Demographic Changes and MacroeconomicDemographic Changes and Macroeconomic Performance: Japanese Experiences

May 30, 2012BOJ IMES ConferenceBOJ-IMES Conference

ki Shi kMasaaki ShirakawaGovernor of the Bank of Japan

Chart 1

D hi Ch i JDemographic Changes in Japan160

Child and aged populationForecast

million

120

140Child and aged populationWorking-age populationTotal populationEmployed persons

Forecast

80

100

40

60

0

20

40

01970 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60CY

Note: Child population working age population and aged population refer to the number of persons under 15 years those between 15

1

Note: Child population, working-age population, and aged population refer to the number of persons under 15 years, those between 15and 64 years, and those over 64 years, respectively.

Sources: National Institute of Population and Social Security Research; Ministry of Internal Affairs and Communications.

Eff t f R id P l ti A i

Chart 2

Effects of Rapid Population Aging

Real GDP Growth Rate Real GDP Growth RateReal GDP Growth Rateper Capita

Average for 2000-10, percent

Real GDP Growth Rateper Working-Age Person

Average for 2000-10, percent Average for 2000-10, percent2.02.02.0

1 2

1.6

1 2

1.6

1 2

1.6

0.8

1.2

0.8

1.2

0.8

1.2

0 0

0.4

0 0

0.4

0 0

0.4

0.0JP US UK Euro

areaDE FR

0.0JP US UK Euro

areaDE FR

0.0JP US UK Euro

areaDE FR

2

Note: A working-age person refers to those between 15 and 64 years old.Sources: World Bank; Haver.

G th R t f W ki A P l ti

Chart 3

Growth Rate of Working-Age Population

5 year-on-year change, percent

3

4 Forecast

2

3

0

1

-2

-1 JapanUnited StatesKoreaChina

-3

2

1955 65 75 85 95 05 15 25 35 45 55

China

CY

3Sources: National Institute of Population and Social Security Research; United Nations.

Japanese Age Structure in the High-Growth EraChart 4

p g g19751955

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4100

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4million million

80

90

100

Males Femalesage

80

90

100

Males Femalesage

50

60

70

50

60

70

20

30

40

20

30

40

0 00 20 40 60 81 01 21 40

10

20

0.00.20.40.60.81.01.21.40

10

20

Males Females

W ki l ti ti 67 7% 67 8%

Males Females

W ki l ti ti 60 8% 61 8%

0.00.20.40.60.81.01.21.4million million

Working-age population ratio 67.7% 67.8%

4Source: Ministry of Internal Affairs and Communications.

Working-age population ratio 60.8% 61.8%

Total and Working-Age PopulationChart 5

2 5year-on-year change, percent

g g pGrowth Rate of the Working-Age Population Growth Rate of the Population

2 0year-on-year change, percent

1.5

2.0

2.5

1 0

1.5

2.0

0.0

0.5

1.0

0.0

0.5

1.0

1 5

-1.0

-0.5JapanUnited StatesUnited Kingdom -1.0

-0.5

-2.5

-2.0

-1.5

1955 65 75 85 95 05 15 25 35 45 55

gFranceGermanyAdvanced economies' average

CY-2.0

-1.5

1955 65 75 85 95 05 15 25 35 45 55

Japan United States United Kingdom France Germany Advanced economies' average

Working age population 0 74 0 81 0 59 0 49 0 23 0 35

1955 65 75 85 95 05 15 25 35 45 55CY

Growth Rate in 2010, percent

1955 65 75 85 95 05 15 25 35 45 55

Working-age population -0.74 0.81 0.59 0.49 -0.23 0.35Total population 0.05 0.89 0.60 0.58 -0.06 0.41

5Sources: United Nations; National Institute of Population and Social Security Research.

R i i i th J T t l F tilit R t F t

Chart 6

Revisions in the Japanese Total Fertility Rate Forecast2.4

2.0

2.2 Forecast in 1976

Forecast in1986

Replacement ratio

1.8 Forecast in1992

in1986

Forecasti 1997

1.4

1.6 Forecast in 2002

Forecast

in1997

1.2 Forecast in 2006

Forecast in 2012

1.0 1964 70 76 82 88 94 00 06 12 18 24 30 36 42 48 54 60CY

6

Sources: Ministry of Health, Labour and Welfare; National Institute of Population and Social Security Research.

Newspaper Citations on Low Birth Rate Chart 7

p pand Population Aging

number of articles

5,000

6,000"Low birth rate" or "population aging"

"Bubble"

4,000

"Non-performing loan"

3,000

1,000

2,000

01991 93 95 97 99 01 03 05 07 09 11CY

7

Note: Number of articles found in The Nikkei, The Nikkei Business Daily, and The Nikkei MJ.Source: Nikkei Telecom.

