Japan's deflationary demographics

Japan's low birth-rate and ageing society is giving it fiscal problems.

Japan Should Curb Medical, Social Welfare Spending, Panel Says
Japan should curb the growth in spending on medical and social welfare because its society is aging and public debt in the world's second-biggest economy is rising, a panel advising the government said... Social welfare and medical spending is budgeted to rise 2.9 percent to 20.4 trillion yen ($187 billion) this fiscal year as the population ages, boosting expenditure on medical care and pensions, which account for a quarter of government spending. The government forecasts the economy will grow 1.6 percent this fiscal year.

Prime Minister Junichiro Koizumi has pledged to curb the expansion of public debt, which his government has projected will reach 151 percent of the gross domestic product by March 2006. The number of retirees will rise to 34 million people, or 40 percent of the population by 2050, as the populace starts to shrink from next year, the government said this month...

Japan plans tax crackdown
Japan's tax commission on Tuesday proposed a radical overhaul of income tax as early as next year in an effort to repair what it considers the country's dire fiscal position. With the fiscal deficit running at more than 5 per cent of gross domestic product before debt interest payments, the influential commission is proposing sweeping changes aimed at limiting avoidance and bringing more people into the tax net. Hiromitsu Ishi, commission chairman, told the Financial Times that immediate improvement of tax collection was needed if Japan was to meet the challenge associated with a rapidly ageing society...

Even universities are suffering the effects.

Ghosts of Low Birth Rate Haunting Japanese Universities in Real Life
A private university in Japan virtually declared bankruptcy after financial difficulties arising from a lack of students. Japanese educational institutions are anxious that the rumored "university bankruptcy" scenario was becoming true.

Hagi International University, a four-year private university in Japan's Yamaguchi Prefecture, decided in its June 20 board of administration that it was unable to manage its debts of more than three billion yen (or about 30 billion won) and will file with the Tokyo Regional Court for an application of the civil regeneration law...

Unfortunately, May trade figures show that Japan's much-vaunted export machine isn't pulling its weight in offsetting its domestic weakness at the moment.

Japan's Trade Surplus Narrows as Oil Boosts Imports
Japan's trade surplus shrank by more than two-thirds as record oil prices depressed demand for exports and boosted the value of imports, threatening to sap a recovery in the world's second-largest economy. The surplus narrowed 68 percent to 297 billion yen ($2.7 billion) from a year earlier, the Ministry of Finance said in Tokyo today. The surplus was expected to shrink to 499.1 billion yen, according to the median forecast of 31 economists surveyed by Bloomberg News. Exports rose 1.4 percent, and imports gained 18.6 percent.

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From a month earlier, the surplus shrank 1 percent to 690 billion yen, seasonally adjusted. Exports fell 0.1 percent, and imports were unchanged...

Meanwhile, A Fistful of Euros looks at the relatively more optimistic demographic trend in France, whose population is projected to hit 75 million and be the largest in the EU by 2050, as well as how demographics may be impacting textbook economics.