in and out of Japan for over 25 yrs. And the aging demographic and resulting sliding standard of living has been a topic of Western media all along.

So here are last year standard of living figures for Japan.

https://www.usnews.com/news/best-countries/japan

Here is my conclusion. If Japan is deteriorating overall , then most all other countries are deteriorating even faster.

Keep up the good work Japan. Try your best. No one has it easy, but you’re not doing too badly.

3 ( +5 / -2 )

This is world wide not just Japan. My personal situation is that I am lucky that I can work from home and the office while taking care of my elderly parents. This will be the norm in years to come if not already in some countries. As for living standards falling that is a complex issue and not just the due to a greying population. I would sooner point the blame to Corporate greed as the more likely culprit.

6 ( +6 / -0 )

Hello I'm Captain Obvious. Allow me to show you the

... obvious.

-3 ( +1 / -4 )

Thing is greying is just the beginning. Not just Japan but in many other countries too will have it worse in the future : Italy, Spain, South Korea...

Keeping around 1.8 for fertility rate avoids hard hits for retirement and capacity to take care of your elders.

I don't want to die alone and in poverty.

-4 ( +0 / -4 )

Thing is greying is just the beginning. Not just Japan but in many other countries too will have it worse in the future : Italy, Spain, South Korea...

Keeping around 1.8 for fertility rate avoids hard hits for retirement and capacity to take care of your elders.

I don't want to die alone and in poverty.

-4 ( +0 / -4 )

I have mixed opinions on this. I found in many ways Japan is not expensive and public health etc. is something to be proud of.

But from a simple human perspective I feel sorry for most of the population. Overcrowded cities, small living spaces without place to relax. People in Europe and US even with lower incomes enjoy bigger living room and at least small garden than 90% percent of the Japanese. It is very stressful life that is accepted as a norm here.

4 ( +5 / -1 )

Abolish the mandatory retirement age (except for politicians....60 sounds about right). Let others continue as long as they are able and continue to pay those taxes. I do not want to stop at 70 as I am entirely healthy and capable. Come on Japan! This answer, at least, is 100% obvious.

3 ( +3 / -0 )

Jeff Lee correctly pointed out the problem in the first comment: neo-liberal, rentier shareholder centered business models depressing the share of rising productivity gains to workers.

2 ( +2 / -0 )

True .

-1 ( +0 / -1 )

Wahouu.

No one here realizing that killing the notion of a family by not having children is playing a big part and resulting in this.

One can have kids and get a better happy life if social attitudes were different about expectations.

0 ( +0 / -0 )

Utterly flawed narrative. Japan's GdP per capita is basically in line with OECD norms

Personal annual incomes and average weekly wages in Japan in constant yen terms have been falling steadily for the past 20 years. The OECD includes nations as wealthy as Luxembourg and as poor as Turkey and Mexico.

1 ( +1 / -0 )

No one here realizing that killing the notion of a family by not having children is playing a big part and resulting in this.

One can have kids and get a better happy life if social attitudes were different about expectations.

This is not a problem confined to Japan but one faced all across the developed world. There are nations like Italy, Singapore and China that have even more challenging demographics than Japan. I would attribute this to the demands of work in the modern corporate world where bosses expect everyone to work as many hours as possible combined with the challenges of raising children in the sorts of high rise apartments or flats that are purchased one finds in most big cities in Asia and Europe. Your twenty stories up, you can't tell your kids "go outside and play" while you take care of things inside. Prices are such in big cities that both husband and wife must work to pay the bills. When they get off work they have to shop, prepare meals, do housework, etc. Where is there any time to raise a family?

0 ( +0 / -0 )

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