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Managing an aging society: Learning the right lessons from Japan

Author

Listed:
  • Jacob Funk Kirkegaard

    (Peterson Institute for International Economics)

Abstract

As the world and especially other Asian and European economies enter the accelerated process of aging that Japan experienced from the mid-1990s onwards, learning the right policy lessons from Japan's response is crucial. This paper argues that, overall, Japan has done relatively well by implementing a response that--even if often belatedly so--has mitigated some of the worst economic effects of aging. Japan has successfully raised domestic labor utilization and immigration levels, integrated its economy more with the rest of the world, and implemented a fiscal policy based on debt expansion that has seen debt costs decline. Other advanced Asian economies and China now face aging processes materially faster than Japan's and will age simultaneously rather than alone like Japan. In addition, many advanced economies will age during a period of much slower global economic growth and less rather than more global trade and investment opening than what Japan faced from the mid-1990s. These less benign international economic and political circumstances mean that many advanced economies will likely not age with the same relative political and economic stability seen in Japan in the last 30 years. In time, this paper argues, "Japanification" will no longer mean a slowly developing economic disaster but will come to mean competent management of a very difficult economic transition.

Suggested Citation

  • Jacob Funk Kirkegaard, 2025. "Managing an aging society: Learning the right lessons from Japan," Working Paper Series WP25-4, Peterson Institute for International Economics.
  • Handle: RePEc:iie:wpaper:wp25-4
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    File URL: https://www.piie.com/publications/working-papers/2025/managing-aging-society-learning-right-lessons-japan
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    More about this item

    Keywords

    Japan; Aging; Demographics; Labor Utilization; Immigration; Productivity; Fiscal Policy; Government Debt and Deficits;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N35 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Asia including Middle East

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