Japan has just crossed perhaps the most vivid line in the demographic divide. Still, there are other surprises about what may ensure future economic growth across Asia.
Japan crossed a threshold this year. Sales of adult diapers are now greater than those destined for babies. Other statistics to do with the aging population are equally surprising. Not only are there a massive number of centenarians in Japan, but the country also accounts for half of Asia's 86,000 “longevity millionaires” -- people who have lived more than a million hours, that is, who are over 114 years old.
However, it’s not just in Japan that sales of nappies for adults are increasing; also in other Asian countries and regions such as China, Thailand and Taiwan. Meanwhile, populations in Indonesia and India are very young so the comparison highlights the diversification of Asia’s demography. The overall trend of an aging population will undoubtedly affect fundamental economic momentum such as demand, output and the labor market. At the same time it will also create driving forces for technologic innovation in the financial markets and various asset sectors.
Japan is certainly not the only country or region that faces an aging population. China, South Korea, Hong Kong, Singapore as well as Taiwan are not spared, but suffer to a lesser extent. In the past five years, Japan’s working population has decreased by 4.3%, and is expected to shrink another 5.1% in the next five years.
As for the other places, fortunately, the total working force is still increasing though the rate of increase is declining. For instance, China’s working population has gone up 4.2% in the past five years, whereas in the next five years this growth will probably come down to 1.2%. As for Taiwan, South Korea and Hong Kong, the work force is likely to start shrinking. In brief, the high-income countries in Asia are aging faster.
It’s the southeast Asian countries, and in particular Indonesia, Malaysia and the Philippines that can boast their demographic bonus. In these countries the working population, particularly the group between the age of 25 and 44, will continue rising in the 20 years to come. This age group is important not only because it sustains consumer demand but also because it sustains the growth of population.
The weight on public coffers
Of course, an aging population can be countered by allowing immigration. For example, the 15-24 demographic in Singapore has increased 22.4% in the past five years thanks to its immigration policy. All in all, Japan is the country that faces the most severe aging population issue.
But while a young population can confer advantages, it does not guarantee success. Productivity and growth also rely on the quality of technologies and the labor force. With the complementarities of superior innovation and advanced workforce training, an aging demography won’t necessarily represent a disadvantage. This is exactly what a lot of these governments’ policies are focusing on. Indonesia, Malaysia and the Philippines, for example, could further boost their growth if they could raise their expertise in education and high-tech.
The discrepancies of age in fact have an even greater direct impact on government spending, social consumption trends, and the technical factors of the financial market. From a fiscal point of view, an aging demography implies more public spending on medical care and social security. As far as consumption is concerned, advanced countries’ aging population groups in general enjoy higher spending power.
Nevertheless, in Asia, retirement and medical welfare account for a relatively lower proportion of GDP. Retirees’ income and consumption are determined by their personal savings so this might go up or down. To say which consumer goods will benefit or be harmed by the changing demography would require more bottom-up analysis in each country.
All in all, the industries where demand may go up, thanks to the aging population, are medicine, incontinence-related products, leisure activities, tourism, food and beverage, as well as anti-aging products. For instance, China’s sales of products that promise to stave off the effects of old age have already surpassed the United States'.
Robots in demand
Over the past decade, due to China’s strong economic growth, overall trade volume within Asia has increased greatly. Consumer demand due to demographic changes is increasingly being satisfied by enterprises from Asia itself. Take Japan for instance, it accounts for 84% of sales of Asia’s incontinence-related products. Besides, it is also leading in the development of robotic products to meet the needs of older persons. Meanwhile, Taiwan is actively seeking to become a robot manufacturing center while Chinese and South Korean total shipments of robots almost rival those of Japan.
An often overlooked factor is that in countries like Japan, an aging population may increase demand for certain types of financial products, particularly for assets that provide a stable revenue. Many retirees in Asian countries rely on their own savings to live on, so assets that preserve and increase value against inflation while also allowing a regular income will become more and more popular.
In the past few years, the financial market has been very volatile. This has motivated a lot of people to seek assets which can bring income. Even if the world’s economy once again returns to normal growth, the factor of an aging demography alone is already providing long-term technical support for financial assets that provide steady income growth. These assets can be physical assets or dividend-paying stocks or bonds giving fixed interest income.
Traditionally, Asians relied on their children to support them in their old age. More and more, Asia’s elderly will have to be capable of taking care of themselves; the lucky few may also manage to leave an inheritance to the next generation.