Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Elderly Reveal Japan Grows Without Wage Growth: Cutting Research

Prime Minister Shinzo Abe’s policies to boost Japan’s growth and reflate the economy can succeed even if wages don’t immediately accompany price increases, according to Barclays Plc.

People born between 1947 and 1949, part of the country’s baby boom, are starting to retire and will become buyers rather than workers and savers, Tokyo-based economists Kyohei Morita and Yuichiro Nagai wrote in a July 23 report. A “staggering” 2.21 million people will join Japan’s consumer ranks annually by 2014 even as the total population declines, they said.

A key part of Japan’s recovery this year has been the strength of private consumption, which is often attributed to better consumer sentiment and wealth effects stemming from higher share prices and yen depreciation under the so-called first arrow of Abe’s economic policies, Barclays said. With wages not growing as strongly as consumption, this suggests financial assets are an important source of funding for expenditure as well as income, they wrote.

“In this context, the retirement of Japan’s baby boomers cannot be overlooked,” they said. “While Abenomics has helped to stimulate consumption, the retirement of Japan’s baby boomers may have been the catalyst.”

The emergence of the elderly as consumers also tends to prompt a swing from goods to services spending, Barclays said.

“As the target of consumption shifts from goods to services, the correlation between consumption and industrial production naturally drops,” wrote Morita and Nagai, adding the link has weakened since about 2012, when the baby boomers began to turn 65. “This weakening correlation highlights an important point in terms of economic analysis -- there is a risk that economic analysis based on industrial production will underestimate the momentum of private consumption and the economy as a whole.”

* * *

Concerns that the Chinese economy is threatened by overinvestment may be misplaced, at least for the time being, according to a report by consulting firm EC Harris LLP. In the first Global Built Asset Wealth Index, the company quantified the value of all the public and private property and infrastructure in a country, including its residential and commercial office space, transport infrastructure and utility networks.

China had $35.45 trillion of built assets in 2012. That’s one rank below the U.S., which led with the world with $39.73 trillion. China’s total stock of built assets is estimated to be 286 percent of its gross domestic product, compared to the average of 284 percent in the study of 30 economies.

“The comparison between China and the general relationship found between built assets and GDP across our sample suggests that the Chinese economy is expanding its investment largely in line with what could reasonably be expected,” the firm said in the July 22 report. “However, if investment continues to expand at a high rate, as we expect it to, overinvestment becomes a growing concern.”

The amount of built assets in a country indicate the wealth the nation has accumulated and resources it can use to generate growth, according to EC Harris. That, in turn, can affect incomes, it said.

China will overtake the U.S. as the wealthiest nation in those terms in the next decade, the report showed. By 2022, Asia’s largest economy will probably have accumulated $75.7 trillion of such assets, compared with $47.3 trillion in the U.S.

“The fastest growth over the next decade is expected in the Middle East and Africa and in Asian economies, as built assets are forecast to rise by 63 percent in both regions,” the firm said in its report. “This rapid expansion, combined with slower growth in the developed economies of North America and Europe, will allow these regions to continue to close the built asset wealth gap.”

* * *

A hard landing in China would mean trouble for asset prices and economies far from Beijing.

Economists at Societe Generale SA led by Patrick Legland updated a report on the potential impact of a sharp slowdown in Chinese growth, showing a slump in the 2013 expansion to less than 6 percent could trim 1.3 percentage points from global growth. Trade shocks or “an intended credit deleveraging going out of control” could trigger such a slump, according to the report.

The slowdown would also lead to a 30 percent to 40 percent drop in base metal prices and a 30 percent drop in the price of Brent crude oil. Equities across Asia would suffer, the economists said.

A hard landing in China is not the French bank’s base case, according to the report -- it forecasts growth of 7.4 percent this year, slowing to six percent by 2017.

* * *

Baby Boomers may have trouble selling their big houses as they retire.

Condominiums and other smaller multiple-unit dwellings are becoming more popular as fewer young people marry and have smaller families, according to a study of census figures by Conference Board of Canada economist Julie Ades. The Boomer generation, now 46 to 67 years old, will add to the trend as the popularity of living in single-unit houses starts to decline when people hit 55, she said.

Boomers make up 29 percent of Canada’s population and are the biggest owners of single homes. The last census showed the percentage of people in their 20s who were part of a couple fell to 30.8 percent from 32.8 percent in 2006, down from more than 50 percent in 1981.

“These trends raise the question of whether future demand for single-detached homes will be enough to support price growth, particularly for homes far from city cores,” Ades wrote on the Conference Board’s blog.

The prospects for Boomer downsizing aren’t “all bleak,” she said. Greater immigration and new families will support demand, while builders will reduce the supply of new single-family homes and convert others into semi-detached units.

“While pockets of oversupply might remain, these factors will help balance the market,” she said.

* * *

The formation of the euro has not led to true convergence of euro-region economies as evidenced by unemployment rates, output gaps and competitiveness, according to Capital Economics Ltd.

While nominal economic variables such as inflation or public and private sector debt levels have become more similar, the divergence in real variables such as joblessness paint a “stark picture,” said Ben May, a London-based economist, in a July 23 report.

Core euro economies are operating at close to full capacity while there is a huge amount of resources idle in peripheral ones, he said. In the labor market in 2012, German unemployment was near a record low while the rates in Spain and Greece rose above 25 percent. Rising unit labor costs in peripheral economies have also led to a divergence in competitiveness within the region, he said.

“It has been a bit like wearing a corset in order to appear slimmer -- the fat just bulges out in different places,” May said.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.