Connect with us

Emerging Markets

From Tokyo to Beijing, growing old is hard to do

Published

on


Sometime later this month, Japan will release the first estimate of births and deaths in 2020 — an annual gift from the health ministry that arrives around December 25 with all the seasonal joy of a broken boiler.

For the past 13 years, this release has delivered evidence of Japan’s shrinking indigenous population and its darkening demographic shadow via a series of bleak milestones. These seem all the starker for their stubborn resistance to remedy and for the cautionary road map they provide the outside world. 

By 2008 — one year after the great inflection from growth to decline — deaths in Japan outnumbered births by just over 50,000. By 2019, that imbalance had increased tenfold to more than half a million. In 2016, the population decreased at an average rate of 1,000 people per day. Based on monthly numbers, 2020 is on trajectory for a possible shrinkage rate equivalent to 1,500 per day, or one person per minute. 

As per tradition, Japanese media will greet this by assembling experts to shake their heads and wring their hands. But for Japanese viewers, both young and old, it is all gloomy non-news. They may not relish it, but the populace, whose popular books include Enjoying Nursing Care, has already struck a bitter peace with reality. The audience that really matters — in a country where birth rates fell to a 70-year low in 2019 and senior officials often highlight “warning lines” on fertility rates — is China.

The question for Beijing is not how worried to be, but rather when the weight of demographic concern makes itself felt. Along the road of ageing and population decline, there are some unexpected moments of benefit: Japan’s jobs-to-applicant rate, for example, has stayed above 1.0 this year, despite Covid-19. Yet an aged population is nothing to look forward to. There are also important differences in what brought the two countries to their demographic present: China’s 1979 one-child policy is prime among them. Even so, Japan’s experience is instructive. 

Japan’s latest health ministry numbers will confirm a phenomenon whose effects are now plain but that have been the subject of warning for over a quarter of a century. From giant typefaces on menus, to empty schools being razed to build care homes, daily life teems with mundane examples where Japan’s physical fabric is changing. Businesses, families and the public sector must adapt to having almost 29 per cent of the population aged over 65 and a relentlessly shrinking workforce to support them. Changes to the macro fabric — such as a historic risk rebalancing by pension funds, or a surge in outbound acquisitions — can also reverberate globally.

For China, where the over-65s ratio stood at 11.9 per cent in 2019, a Japanese-style demographic fate may seem distant. But China’s ratio is rising more rapidly than it did in Japan and some projections suggest it will hit 25 per cent in about 15 years. The critical death-birth crossover that Japan experienced in 2007 will, on current projections, happen in China a decade from now. 

Japan’s lesson is that real peril lies in the expectation of pain. In the more than 30 years since the bursting of Japan’s stock market and property bubble, there has evolved a spectrum of theories about the economic landscape that formed in its aftermath: for some, a permanently half-baked flirtation with recovery; for others, a reasonably managed decline with dignity. 

Less in doubt is that there has never since been any real sense that Japan will ever sustainably recapture the optimism and euphoria that once acted upon the country as such a powerful propellant. Recent days have been a reminder of that. Any celebration of the Nikkei 225 stock market index hitting a 29-year high last week was tempered by the fact that it is still a third below the 1989 peak. There are many reasons for this, but demographics are surely central: once the idea beds-in that population decline is inexorable, it is difficult to look out at the economic horizon and see, as Japan once did, infinite possibility. 

Japan’s fertility rate fell to 1.5 the year after the bubble burst in 1990; five years later the working-age population began to fall. By 1997, demographers were predicting that the crossover into overall population decline would come a decade on — as it duly did. China faces a similar series of milestones over the next 30 years. The double challenge is not only to prepare the economy for the practical effects of population decline and ageing, but to find ways to be optimistic in their shadow.

leo.lewis@ft.com



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Emerging Markets

Bond sell-off roils markets, ex-Petrobras chief hits back, Ghana’s first Covax vaccines

Published

on

By


The yield on the benchmark 10-year Treasury exceeded 1.5 per cent for the first time in a year and the outgoing head of Petrobras warns Brazil’s President Jair Bolsonaro against state controlled fuel prices. Plus, the FT’s Africa editor, David Pilling, discusses the Covax vaccine rollout in low-income countries. 

Wall Street stocks sell off as government bond rout accelerates

https://www.ft.com/content/ea46ee81-89a2-4f23-aeff-2a099c02432c

Ousted Petrobras chief hits back at Bolsonaro 

https://www.ft.com/content/1cd6c9fb-3201-4815-9f4f-61a4f0881856?

Africa will pay more for Russian Covid vaccine than ‘western’ jabs

https://www.ft.com/content/ffe40c7d-c418-4a93-a202-5ee996434de7


See acast.com/privacy for privacy and opt-out information.

A transcript for this podcast is currently unavailable, view our accessibility guide.