Decomposition of Real GDP Growth in Japan

Chart 8

Decomposition of Real GDP Growth in Japan

6 average of year-on-year changes, percent

4

5 Productivity (real GDP per employed person)

the number of employed persons

Real GDP

+0.92

3

0.9

+0.8

0

1 Forecast

+0.5 -0.3

-0.6 -0.8-1.2

-2

-1

0

Note: Fiscal-year basis. The rates of change in the number of employed persons from the 2010s onward are calculated using the population outlook (medium variant) and the projected labor force participation rates (assuming the labor force

-2 1970s 1980s 1990s 2000s 2010s 2020s 2030s

8

p p ( ) p j p p ( gparticipation rates in each age/sex group to remain the same as those in 2010).

Sources: Cabinet Office; Ministry of Internal Affairs and Communications; National Institute of Population and Social Security Research.

Labor Participation of Female WorkersChart 9

pLabor Participation of Female Workers in Japan Comparison of Labor Participation of

Female Workers in 2010t

90

100percent

90

100percent

60

70

80

60

70

80

40

50

60

1990 40

50

60

Japan

20

30

1990

2000

201020

30United States

Germany

Sweden

0

10

15- 20- 25- 30- 35- 40- 45- 50- 55- 60- 65-

2010

age0

10

15- 20- 25- 30- 35- 40- 45- 50- 55- 60- 65-

9

15 20 25 30 35 40 45 50 55 60 65age 15 20 25 30 35 40 45 50 55 60 65

Sources: Ministry of Internal Affairs and Communications; OECD.

“The Spending Wave”

Chart 10

p g

Housing Starts Domestic Car Sales Real Output in the Medical and Health Care Industryy

1.6

1.8 million

5million

50

60trillion yen at constant 2000 prices

1.2

1.4

3

4

40

50

0.8

1.0 2

20

30

0.6 1980 85 90 95 00 05 10CY

11980 85 90 95 00 05 10

101980 85 90 95 00 05 10

Note: Average in the last five years. The value in 2010 for “Real Output in the Medical and Health Care Industry” is calculated using year-on-year changes from 2006 to 2008.

Sources: Ministry of Land, Infrastructure, Transport and Tourism; Japan Automobile Dealers Association; Japan Mini Vehicles

10

y , , p ; p ; pAssociation; Research Institute of Economy, Trade and Industry.

Fiscal Balance in JapanChart 11

p

FY 2012 Budget (General Account)

Social Security Expenditure by Category

55trillion yen

( )Pensions

51.7 tril. yen(51.8%)

45

50

Medical care30.8 tril. yen30

35

40 National debt service

21.9 tril. yen (24%)

Others 25.4 tril. yen

(28%)30.8 tril. yen

(30.9%)

Welfare and 20

25

30Local

allocation tax grants

16 6 tril yenSocialothers

17.3 tril. yen(17.3%)

10

15

16.6 tril. yen (18%)

Social security

26.4 tril. yen (29%)

0

5

1970 75 80 85 90 95 00 05FY 09

11

Note: The scope of social security expenditure is based on the International Labor Organization standards for international comparison.Sources: National Institute of Population and Social Security Research; Ministry of Finance.

1970 75 80 85 90 95 00 05 09

Chart 12

Household Financial AssetsHousehold Financial Assets

90%

100%

70%

80%

90%

Others

Investment trusts

50%

60%

70% Investment trusts

Equities

30%

40%

50%Bonds

Life insurance

10%

20% Deposits

0%20-29 30-39 40-49 50-59 60-69 70-age

12

Note: As of 2011.Source: Central Council for Financial Services Information

Ratios of Population over 65 Years by Region

Chart 13

Ratios of Population over 65 Years by Region

Under 20.020.0–22.923 0 25 9

Ratio of aged population, %

23.0–25.926.0 and over

13Note: As of 2010.Source: Ministry of Internal Affairs and Communications.

Working Age Population Growth and Inflation:

Chart 14

Working-Age Population Growth and Inflation: Cross-Country Comparison

1990 20001990s 2000s

12year-on-year change, percent

8year-on-year change, percent

8

10

r

567

2

4

6

GD

Pde

flato

r

1234

DP

defla

tor

2

0

2G

Correlation coefficient：0.07Japan

2-101G

D

Correlation coefficient：0.67Japan

-2-1 0 1 2 3

Working-age population growth percent

-2-1 0 1 2 3

Working-age population growth percent

14

Note: For the 24 countries where the data are available among those that joined the OECD by the 1990s.Source: OECD.

Money Growth and InflationChart 15

10

15(-0.18)(0.62)

12025

(0.59)(0.79)

United States France

0

5Adjusted Money Growth (% points)

05

1015

-51970 80 90 00 10

Infration Rate (%)-5

0

1970 80 90 00 10FY

U it d Ki d Japan

152025

(0.31)(0.65)20

30(0.17)(0.49)

United Kingdom Japan

05

1015

-10

0

10

-50

1970 80 90 00 10-20

1970 80 90 00 10Notes: 1. Figures in parentheses are correlation coefficients of 1970-1994 and 1995-2011.

15

g p2. Money growth is selected as M2 for the US and Japan, M3 for France, and M4 for the UK, respectively.

Adjusted money growth is defined as money growth minus real GDP growth. 3. Because of the data discontinuity of Germany in 1990’s, French is selected as the representative of the euro area.

Sources : International Monetary Fund; Statistics by individual countries.

