Japan shows the damage that unfavorable demographics (aging and a shrinking population) can inflict on an economy. Despite unprecedented easing, the country is in recession, and inflation (at 0.9 percent this year) hasn’t risen. At 3.3 percent, the primary deficit (budget deficit minus interest payments) is unsustainable because it can’t remain higher than the rate of nominal GDP growth in the long run. The only way out for Japan: higher taxes (preferable to default or hyper-inflation).

Japan is a case study on how the cost of aging will affect public finance and demonstrates the absolute economic necessity to be old and well.

A quarter of the Japanese population are above 65, with 10 million people above the age of 80. Dementia, a characteristically old-age disease, now affects 5.2 million Japanese, and the government estimates that this number will rise to 7.3 million within 10 years. That means one in five elderly people and one in 17 of the total population.

The Japanese Ministry of Health estimates that last year, the cost of dementia amounted to $118 billion USD (half borne by the families). But Japan isn’t sitting still: They’re at the forefront in terms of how to cope with the disease, ranging from long-term health insurance to dementia-care training. But increasingly the issue is being addressed from a preventative angle.

Some institutions now put into place “Dementia – Prevention Model classrooms” that integrate wellness activities like gardening or tea-picking field trips. There is no doubt that this wellness preventative dimension is bound to expand in the coming years.

By Thierry Mallaret, predictive economist and board member of the Global Wellness Institute

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