Elliott and Associates


Elliott & Associates Research Global Markets: Japan's Death Spiral and its Economic Effects

Japan's number of births has hit an all-time low for 4 years in a row, spelling a worrying issue on its already delicate economy.

In 2014, the estimated birth-rate in Japan reached a record low of a mere 1 million while the number of registered deaths reached 1.3 million. Such downward trajectory in the country even worsens the already bad situation with a shrinking and aging population.

As noted by Elliott & Associates Research Global Markets, births in Japan have seen a huge and relentless decline for decades now. Starting in 1973, there was not a year where the fertility rate in Japan hit enough numbers to support a stabilized population. Though there were some recent improvements made, they were still not enough to increase the numbers. The number of deaths that has outnumbered the number of births by the biggest margin yet poses a problem for the government to ensure the small workforce can continue to support growing number of seniors.

Experts would say Japan is in a "death spiral" because its demography has been on a bad situation for a long time now that it is virtually impossible to change its trajectory significantly.

Data shows that the so-called "death spiral" started in the 1970s and has since proceeded in a gradual but steady decline. Indeed, last year's population decline was a record low but that's already something to be expected every year for the next decades.

According to an official from Elliott & Associates Research Global Markets with knowledge of the data, the women of who are of reproductive age are declining which inevitably leads to a decline in the number of kids. To be fair, Japanese women today are having a bit more children on average than they did years ago. However, there are fewer women in the population now who could bear a child so it's still not enough to make up for the difference.

Japan's government bond market has been surprisingly strong even in such demographic issues though this cannot be counted on to continue indefinitely. There will come a time that people will realize Japan won't have enough productive citizens anymore and so won't be able to return debts (except perhaps by printing money).

The Japanese government has already issued a warning that by the year 2060, almost 40% of their population would consist of seniors. As it is, they are already having difficulties supporting the pensioners that make up one fourth of its total population now.