I'll say something more later on the main theme of my earlier posts, which is about politics not economics, but I would like to reply to two messages about Japan's economic problems and solutions.

Jean-Christophe Helary writes that the problem is demography and says the solution is to boost the birthrate by subsidizing education and making careers with children possible for women. I'm fine with his policy prescriptions but to think they would make a big change in the demographic picture at least for 30 or 40 years doesn't make sense. First, because the number of women of childbearing age is dropping, even a substantial rise in the birth RATE will not result in many more babies. Second, babies born in the next five years or so would not be entering the labor force for twenty or twenty five years.

Then, Greg Johnson agrees that demography is the problem but "immigration is the answer that few dare speak of in Japan." Really? Seems to me the day doesn't go by without someone talking about it, but anyway, back in the late bubble when Japan had a labor shortage immigration increased substantially. I'm confident it will again if Japan ever faces a labor shortage again.

But both are side issues. The key point, not widely recognized, is that the few-children aging society has NOT been the reason for Japan's economic troubles over the last 20 years, and is NOT the main problem for at least the medium-term future. That is because the way aging is supposed to hurt economic growth is by a shortage of workers or a shortage of money for investment (because the savings rate should drop). Has either been a problem for twenty years? Absolutely not. Will it be soon? I sure hope so--a tighter labor market and more demand for investment funds, which can only come from increased demand, is just what the Japanese economy needs. But I doubt it.

Aging causes problems, for sure, but it is far from the biggest problem facing the Japanese economy today.
When I do talks I usually put it as #4 or 5. I recently did a talk on this subject (at Shaken, the host for this forum, as it happens), and I'll send the slides to anyone interested.

John Campbell