Digging through some old IMF publications last night we came across this little nugget of data on global demographic trends that really caught us by surprise. When most think about Asia x/Japan they picture a young dynamic growing population ready to take on the next century, no? Not so fast.
Here’s the IMF,
Two fundamental demographic trends are at work in the world. In countries that are achieving reasonable economic success and are free from the extreme effects of AIDS, life expectancy is increasing, possibly without limit. And in all economically successful economies, irrespective of apparent cultural differences, fertility rates have fallen or are falling to replacement level and, in many cases, well below. The United Nations medium projections suggest that, within 15 years, the total fertility rate will be about 2.0 or fewer children per woman in countries as diverse as Brazil, Iran, and Turkey. (A birth rate of a little more than 2.0 is required to ensure that each generation is at least as large as that of its parents, with the required increment above 2.0 driven by the proportion of children who die before reaching child-bearing age.)
A similar trend is seen in the economically successful states of southern India and in China, whose fertility rate, at 1.74, is well below replacement level. That trend, of course, partly reflects the one-child policy, but low fertility rates in Hong Kong SAR, Singapore, and Taiwan suggest that the Chinese policy has simply brought forward an otherwise naturally occurring phenomenon. Indeed, the East Asian pattern suggests that, as China becomes more prosperous, its fertility rate could fall further.
Longer lives and lower fertility rates are dramatically increasing the proportion of the population above the ages we typically associate with retirement (see table). In the United Kingdom, the ratio of people older than 65 to those between the ages of 20 and 65 will almost double between now and 2050. In Korea, that ratio could increase more than four times.
Now let’s figure out how to position for the demographic changes. Maybe it’s too long term of a focus today’s markets, which flip from headline to headline.
(click here if table is not observable)
Global Macro Monitor 
Interesting point, it may be a long term trend but deeply powerful. Market implications might include savings rates and asset values (as propensity to save depends on age), long term bond rates (who pays off those debts when everyone retires?), and also huge consequences for longer term growth prospects in different countries.
The IMF figures for the UK look out of date though. In the 6 years since then an unexpected baby boom, and big rise in net immigration has boosted the number of young people. We’re still ageing, but the baby boomers “pig in the python” is being flattened out. I’ve recently posted about this effect here: