Is your country ready for its Japanification?
The 4th and final webinar in the "Ageing Effect" series, organized by Swiss Re Institute and the Asia Society Switzerland, took place last week. As with the previous sessions, it was eye-opening - and should, frankly, be mandatory viewing. After all, what happens in Japan is our future - we should learn and prepare.
The event's title was "The Japanification of the world" - in short, the term Japanification refers to what Japan has experienced in the past few decades: low growth, low inflation, and low interest rates, all driven by an ageing population. The demographic trends, in Japan and across the globe, are starkly clear - our societies are growing older and older, shifting balances, creating looming challenges for cultures and economic systems. However, as the Japanese example shows, there are also opportunities.
This final webinar brought together Yumiko Murakami, Head of the OECD Tokyo Centre, and Jeffrey Bohn, Chief Research Officer of the Swiss Re Institute (and a Japanophile who's lived and worked in Japan for years). Moderated by Asia Society Switzerland's Nico Luchsinger, the conversation focused on the Japan's experience and learnings - and what the rest of the world can learn from the country that leads in terms of ageing societies.
The tsunami of demographic changes
Yumiko Murakami opened with a memorable introduction - she compared the demographic changes (something that sounds rather tame) with a huge tsunami. Suddenly the idea of demographic changes sounds dramatic - and that is exactly what it is. We should remember the image of the tsunami. Murakami said that Japan is, at this time, riding the tsunami wave and that the country is highly aware of the challenges ahead.
The above chart shows you countries' old-age dependency ratio (ratio of the 65+ population to the working age population (15 to 64)). Japan is leading, by a lot - but none of the other countries should sit back and relax. The demographic shift is happening around the world and Japan's reality today will be ours tomorrow. To illustrate, Murakami shared a second slide (see below) - and it depicts the projected old-age dependency ratio by 2050.
You see that there will be continuing large shifts in all the charted countries - with some of them (Korea, Spain, Greece, Portugal, Italy) rapidly catching up with Japan's reality. The chart is a lot of food for thought and action. By 2050, the ratio in Japan and Spain is expected to be at 70%, in Switzerland at 50% - the structural changes to make countries ready for those demographic futures need to start happening now.
Murakami - author of "Turning demographic challenges into economic opportunities" - said that Japan is currently riding the tsunami moderately well. Developed countries and emerging countries alike will experience those same demographic changes - the tsunami is coming - and so it is imperative that countries start learning from the Japanese example.
Jeff Bohn took a step back to look at developments in Japan over the years, through financial crises and bursting bubbles - and through the recent years of Abenomics. Throughout history, in Japan and elsewhere, major changes are, at first, always met with denial. Then, after a rationalization period, acceptance sinks in. He agreed with Murakami in that, absolutely, we can learn from the Japanese experience.
A tsunami as an opportunity
Moderator Nico Luchsinger asked both presenters about opportunities for countries that experience rapidly shifting demographic realities. Jeff Bohn began by saying that he thinks the Japanese, for cultural reasons, seem to be better at managing expectations.
Murakami highlighted that there is barely unemployment in Japan. In fact, there's a shortage in several sectors. For that reason, she sees a very different "relationship" people have with the idea of increasing automation. In Japan, this is something that is being seen as a positive - where in many other parts of the world technological advances are looked at as a threat to the working population.
According to Shinzo Abe in Davos last year, Japan's labor force had decreased by 4.5 million over the course of six years. In that time, two million more women and elderly people found employment. There are many structural changes actively driven forward, among them the increased focus on high female participation in the workforce, the other on the elderly component of the workforce. According to Wikipedia, the majority of retired workers returning to work, are rehired as "irregular" workers.
As mentioned, Murakami says that technological advances and increasing automation are welcomed in Japan - but she doesn't think this will last, unless reskilling and upskilling help the different generations be productive into the future. Her hope is that Japan, thanks to low unemployment and a welcoming attitude toward technology, will make the most of this point in time to reskill the workforce and find the right balance.
Embracing technology and immigration
Bohn pointed out that Japan is poised to tackle the challenges - but challenges they are. He sees a certain unwillingness to accept structural changes. He mentioned younger Japanese being less optimistic compared to their parents. And, as for technology, Japan isn't as consistent as one might think - while their retail sector is hugely efficient and technologically advanced, the banking sector is still inefficient. Bohn sees a complicated picture, but believes that the Japanese people are, overall, accepting of the things to come.