Source link

Continue Reading

Emerging Markets

Petrobras/Bolsonaro: bossa boots | Financial Times

Published

on

By


“Brazil is not for beginners.” Composer Tom Jobim’s remark about his homeland stands as a warning to gung-ho foreign investors. Shares in Petrobras have fallen almost a fifth since President Jair Bolsonaro said he would replace the widely respected chief executive of the oil giant.

Firebrand Bolsonaro campaigned on a free-market platform. Now he is reverting to the interventionism of leftist predecessors. It is the latest reminder that a country with huge potential has big political and social problems.

Bolsonaro reacted to fuel protests by pushing for a retired army general to supplant chief executive Roberto Castello Branco, who had refused to lower prices. This is politically advantageous but economically short-sighted.

Fourth-quarter ebitda beat expectations at R$60bn (US$11bn), announced late on Wednesday, a 47 per cent increase on the previous quarter. This partly reflected the reversal of a R$13bn charge for healthcare costs. Investors now have to factor the cost of possible fuel subsidies into forecasts. The last time Petrobras was leaned on, it set the company back about R$60bn (US$24bn at the time). That equates to 40 per cent of forecast ebitda for 2021.

At just over 8 times forward earnings, shares trade at a sharp discount to global peers. Forcing Petrobras to cut fuel prices will make sales of underperforming assets harder to pull off and debt reduction less certain. Bidders may fear the obligation to cap prices will apply to them too.

A booming local stock market, rock bottom interest rates and low levels of foreign debt are giving Bolsonaro scope to spend his way out of the Covid-19 crisis. But the economy remains precarious. Public debt stands at 90 per cent of gross domestic product. The real — at R$5.40 per US dollar — remains near record lows. Brazil’s credit is rated junk by big agencies.

Rising developed market yields will make financings costlier for developing nations such as Brazil. So will high-handed treatment of minority investors. It sends a dire signal when a government with an economic stake of just over a third uses its voting majority to deliver a boardroom coup.

If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button “Add to myFT”, which appears at the top of this page above the headline.



Source link

Continue Reading

Emerging Markets

South Africa’s economy is ‘dangerously overstretched’, officials warn

Published

on

By


South Africa is pushing ahead with plans to shore up its precarious public finances as officials warn the economy is “dangerously overstretched” despite the recent boom in commodity prices.

Finance minister Tito Mboweni hailed “significant improvement” as he delivered the annual budget on Wednesday and said that state debts that will hit 80 per cent of GDP this year will peak below 90 per cent by 2025, lower than initially feared.

But Mboweni warned that President Cyril Ramaphosa’s government was not “swimming in cash” despite a major recent tax windfall. The Treasury now expects to collect almost 100bn rand ($6.8bn) more tax than expected this year after a surge in earnings for miners. This compares with a projected overall tax shortfall of more than 200bn rand. Still, the finance minister made clear that spending cutbacks would be necessary.

“Continuing on the path of fiscal consolidation during the economic fallout was a difficult decision. However, on this, we are resolute,” Mboweni said. “We remain adamant that fiscal prudence is the best way forward. We cannot allow our economy to have feet of clay.”

The pandemic has hit South Africa hardest on the continent, with 1.5m cases recorded despite a tough lockdown. An intense second wave is receding and the first vaccinations of health workers started this month. More than 10bn rand will be allocated to vaccines over the next two years, Mboweni said.

‘We remain adamant that fiscal prudence is the best way forward’ – South African finance minister Tito Mboweni © Sumaya Hisham/Reuters

Even before the pandemic’s economic hit, a decade of stagnant growth, corruption and bailouts for indebted state companies such as the Eskom electricity monopoly rotted away what was once a prudent fiscus compared with its emerging market peers. 

Government spending has grown four per cent a year since 2008, versus 1.5 per cent annual growth in real GDP. The country’s credit rating was cut to junk status last year. Despite this year’s cash boost, the state expects to borrow well over 500bn rand per year over the next few years. The cost to service state debts is set to rise from 232bn rand this year to 338bn rand by 2023, or about 20 cents of every rand in tax.

The fiscal belt-tightening will have implications for South Africa’s spending on health and social services. On Wednesday Mboweni announced below-inflation increases in the social grants that form a safety net for millions of South Africans. “We are actually seeing, for the first time that I can recall, cuts in the social welfare budget,” said Geordin Hill-Lewis, Mboweni’s shadow in the opposition Democratic Alliance.

The finance minister is also facing a battle with union allies of the ruling African National Congress over a plan to cap growth in public sector wages. South Africa lost 1.4m jobs over the past year, according to statistics released this week. The jobless rate — including those discouraged from looking for work — was nearly 43 per cent in the closing months of 2020.

The South African treasury expects the economy to rebound 3.3 per cent this year, after a 7.2 per cent drop last year, and to expand 2.2 per cent and 1.6 per cent next year and in 2023 — growth rates that are widely seen as too low in the long run to sustain healthy public finances.

“The key challenges for South Africa do however persist, clever funding decisions aside,” Razia Khan, chief Middle East and Africa economist for Standard Chartered, said. “Weak structural growth and the Eskom debt overhang must still be addressed.” 



Source link

Continue Reading

Trending