Money in the Age of Rapid Population Decline
May 23, 2021 (Sunday) A rare glimpse of sunshine
Money in an era of rapidly shrinking population: Stocks, currencies, interest rates... Changes approaching the shrinking archipelago
“The advancing birth decline is a crisis,” said at the April 26 meeting of the Council on Economic and Fiscal Policy, where private sector members projected that the number of births in 2021 would fall below 800,000.
Under the government’s traditional outlook, the 800,000 threshold would be breached in 30 years.
The spread of COVID-19 led more people to delay marriage and pregnancy, accelerating the pace of population decline by about 10 years at once.
Japan, along with 22 other countries including Thailand and Spain, are projected to halve their populations by 2100.
Changes in population dynamics are likely to affect the movement of money as well.
In Japan, more than 60% of the 1900 trillion yen in personal financial assets are owned by those aged 60 and older.
Now, this affluent segment—the major clients of large securities firms—may shift their assets from equities to deposits in the future, potentially weighing on stock prices.
Money in an era of rapidly shrinking population: Stocks, currencies, interest rates... Changes approaching the shrinking archipelago
Attention must also be paid to foreign exchange rates and interest rates.
The foreign exchange market is said to reflect national strength over the long term.
If the yen loses its status as a “safe haven,” foreign capital could flow out and a “bad yen depreciation” could advance.
Money in an era of rapidly shrinking population: Stocks, currencies, interest rates... Changes approaching the shrinking archipelago
On the other hand, if population decline is viewed positively, there are alternative perspectives.
As Japan, the world’s first to enter a super-aging society, we can avoid simply shrinking the economy and instead accumulate wisdom to “shrink wisely” while maintaining national strength.
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