- Declining consumer prices
- Declining real estate prices
- Declining stock market values
It almost seems like the economy is eventually going to close up shop and call it quits. Of course, that’s an exaggeration. But with housing starts at 45 year record low, it isn’t that much of an exaggeration.
A large portion of this secular decline is due to Japan’s aging, and shrinking, population. Population growth is a big driving factor behind economic growth. It’s a pretty basic concept – more people need more things.
I think a declining population and shrinking economy can be managed reasonably well if the downsizing is proportional to the smaller workforce. However, the burden of an aged society can be excessive and must be adequately anticipated with high savings rates.
Japan has historically saved a lot of money. Of course, today the savings rate is in secular decline, along with everything else, as the aging populations draws on its savings. This will impact the debtors that historically benefited from these high savings rates.