Japan is rethinking immigration. As there is a shortage of, for example, nursing staff, the country tries to open up and present itself as an attractive place to be. Murakami said that, otherwise, qualified staff may just choose another country instead. While we, in most of the western world, think of immigrants as a burden, both Murakami and Bohn argued that there needs to be a shift. Japan already embraces this - as for the western world, Bohn reminded the audience that the United States has always thrived on being the melting pot, on bringing in new people, fresh blood, new ideas - and leveraging them to improve the country overall. With a smile, Murakami said,
I found the focus on immigration fascinating - the thought that Japan looks at it positively now, wants immigrants to come. Japan's immigration policies need to change and the environment needs to be made more attractive to be internationally competitive, Murakami said. It'll take a complete 180 for the western world to accept and embrace immigration as such as a positive - but that just may be the very thing that will make all the difference in decades to come. Murakami suggested that western countries may be able to head off the problems arising from the demographic changes, by bringing in more immigrants.
Learning from Japan
The two experts talked about interest rates and policy responses, learning from Japan's financial markets, pension systems and the discipline of Japanese companies. But learning goes both ways. There's also the challenge of Japan's rigid labor market with its feature of "lifetime employment" - both Bohn and Murakami said that there need to be changes in Japan's future in this regard - paths to embracing new business opportunities and a more fluid labor market.
The experts both considered the success of Abenomics a mixed bag. The three arrows (as they're called) of Abenomics focus on monetary easing, fiscal stimulus and structural reforms. With the latter, Bohn said that there hasn't been a success so far. Murakami agreed, saying that the first two arrows gave Japan the breathing room needed to tackle the third - and the third is the hardest part. Murakami said that the structural changes will come with some pains. To give an example, she said that, even now, the process of extending the pension age to seventy is being planned - labor market deregulation will mean further adjustments.
To deal with the demographic changes, the workforce needs new blood in the system, new companies and more fluidity, to help the economy grow.
Japan has a highly educated workforce - something that will help them make the necessary adjustments - because simply extending the working life of older people won't solve the problem. Reskilling is key and the Japanese ways of thinking long-term will provide the necessary patience and stamina to see it through a host of structural changes.
An increasing number of countries are on a path of Japanification today - while there are differences (culture among them), the demographic changes are coming. There's a lot that can be learned from Japan - and no doubt some of it will need to be learned and then molded to fit a different society with a different history and culture ... but, again, we're on that same aging path. One branch of learning is with regard to health: The Japanese don't just have a high life expectancy, they are also living healthier lives compared to those of many westerners. It is because of that overall health that Japan's elderly can be expected to meaningfully and successfully participate in the workforce.
In closing, a post-COVID question
Both Jeff Bohn and Yumiko Murakami had many more insights, of course - but this blog is turning into a while - time to call it quits.
A final thought and question by the moderator - he asked both experts to point out the one main "build-back" thing governments must do post COVID ... the answer was clear and certainly felt right - whether it's Japan or the rest of the world, COVID has dramatically shown where the systems failed and who was disproportionately affected. Murakami said that the focus will have to be on fixing the social nets so that no one will fall through the gaps when a next disaster strikes - regardless of financial means, ethnicity, gender - or age. Aside from fixing healthcare and improve social safety nets, Bohn also added the urgent need for wide-spread, democratized/fair digital infrastructure investment, saying that the pandemic has shown that many people were completely cut off from the possibilities and benefits of the digital services economy.
2050 ... where will we be? Where will you be? Where will I be? Where will our children be? I'm fifty-eight now - by 2050 I'll be eighty-eight. Frankly, body and mind willing, I have every intention of still working in 2050. It'll be different, for sure. It'll be writing, without a doubt ... but next to writing it may be other things. As they say, age is not a number, it is a feeling. Here's hoping that more and more of us will continue to feel young at heart, lithe in spirit and full of breath. The demographic changes are coming ... and I don't think we need to wait until we're forced to ride a monster wave - we can make the structural changes in this decade - and then comfortably walk into that future. Well, I'll likely be here to see it all - I have plenty of ideas of what geriatric employment might look like then - but that's for another post!