Population Growth and Inflation in Japan

Chart 16

Population Growth and Inflation in Japan

Population and the GDP DeflatorPotential Growth Rate and Expected Inflation in

the Medium to Long Term

9

4

5 Working-age populationLabor force

y/y chg., percent y/y chg., percent

3 0

3.5 4.5

Potential growth rate per capita

percent percent

6 3

4 Labor forceGDP deflator (right scale)

2.5

3.0

3.0 Expected inflation (right scale)

3

1

2 1.5

2.0 1.5

0 0

1

0.5

1.0 0.0

Note: Lagged values are used for population growth because they precede inflation by a year Expected inflation is the inflation

-3 -1 1960 65 70 75 80 85 90 95 00 05 10CY

0.0 -1.51991 96 01 06 11FY

16

Note: Lagged values are used for population growth because they precede inflation by a year. Expected inflation is the inflation outlook for CPI in the next 6 to 10 years by the Consensus Forecast (average of the April and October surveys in each year).

The potential growth rate is calculated by the Bank of Japan.Sources: Bank of Japan; Consensus Forecast; Ministry of Internal Affairs and Communications.

Real per Capita GDP Growth Rate in Advanced Economies

Chart 17

Real per Capita GDP Growth Rate in Advanced Economies

5 Japan United States

ten-year average growth rate, percent

4

Japan United StatesGermany FranceUnited Kingdom SpainItaly

2

3

1

2

0

-1 1971-

8073-82

75-84

77-86

79-88

81-90

83-92

85-94

87-96

89-98

91-00

93-02

95-04

97-06

99-08

01-10

CY

17

Sources: United Nations; Statistics by individual countries.

C t A t T d B l d I B l

Chart 18

Current Account, Trade Balance and Income Balance

35trillion yen

25

30

35Trade balance Service balanceIncome balance Current transfersCurrent account

15

20

5

10

-5

0

-101996 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11FY

18

Sources: Ministry of Finance; Bank of Japan.

Labor Participation of Female Workers and Fertility RateChart 19

p yPrefectures in Japan15 OECD Giants

2 0total fertility rate

2 4total fertility rate

1.8

2.0

2.2

2.4 y

United States

1.6

1.8

2.0 United KingdomFrance

Sweden

1.2

1.4

1.6

Japan Germany

Canada

1.0

Correlation coefficient： 0.381.2

1.4 Japan GermanyItaly

KoreaC l ti ffi i t 0 46

0.8 60 65 70 75 80 85

Labor participation for female workers d

Correlation coefficient： 0.38

1.0 40 60 80 100

Labor participation for female

Correlation coefficient： 0.46

19Note: The left panel includes the15 largest countries in terms of nominal GDP in 2009. The right panel shows the values in 2010. Sources: National Institute of Population and Social Security Research; Ministry of Internal Affairs and Communications; OECD.

aged 30 to 44, percentLabor participation for female workers, percent

L b P ti i ti f A d W k

Chart 20

Labor Participation of Aged WorkersLabor Participation of

Aged Workers (over 60) in Japan Labor Participation by Sex in Japan

50

55

TotalMales

percent

90

100percent

40

45

MalesFemales

70

80

35

40

50

60

25

30

30

40

15

20

0

10

20 Males

Females

20Note: The statistics do not include the data for Fukushima, Miyagi, and Iwate prefectures in 2011.Source: Ministry of Internal Affairs and Communications.

151990 92 94 96 98 00 02 04 06 08 10CY

015- 20- 25- 30- 35- 40- 45- 50- 55- 60- 65-

Chart 21

Population Aging and Health Care Expenditure

Japan Germany United States France United Kingdom

Population over 65 Years(Change from 2000 to 2010, percent) 33 25 16 11 11

E dit f H lth C

Source: United Nations; OECD

Expenditure for Health Care(Change from 2000 to 2008, percent) 11 25 74 49 85

Source: United Nations; OECD.

21

G D ti P d t d G N ti l I i J

Chart 22

Gross Domestic Product and Gross National Income in Japan

GDP and GNI Income Balance

18

20Portfolio investment incomeDirect investment income

trillion yen

116

118 Gross domestic productG i l i di i

CY 2000=100

14

16 OthersIncome balance

110

112

114 Gross national income - trading gains

8

10

12

104

106

108

4

6

8

98

100

102

0

2

1996 98 00 02 04 06 08 10 11FY

94

96

1996 98 00 02 04 06 08 10 11CY

22

Sources: Cabinet Office; Ministry of Finance; Bank of Japan.

FY

Chart 23

F i O t d Di t I t tForeign Outward Direct Investment

90 percent of nominal GDP

70

80 Japan

United States

50

60 Germany

France

United Kingdom

30

40

g

10

20

0 1990 92 94 96 98 00 02 04 06 08 10CY

23

Source: OECD.

Chart 24

L b P d ti it E l d P b C tLabor Productivity per Employed Person by Country

United States

Italy

France

Germany

Canada

United Kingdom

20 30 40 50 60 70 80 90 100

Japan

h d USD

24

Note: Average in 2000s.Source: World Bank.

thousand USD