By Dean Baker, CEPR, 29th April, 2012
The
Washington Post has a practice of running a story ever month or so
about Japan facing a demographic nightmare because its population is
living longer. The idea is that this will impoverish the nation's
youth, imposing a crushing burden for caring of the elderly. Of
course those who know arithmetic know better.
This
month's feature
began by telling readers:
"The
ominous demographics of this aging nation have long been seen by
Japanese as a distant concern, not a present-day one. But that
mind-set is being called into question by a prime minister who says
that a crisis requiring immediate sacrifices has already begun.
In
recent months, Prime
Minister Yoshihiko Noda
has staked his job and bet his support on a tax increase designed to
fund Japan’s soaring social security costs.
And
the potential
tax hike
is only a sneak preview of the burdens to come as Japan grows into
the world’s grayest society, a nation where two decades from now
seniors will outnumber children 15 and younger by nearly 4 to 1.
Economists
and government officials say that Japan, in the coming years, will
probably raise the retirement age, again increase taxes and trim
spending on everything from education to defense, all to care for its
elderly.
Young
Japanese — those entering the workforce amid two decades of
stagnation — will face the greatest burden: They will earn less in
real terms than their parents, pay higher pension premiums, receive
fewer social services and, eventually, retire with a less-generous
pension package."
Okay,
let's unpack this one a bit. First, by every measure Japan's economy
is operating far below its potential capacity. Why on earth does it
need tax increases to pay for anything right now? This makes zero
sense.
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