March 20, 2011
Japan's Earthquake: Can the Aging Samurai Recover?By Anurag Maheshwari
When the most powerful earthquake in modern Japanese history hit the North-Eastern shores of its largest island Honshu, Emperor Akihito's rare address to the nation symbolized the magnitude of misery nature had inflicted on his people.
Japan has always shown phenomenal resilience in the face of immense odds. This was true when a Medieval Japan of 8 million ruled by Kamakura Shogunate stared down the enormous Mongol Empire of Kublai Khan stretching across Eurasia with its ~120 million subjects during the invasions of 1274-1282 AD. After World War II, a defeated Japan in smoldering ruins was ruled for the first time by a Gaijin Shogun, General Douglas MacArthur. Never before had the Japanese, an extraordinarily heroic people, been ruled by a foreigner.
If such historical events are any indication, there is no doubt that the strong willed and able Japanese will eventually recover from the daily tragedy now unfolding in terms of lost lives, shattered families, nuclear meltdowns and deluged cities in the aftermath of the March 11th, 2011 earthquake.
However, the deeper crisis Japan faces is not from rare earthquakes, but the long, seemingly irreversible momentum towards a relatively fast aging population and sub-replacement birth rates over the last 50 years.
During the post-war era a resource-poor but youthful and talented Japan had grown at a phenomenal rate to become the world's 2nd largest economy. Throughout the 1980s and early 90s, American and East Asian businesses immersed themselves in Japanese management techniques and culture, inclined to absorb as much as they could to replicate the stellar Japanese success. Japan had become a leading light and model for innovation, discipline, excellence and prosperity. For many Asian countries there was no need to look West and North, they could gaze closer to the east.
By 1989, Japan's Nikkei Stock Index had reached its peak, accounting for 40% of the entire global stock market capitalization. In comparison US stood 2nd at 29% of the global share. But staying on top would be much harder than the ascent even for the tenacious Samurai.
To make matters more ominous China, Japan's giant western neighbor was growing at 8-10% annually with a population base 11 times as large.
Fast forward to 2001, China had already surpassed Japan as the 2nd largest economy by purchasing power, and international media increasingly put the spotlight on maturing demographics as the underlying cause of Japanese stagnation. The two lost decades in Japan's economic growth meant that only a major restructuring of its socio-economic system or a massive influx of skilled and educated immigrants would reverse this secular decline.
Japan now has Asia's oldest population with a median age of 47 years. Except Russia, every country or region in Japan's North-Pacific vicinity is younger. The median age for Chinese is 36 years, South-Korea 39 years and North-Korea 35 years. Among Association of South East Asian Nations (ASEAN), a South-Pacific conglomerate which numbers 600 million peoples, almost every single nation including Indonesia (240 million), Philippines (92 million) and Vietnam (90 million), is witnessing massive unsustainable population bulge. Except Thailand and Singapore, all ASEAN countries boast median age below 30 years.
The fertility trends are also very uneven and not in Japan's favor. Japan, along with South-Korea and Singapore has the lowest birth rates in Asia from 1.2-1.3 Babies/woman. Japan's security nemeses China and North-Korea both have much higher birth rates from 1.8-1.9 Babies/woman. Birth rate for ASEAN is even higher at 2.4 babies/woman. From 2001-2010, mothers in Japan have given birth to 1.1 million babies annually on average, compared to 4 million for US and 19 million for China.
The positive aspects in Japanese demographics are its life expectancy >82 years, the highest in the world, and Human Development Index (HDI) among top 10 in the world.
Aging Singapore (5 million) has relied on immigration from a limitless pool of global ethnic Chinese diaspora (50 million) and mainland China (1.35 Billion) to maintain its racial-cultural balance. Reunification will allow South-Korea (49 million) to add 24 million much younger racially and culturally identical North-Koreans to boost its demographics at some point in future. Apart from 1.5 million Japanese diaspora in Latin America, Japan can look nowhere else for racially and culturally similar immigrants.
Persistent suggestions from international media and organizations such as UN to allow mass immigration have so far not convinced the Japanese to open their gates beyond 15,000-20,000 skilled migrants per year. Japan has carefully observed how Europe and America allowed massive influx of tens of millions uneducated, unskilled immigrants since the 1960s without carefully considering the ramifications such as criminal abuse of welfare system, high unemployment, disinclination to assimilate, civil strife, demands for privileged treatment, espionage, "home grown" terrorism and displacement of native populations as a consequence of high immigrant birth rates.
However, both aging and fertility trends relative to its Pacific neighbors are causing deep concern among the Japanese political, business and security class.
How has the aging Samurai managed this relative decline so far? Fiscally, perhaps not very well. Japan's public debt is now >200% of its GDP, the highest among the industrialized world, and domestic savings are proving inadequate, so for the first time Japan is looking to foreign countries to finance its domestic debt, even though it holds almost $1 Trillion in international debt mostly of the U.S. The devastation from the earthquake will further accelerate the long term fiscal crisis for the Japanese government.
Japan's maturing demographics and high-tech economy presents both opportunities and impediments for its future prosperity and security. Gradual decline in numbers for an overpopulated island nation with density 11 times higher than the US, almost no energy or mineral resources and only 40% food self-sufficiency is a blessing.
Aging population has also instigated Japan to restructure its economy by identifying and expanding the role of healthcare, robotics, real estate renewal and renewable energy sectors in its economy. A life expectancy of 82 years has prompted calls to raise the retirement age to 70 years and include means testing as a way to overcome fiscal crisis.
It is likely that in the long run Japan will be able to restructure its internal socio-economic and monetary system to suit its demographic situation. The recent earthquake and nuclear meltdowns will strengthen Japan's resolve towards accelerated innovations in solar and wind energy sectors, but will it be able to maintain its economic, security and diplomatic influence in Pacific Asia?
Whether it was an act of God or Nature, the recent calamity should be seen by Japan as a foreboding that to speed up its recovery, manage its demographic decline, ensure its national security and augment its international influence, it needs a much deeper and institutionalized economic-security partnerships closer home with population giant India, as well as natural resource giants like neighboring Russia and Australia. This would help a declining and overstretched US to focus more on its porous and chaotic Mexican border and ensure Israel's security in the Middle-East.
Andy Maheshwari (PhD) has been writing on National and International affairs since 2008. He has been published in the Massachusetts Institute of Technology's The-Tech, Canada Free Press, American Thinker and Examiner.