Japan's silver population boom threatens economy

Japanese population aged 65 and older will rise to 30% by 2030.

Moody’s Investors Service reported that Japanese population aged 65 and older will rise to 30% by 2030, from 17% in 2000, which poses risks to Japan’s economy, specifically in terms of GDP growth, and finance transactions.

A declining labor force due to ageing population will cause GDP growth to slow down, Moody’s said.

Japan’s GDP only rose by 1% from 1995 to 2015, whilst it grew 3.7% in the decade before 1995. Its working age population in 1995 was high at US$87.8m, which decreased by 11% in 2015.

Further, structured finance transactions will be affected by older borrowers as they have higher mortality-related risk, which in turn will cause losses in loans. Older borrowers aged 60 and above are also less resilient than younger employees when it comes to income changes.

Disposable incomes are high in employees aged 50 to 59, which is at US$44,490, whilst US$30,502 for aged 60 to 69, US$29,119 for aged 65 and older, and US$25,842 for 70 and older. Older borrowers and retirees have more limited income sources to repay their debts.

Meanwhile, household savings will decline as retirees reduce assets.

Household net saving ratio fell down to 0.7% in 2015, from 10% before 2000, but will not have a great impact as Japanese originators do not offer loans to those who do not have wage earnings.