The Impact of Japan's Aging Population on its Macroeconomics

Abstract

Japan's economy has become characterised by population ageing, with the country being designated a super-aged society as early as 2006 (Ministry of Health, Labour and Welfare, 2023). This demographic shift carries profound implications for significant macroeconomic variables, ranging from the demographic trend itself to the effects on an ageing population.This study analyses how changes in the age distribution of the population affect Japan's real GDP, inflation, fiscal balance, unemployment rate, domestic saving and domestic investment over the long run. The analysis attempts to quantify the connections and identify the underlying mechanisms causing the economic adjustments related to ageing demographics using annual data from 1993 to 2023.