What’s so good about Japan’s demography?

Pessimists obsess about Japan’s debt, deflation and demographics. The last on the list, they argue, acts as a drag on growth. Labor scarcity, aggravated by rapid technological change, makes it difficult for firms to fill available jobs—especially in new knowledge-based industries. Nicholas Smith, Japan strategist at investment bank CLSA, is an optimist. “I think demographics are the best thing that ever happened to Japan,” he says.

Even as manufactures hum along, honed by decades of competition in foreign markets, Japan’s unprofitable and inefficient (mostly) labor-intensive service-based companies—zombies—remain in business. The zombies are now slowly disappearing. Firms which were previously operating unprofitable business divisions and are now unable to recruit workers on desired terms are telling themselves, “Actually, we can’t afford to do this. We’ve actually got a labor shortage,” reports Smith…. continue reading at The Japan Times.

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