The Next Big Crash: Japan

Country's aging population makes it a 'global time bomb'
By Kevin Spak,  Newser Staff
Posted Sep 27, 2010 1:19 PM CDT
A man looks at stock prices as he is reflected on the electronic stock indicator of a securities firm in Tokyo Tuesday, Aug. 24, 2010.   (AP Photo/Shizuo Kambayashi)

(Newser) – The next great economic catastrophe could be looming in Japan, according to one financial analyst. “We try to avoid hyberbole as much as possible,” writes Hedgeye analyst Darius Dale in Fortune. But after examining Japan’s aging population and pension obligations, “we have to say that, in our opinion, they represent one of the most dangerous potential risks to global investing over the next 10-20 years.”

The ratio of working-age Japanese to retirees is currently 3-to-1—and in 10 years, it’ll be nearly 2-to-1, which “is frightening to say the least.” It gets even worse when you realize that 56% of Japanese workers need financial help from their parents—basically being supported by the generous pensions they're funding. The public pension fund is already selling assets to cover shortfalls, and Japan is making things worse by ramping up spending. “These types of problems typically don’t end well,” says Dale. Unless Japan does something soon, it’ll wind up having to “turn hat in hand to international institutions for a rescue.”

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