Takeo Hoshi Paper Cited on Japanese Debt
Why Monetary Easing Won’t Help Japan
Virginie Maisonneuve, AdvisorOne
Japan’s new leader, Shinzo Abe, will take the helm of a country in recession, with business confidence near three-month lows and the highest debt-to-GDP ratio in the OECD. The prime minister, who has openly pushed for more aggressive monetary stimulus, has made clear his economic targets for his second period in power: overcoming deflation, reversing the rise of the yen and achieving nominal GDP growth of at least 3%. But how realizable are these goals in light of Japan’s demographic realities?
Japan has one of the most challenging demographic profiles globally. It is the oldest country in the world, with a median age of 44.7: five years higher than the developed country average and over 15 years higher than the global average. Life expectancy is high at 83, while Japanese fertility has, since the 1950s, been undergoing a steep and long fertility decline – one of the most dramatic in modern history. Current childbearing is estimated to be nearly 35% behind the replacement level.
Takeo Hoshi is the Pacific Economic Cooperation Professor in international economic relations at IR/PS, and a research associate at the National Bureau of Economic Research (NBER) and at the Tokyo Center for Economic Research (TCER). His major research area is the study of the financial aspects of the Japanese economy, especially corporate finance and governance.