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Comments on Japan’s Demographic Collapse

Dennis Gartman, of Gartman Letter fame, had some good commentary on Japan’s demographics in his March 20 issue that are worth repeating here.  The Japanese demographic implosion is a topic that we find particularly fascinating.  Here before us, we see a real-time case study in what happens to a modern country with a shrinking and aging population.   In a pre-industrial agrarian society, a shrinking population means fewer mouths to feed and is a boon to those who remain.  But in a modern, consumer-focused economy, population growth is a necessity.  Fewer, increasingly older consumers mean fewer sales.  Fewer workers means fewer people paying income taxes.  A shrinking population also quickly exposes pay-as-you-go social security systems as the Ponzi schemes that they are.   Let us now take a look at Gartman’s interpretation of events: 

We have long argued that Japan has put itself into a horrid place demographically as her birth rate keeps on plunging and as Japan is no longer replicating itself. Things have gotten so bad demographically that the government itself says that Japan’s population shall halve in another 50 years…. At this point, little… indeed it appears nothing… can be done to stop this terrible demographic collapse. We are watching a demographic train wreck happen in very slow, but inexorable motion.

We like his train-wreck analogy and find it to be absolutely appropriate.  Much as a train cannot veer off of its tracks to avoid a collision, there is absolutely nothing that the average Japanese citizen or even the government as a whole can do to stop the coming collapse.  An individual family can decide to have more children, but their efforts will be a drop in the ocean in a country of 120 million people.  With the number of women of child-bearing age getting progressively smaller, it would require an unimaginable societal shift in preference towards large families.  But as Gartman contends, this is highly unlikely.  Marriage and family formation are in an unprecedented decline.  Despite the fact that the population is falling, the number of households is actually rising, to 30% of total households from 20% a decade ago.  Young and early middle-aged Japanese have made it very clear that they are not prepared to accept the responsibility of child rearing. 

In language that echoes HS Dent, Gartman saves some of his best comments for last: 

Demographics drive everything. [Emphasis ours] They are tidal in nature, and demographic trends are monstrous in size and not readily turned around. Demographic trends are the aircraft carriers of economic forces; that is, once they are set in motion it takes time… and lots of it… to turn the trend around. Japan’s trend toward demographic self-destruction is now well established. The young are not about to change their selfish lifestyles, and the society is on its way toward eventually self-destruction. This has been and this shall be sad to watch.

It could be that Japan’s purpose in the decades ahead will be to serve as a morality play of sorts for the rest of us.  We are glad to see that Gartman–with one of the widest read newsletters on Wall Street–is covering this.  If you do not receive the Gartman Letter, we highly recommend you do.  It’s some of the best commentary available today.