The Vexing Problem of Japan's Aging Population

Analyzing the top news stories across the web
Oct. 10 2013 12:16 PM

Abenomics Is a Gigantic Headache for the World's Largest Pension Fund

In Japan, 23.1 percent of the population is over the age of 65, compared to 13 percent in the U.S.

Photo by YOSHIKAZU TSUNO/AFP/Getty Images

This post originally apeared in Business Insider.

By Saranya Kapur


Abenomics, the controversial Japanese economic program, has led to an upsurge in popularity for their architect Shinzo Abe, Japan's prime minister. The program is a potent cocktail of both aggressive monetary policy and loose fiscal policy. But the increasing public debt and declining bond yields that easy monetary policy brings has one demographic group worried: Japan's enormous population of pensioners.

Lower bond yields will send Japanese pension funds, which are highly exposed to government debt, spiraling into losses, reports Bloomberg. The world's largest retirement savings fund, Japan's $1,25 trillion Government Pension Investment Fund, will be particularly hard hit. It has nearly 60 percent of its portfolio in Japanese government debt.



Takatoshi Ito, head of an expert panel on public investments, told Bloomberg that the fund is exposed to "too much interest-rate risk,” and needs to invest in higher-yield providing alternatives such as real-estate trusts, infrastructure and private-equity investments and commodities. The panel will issue its final recommendations next month.

Meanwhile, the pension fund behemoth is taking small steps toward diversification. Last week, it announced measures that indicated it was in the process of separating out some of its assets and setting up a 'baby fund' to diversify its investments.

Japan's population is sharply in decline. 23.1 percent of Japan's population is over the age of 65. Japan's age dependency ratio, the ratio of people older than 64 to the working-age population was 39 as of last year. As a comparison, "young" countries like India have a dependency ratio of 8. The Japanese savings rate has also been falling for the last five years, which brings into question the sustainability of Japan's debt financing.



Don’t Worry, Obama Isn’t Sending U.S. Troops to Fight ISIS

But the next president might. 

IOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.

Why Greenland’s “Dark Snow” Should Worry You

How Much Should You Loathe NFL Commissioner Roger Goodell?

Here are the facts.

Amazon Is Launching a Serious Run at Apple and Samsung


Slim Pickings at the Network TV Bazaar

Three talented actresses in three terrible shows.


More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

The Ungodly Horror of Having a Bug Crawl Into Your Ear and Scratch Away at Your Eardrum

We Could Fix Climate Change for Free. Now There’s Just One Thing Holding Us Back.

  News & Politics
Sept. 17 2014 7:03 PM Once Again, a Climate Policy Hearing Descends Into Absurdity
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
Sept. 17 2014 6:53 PM LGBTQ Luminaries Honored With MacArthur “Genius” Fellowships
  Double X
The XX Factor
Sept. 17 2014 6:14 PM Today in Gender Gaps: Biking
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
Brow Beat
Sept. 17 2014 8:25 PM A New Song and Music Video From Angel Olsen, Indie’s Next Big Thing
Future Tense
Sept. 17 2014 7:23 PM MIT Researchers Are Using Smartphones to Interact With Other Screens
  Health & Science
Sept. 17 2014 4:49 PM Schooling the Supreme Court on Rap Music Is it art or a true threat of violence?
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.