Japan’s Aging Population And Long-Term Growth

Today’s FOMC minutes release illustrates labor shortages are global in the advanced economies (AE).

Contacts in several Districts reported difficulties finding qualified workers, and, in some cases, firms were coping with labor shortages by increasing salaries and benefits in order to attract or retain workers. Other business contacts facing labor shortages were responding by increasing training for less-qualified workers or by investing in automation.  – FOMC minutes

The structural issues, such as aging populations, are finally catching up and overwhelming cyclical factors, which have traditionally been “fixed” by monetary policy, and to some extent, fiscal policy.

Time for some economic overhaul and structural form.  Good luck with that given our economically ignorant pols.

Japan

Nowhere is it more an issue than in Japan.   ZIRP (zero interest rate policy) and QE won’t create more babies, at least, we don’t believe so!

The simplified version of the long-term growth  model (LTGM),

GDP growth = Labor growth + productivity growth

Japan is making a big bet on robots to increase productivity offset the perilous effects of a rapidly aging population and shrinking labor forces.