Japan Echo Web

The Japanese Economy Amid Aging and Declining Population and Fiscal Deficits

The effect of Japan’s “lost decade” lingers today, nearly ten years later, and there are still few signs of convincing recovery. Faced with new challenges of recovery and reconstruction from the Great East Japan Earthquake, Japan’s economy will likely continue to confront medium- to long-term constraints that lie ahead, including further population decline, a lower birthrate combined with population aging, and accumulating fiscal deficits. Viewing the current situation it is hard to say that deflation is under control. Advancing strength of the yen and low stock prices tied with the increasing sovereign risk in Europe and the United States are making it increasingly difficult to identify a new growth path.

This article narrows down the impacts of medium- to long-term constraints on the Japanese economy, particularly with regard to population aging, the declining birthrate and fiscal deficits, and ties this together referring to policies necessary for sustainable economic growth.