Japan: Effects of population ageing masked by greater labour market flexibility

As population ageing started much earlier in Japan than in other OECD countries, it is interesting to look in Japan for the effects of ageing that will appear later in other countries. But the difficulty is that some effects of ageing in Japan have been masked by labour market change s. While there has been significant corporate automation in Japan, there are no other expected effects of ageing: There is no inflation (other than that resulting from the depreciation of the yen and the VAT hikes), because of the skewing of income distribution against employees and the small wage increases; There is no fall in savings or a shift to an external deficit, because of the high corporate savings due to the skewing of income distribution. This does not mean that ageing does not lead to inflation or falling savings; it means that in Japan, its effects are masked by the shift to a flexible labour market with very weak bargaining power for employees .