To Fathom Japan's Woes, Think Granny

A few days ago, Japan's Health and Welfare Ministry released some new statistics that reveal a great deal about where Japan is heading and how it is behaving in the world these days.

For the first time, the number of Japanese over the age of 100 has climbed above 10,000, the ministry said. There are now 10,158 centenarians in Japan, about 80% of them women.

The growth rate is startling. In 1965, only 153 Japanese were 100 or over, according to the health ministry. Just five years ago, the number was below 5,000.

In their way, these numbers tell us more about Japan, and its economic frictions with the United States, than arid summit meetings such as the one in New York City on Tuesday between President Clinton and Prime Minister Keizo Obuchi.

What Obuchi says probably doesn't matter much. He is just one more in a long line of weak Japanese prime ministers. He probably won't stay in office a full year. A deal he supposedly worked out in Tokyo last weekend--aimed at showing the Clinton administration that Japan is doing something about its financial problems--began to unravel within 24 hours.

Japan's demographic problems are far more lasting than its prime ministers. The story, in a nutshell, is that Japanese are having fewer children and are living longer and longer.

Japan has one of the lowest fertility rates in the world. There are now about 1.4 births per woman per lifetime in Japan--far below the level in the United States. At the same time, Japan's mortality rates are extremely low. By the 1990s, Japan had the longest life expectancy of any country in the world.

"There is a rapid aging process going on in Japan," observes Nicholas Eberstadt, a demographer at the American Enterprise Institute. "Japan has gone from being a very youthful society in the 1960s to one of the world's oldest societies in the 1990s.

"Right now, Japan's median age is about 40. The only other country as old as that now is Germany, with Italy not far behind. But by the year 2015, Japan will rank by itself. Its median age will have risen to 45. There never has been a country in the world whose age profile looked like that. Japan will be the oldest society in the history of mankind."

Japan's 65-and-over generation, now about 15% of the population, is projected to grow to 25% in 2020. By contrast, America's elderly make up 13% of the population now and will rise only to 17% in 2020.

The rest of the world doesn't seem to have caught on to these changes in Japan. Old perceptions linger.

For example, China--scarred by its experiences in the 1930s and 1940s--sometimes seems to behave as though, beneath it all, Japan was Gen. Hideki Tojo, Japan's prime minister during World War II. The United States sometimes acts as though Japan was Akio Morita, Sony's legendary founder.

But no. Japan is increasingly becoming the world's granny. Looking at Japan in this fashion helps explain its behavior.

Grannies need an income. They often survive on pensions. And so the Japanese government for most of the last year resisted the pressure from the United States to cut taxes to stimulate its economy. Why? Largely because the Ministry of Finance is trying to save up a stash of money to pay for old-age benefits.

"To keep the [Japanese] pension system solvent, it will be necessary over the next generation to raise the tax on basic earnings from over 17% to 34%. And that's before any other taxes," observes Eberstadt. "It's a pretty onerous prospect."

Grannies generally don't spend a lot of money. In the midst of the Asian financial crisis, the rest of the world keeps encouraging the Japanese to consume more. Such lectures are nice, but they seem to assume that Japan is made up of young people eager to splurge on new sports cars and stereos.

"What should they buy?" wondered Dick Nanto, a trade specialist at the Congressional Research Service, last week at one of Washington's many seminars about Japan's economic problems. "What do people [in Japan] really need?"

Grannies, by and large, aren't very flexible. It may be a good thing or a bad thing, but the elderly don't alter their lives as quickly as young people. The rest of the world keeps asking Japan to change its attitudes, its spending patterns, its political and economic system. And Japan keeps doing what worked in the past.

The economic implications of Japan's aging society extend well beyond the current financial crisis.

For example, as Japan's society becomes older, its savings rate can be expected to drop. People save money by earning more than they spend. Those who are retired may spend less than working people, but they also earn much less and have less money to put aside.

But a huge drop in its savings rate would mean that Japan has much less capital to invest in its own country or to export overseas. During the 1990s, Japan has exported hundreds of billions of dollars in capital that is invested in other countries, especially the United States. In a decade or two, that Japanese capital may no longer be available to help support other economies.

On Tuesday, at his meeting with Obuchi, Clinton conducted the usual ritual for meetings with Japanese prime ministers. He said the United States "has no more important relationship in the world than our relationship with Japan."

That may be true, but the relationship is also changing as Japan begins to address the different concerns of an aging population. All of the world's industrialized societies are getting older, but Japan is getting there considerably faster than the rest of us.

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