Japan's Demographic Time Bomb
Despite all of the euphoria surrounding the recent political party change in Japan, Barron's published an extremely bearish article on Japan in this week's issue. It contained some good data, including the following items:
- Japan's gross national debt now equals 217% of its GDP, compared with 81.2% for the United States and an average of 72.5% for the G-20 nations.
- The UN median forecast estimates that Japan's population will fall from its current 127 million to only 101.6 million by the year 2050 (the same forecast has the U.S. population rising from 317 million to 404 million during that period).
- Japan itself is predicting that the number of Japanese citizens of prime working age (15-64) will fall from 83 million in 2007 to 49 million in 2050.
- At the same time, the number of older, retired workers that are dependent upon the working generation to fund their pensions, etc... will rise from 27.5 million to 38 million. If this forecast is correct, the ratio of elderly to workers would rise from its current 33 per 100 to 77 per 100. Ouch.
I do not currently have a single Japanese company in my portfolio. With the U.S. consumer retrenching, the eternally weak Japanese consumer, and demographic headwinds in both countries (the latter's being much worse than the former's) I'm glad that I do not have any exposure there. I probably wouldn't shy away from investing in a Japanese company, but it would have to be priced extremely attractively for me to pull the trigger on it.
Is the Sun Setting on Japan?