26/12/2006

The Economic Impact of Aging Baby Boomers -- Medium-term Economic Forecast (FY 2006~2016)

Koichi Haji 

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Japan, the U.S. and Europe share a common challenge in the next decade -- accommodating the aging of postwar baby boomers, which will slow or reverse labor force growth and compel basic social security reforms. Japan’s economy is finally shedding remnants of the bubble economy and heading toward normalcy. With deflation defeated and the consumption tax rate set to rise, consumer price inflation will average 1.6% to fiscal 2016. GDP will expand 1.7% per year in real terms, and an impressive 2.6% in nominal terms. To accommodate the effects of aging, the common prescription for all economies is to tap unused resources more effectively. For Japan, this means mobilizing the labor force of women and elderly workers, improving the low return (relative to the U.S.) of foreign asset holdings, and enhancing the efficiency of existing capital stock.

Koichi Haji

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