Japanese and German population trends are not aberrations...they are the trend setters in a secular declining growth rate globally and likely move toward outright global population declines.
These two nations are very illustrative of where the world is going and the reactions to declining populations. Seems a good idea to review how these two nations have continued to function economically with declining domestic populations and declining domestic demand?
The German core population (15-64yrs/old) peaked in 1998 and has been shrinking since. However, seems the Germans had a plan to deal with this...the birth of the Euro in 1999 created a single currency that essentially enlarged the German economy from 83 million to nearly 500 million Europe wide, without the penalty of a strong deutsche mark. Germany's shrinking population was nicely masked by an EU wide market for the German export engine. Of course, the impact on the remainder of the EU was akin to a blood transfusion from the already sick EU to maintain a healthy Germany.
German population peaked in 2003 and has declined by 1.7 million since. However, this is nothing compared to the declines coming.
And where the declines are coming are entirely the worst places from an economic growth standpoint...the young and core populations.
And when viewed as a percentage from the peak population, the declines that will work their way through the population are stunning...the current 43% decline in the young population will ultimately work it's way through the pipeline to the core with a like decline. That is unless Germany turns to the Faustian bargain of wholesale immigration (importing consumers absent money or net jobs growth...only increasing deficit spending and reducing wages for all).
The Japanese core population peaked in 1995 and Japan took the route the US and so many others would follow...collapsing interest rates to incent a shrinking base of private and public alike to take on massive leverage (credit) to mask the secular declining consumer demand. Japan, like Germany, tried to mask their declining demand via currency depreciation to goose exports but the rest of the world began depreciating to compete with Japan. However, Japanese net emigration didn't bode well for turning around demand and consumption.
Japanese declines by age group...wow!!! And there is no real end in sight?!?
As a percentage, the current 47% decline in young will present itself in the core...this is a sure thing accompanied with the massive consumption declines.
However, both nations have only just begun the process of outright population declines...but the duration and depth of their upcoming population declines is stunning. If one simply looks at both these nations population of young (the headwaters of their future), the declines are already baked in the cake. Even if they were to suddenly begin an unexpected birth rate turnaround...this wouldn't really be felt economically for decades when they began entering the core. And opening up the borders to immigration is simply a Faustian bargain, importing consumers (absent income or savings) to be fed by deficits but absent net job growth only resulting in depressed wages for all.
Japan and Germany's 47% and 43% (respectively) long-term declines in their populations of young (0-14yrs/old) are now working their way through their core populations (15-64yrs/old) and this is crippling demand and consumption in these nations. Central bank policy is to lower interest rates, induce insane levels of credit, all to mask declining demand, but, this is a fools errand as this is just the beginning of what is a debt based economy killer.
Again, Japan and Germany are not aberrations...they are simply the forward edge of a tsunami that is working it's way through the entire globe, hitting different nations at different times and intensity. However, the tsunami is only gaining strength as it continues due to the declining health of global export markets and increasing currency devaluations...these factors and so many more are decreasing the ability of nations to remedy declining domestic growth with global markets.
The globe is like a rowboat, and China was the last set of oars in the water...pulling really hard. So hard, China created demand worldwide via it's massive credit creation over the last decade. But China too is demographically doomed and the idea that China's export model would be shifted to a model of domestic consumption was illogical and mathematically doomed. A 1400% increase in credit over 14yrs was unsustainable, to be kind. China's demographics are following the same path as Japan and Germany's, ensuring a massive secular decline in domestic consumers and consumption.
The chart below shows the declining annual growth of China's core population (15-64yrs/old) and it's substitution of debt for declining growth in demand.
The next decade...Again, China's core population begins declining in 2016 (already entirely baked in the cake) and will do so from here until some new balance is ultimately reached. Remember, China like Japan has net emigration...so no "help" coming there.
Lastly, China's total population peaks in 2030 (unless some means can be found to turn the birthrates around...but what is dead certain is the decline in the core). Assuming a nation likely in economic collapse will suddenly determine to start having more children to feed, to cloth, to educate...seems pretty far fetched.
If you don't understand this, it's simply because you don't want to. And if you think India or Africa will be the savior, you are welcome to read...
For a thousand reasons, the advanced and advancing nations of the world have delayed and reduced family formation and size. The chart below shows clearly the 0-64yr/old populations of these nations will begin outright declining within the next 3 to 4 years and continue declining indefinitely thereafter.
And simply (and crudely) put, every person represents a unit of consumption...how much consumption depending on income, savings, and available credit. Generally wealthy, young / core populations consume far more than poor or old populations. So, given population growth is now all about the poor and old...it's really easy to see why consumption and resultant economic activity is set for a secular decline.
Why central banks round the world have determined lower interest rates to incent ever more debt, more capacity, etc. for a declining population base makes sense is a question sorely in need of asking.
*All population data is via OECD population statistics and estimates.