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Japan's Demographic Time Bomb

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September 28, 2009 – Comments (11) | RELATED TICKERS: EWJ

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?

Deej

11 Comments – Post Your Own

#1) On September 28, 2009 at 5:10 PM, chk999 (99.97) wrote:

The demographic implosion is why Japan Inc. is working on robots so hard. They need to develop ones that can do basic care for the elderly tasks.

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#2) On September 28, 2009 at 5:13 PM, alstry (35.28) wrote:

Deej,

Don't you think the more relevant question is whether the sun has set on America.  We have 100,000,000 million Americans dependent on a monthly check from government simply to eat for welfare, food stamps, and unemployment.

Unfortunatey government is no longer receiving the tax receipts necessary to sustain those 100,000,000 Americans.  Not only that, it can't even afford to pay the 21,000,000 employees working for government.

We have a $2 trillion dollar deficit and receipts are evaporating while expenses exploding...not in 10 or 20 years...BUT TODAY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

So basically, our economy is now one big ponzi scheme and the money you get for working may not be worth much if we keep heading down this path.

Don't you think government should pay each American $1,000,000 to pay off all debt, tax it as ordinary income and pay off the national debt with the proceeds, and than party like never before???????????????????????

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#3) On September 28, 2009 at 6:33 PM, lquadland10 (< 20) wrote:

IS FINANCIAL ARMAGEDDON IMMINENT?????????

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September 24, 2009 – Comments (24)

"It's almost Armageddon if the Japanese and Chinese don't buy our debt,” Robertson said in an interview. "I don't know where we could get the money. I think we've let ourselves get in a terrible situation and I think we ought to try and get out of it."

http://www.cnbc.com/id/33004753/

Since the Chinese started making pottery...they have only accumulated about $1.6 Trillion dollars of  total U.S. debt...of which about $800 Billion is treasuries....and that took a few thousand years.

China's total GDP is only $4 Trillion per year....and a big chunk of it comes from our consumption.

AMERICA IS NOW RUNNING A FEDERAL DEFICIT OF ABOUT $2 TRILLION PER YEAR AND GROWING.....CHINA AND JAPAN DON'T HAVE THAT KIND OF MONEY LAYING AROUND TO FUND OUR DEFICIT.....GUESS WHAT THAT MEANS??????????????????????????????????

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#4) On September 28, 2009 at 7:45 PM, ChrisGraley (29.80) wrote:

Why is a country that has more debt than we do buying our debt anyway?

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#5) On September 28, 2009 at 8:23 PM, vriguy (74.07) wrote:

They buy our Treasuries because there are no goods they want to buy from us, and we give them dollars for all the goods we buy from them.

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#6) On September 28, 2009 at 8:37 PM, ChrisGraley (29.80) wrote:

And they don't buy back their own debt because?

Here's a novel idea for countries in debt. PAY YOUR FREAKIN BILLS! When you make a dollar, buy back your own debt on the open market.

Better yet take your dollars to the FOREX exchange and sell them and buy Yen and buy back your debt in yen.

Just because our country doesn't understand this, doesn't mean that your country should follow.

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#7) On September 28, 2009 at 11:16 PM, Eudemonic (66.44) wrote:

Is there any country in the world today that is not deeply (>50%GDP) in debt?

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#8) On September 29, 2009 at 11:46 AM, maxnik0215 (65.70) wrote:

so what is stopping Japan from opening their country for immigration - to bring educated and qualified workers into their country at some manageable rate?

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#9) On September 29, 2009 at 12:27 PM, dudemonkey (40.13) wrote:

And they don't buy back their own debt because?

Because they can make more buying Treasuries than they'd make paying down their own debt.  Debt in Japan is unbelievably cheap, which is why they can afford to have so much of it.

This is why Japanese companies have such low ROE. Report this comment
#10) On September 29, 2009 at 1:00 PM, kaskoosek (67.54) wrote:

Japan is the best place to be.

 

I totally agree with this blog. Analyzing Mktcap/GDP shows that Japan is undervalued compared to the S&P.

 

Japan's aging population is actually US's problem as they will no longer need to buy treasuries. 

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#11) On September 29, 2009 at 1:18 PM, kaskoosek (67.54) wrote:

There is a misunderstanding of macroeconomics here. 

 

I totally agree with chris. 

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