Digital technology, Aging Population
andIncome distribution of Japan
2019, MayNaoyuki Yoshino
Dean & CEO, Asian Development Bank Institute
Professor Emeritus, Keio University, Japan
yoshino@econ.keio.ac.jp
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Working population is diminishing and elderly population is
growing rapidly…

Population Aging in Asian Countries
Japan

Korea

China
Thailand
Vietnam6

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Effects of Expansional Monetary Policy
Monetary Policy (Working Population)→ Increase investment→ Wages of working population will rise
→ Consumption of working population will rise(Retired Population)→ relies on pensions and social welfare→ monetary policy does not affect to retirees
8Effects of Fiscal Policy (Public Works)
Fiscal Policy (Working Population)→ Create new jobs
→ Unemployment rate declines→ Consumption of working population will rise
Retired population→ Not affected by fiscal policy (punli→ consumption remains the same
→ lower interest rate reduces their interest income9Empirics – Miyamoto and Yoshino (2019)• Specification 1••••

𝑘𝑦𝑖,𝑡+𝑘 − 𝑦𝑖,𝑡 = 𝛼𝑖𝑘 + 𝛾𝑡𝑘 + 𝛽 𝑘 𝑠ℎ𝑜𝑐𝑘𝑖,𝑡 + 𝜀𝑖,𝑡𝒚 : log of output (debt-to-GDP ratio, private-investment-output ratio)
𝒔𝒉𝒐𝒄𝒌 : an unanticipated public investment shock
𝜶 : country fixed effects
𝜸 : time fixed effects• Specification 2𝑦𝑖,𝑡+𝑘 − 𝑦𝑖,𝑡 = 𝛼𝑖𝑘 + 𝛾𝑡𝑘 + 𝛽1𝑘 𝐺 𝑧𝑖,𝑡 𝑠ℎ𝑜𝑐𝑘𝑖,𝑡 + 𝛽2𝑘 1 − 𝐺 𝑧𝑖,𝑡with𝐺 𝑧𝑖,𝑡exp(−𝛿𝑧𝑖𝑡 )=,𝛿 > 01 + exp(−𝛿𝑧𝑖𝑡 )where 𝜹 is an indicator of public investment efficiency𝑠ℎ𝑜𝑐𝑘𝑖,𝑡Impact of Fiscal Policy(Public Investment)
Non-aging economy

Aging economy

32

2.5
1.5
2
1
1.5
0.5
10

0.5

-1

0-1-0.501234-0.5-101234

Recommended
PolicyProductivity based
wage rate andpostpone retirement
age by use ofTechnologicalProgress
Yoshino-Miyamoto(2017) Japan and the World
EconomyYoshino-Farhad-Miyamoto(2017) Credit and CapitalMarkets

Source: Yoshino and Miyamoto (2016).

Impact of Oil Price Decline to Exporting Countries

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Empirical ModelHigh Income Earners
Low Income Earners
𝑀 ↑ → r ↓ and 𝑟𝐷 ↓→ 𝑟𝐷𝐷 ↓𝑀 ↑ → r ↓ 𝑃𝑆 ↑(4)
(5)

Effects ofMonetary Policy

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Development of Financial Technology
1, Access to financial products through mobilephone
2, Financial products can be supplied fromoverseas
3, Households can shop around various financial
products through mobile phone
4, Easy for individuals to access to credit
Households’ Debt Overhang
5, Financial education will be very important19

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Values of the Cumulative Losses and Policy Instruments
Policy (1)Policy (2)Policy (3)Policy (4)Policy (5)b

Stable regime

Dollar peg

Basket peg

Basket peg

Floating

Managed floati

Adjustment—

GradualSuddenSuddenSudden∗∗∗𝑚∗ = 0.016𝑚∗∗ = 0.017∗

Instrument value

𝑖 = 4.34

𝜐 = 0.58

𝜐= 0.68Cumulative loss (value)

17.04

1.80

1.91

2.67

2.31

Cumulative loss (% of y 2 )a

23.4

2.4

2.6

3.7

3.2

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Thank you so much
Naoyuki Yoshino, Dean and CEO
Asian Development Bank Institute<References>
Yoshino, Hesary and Miyamoto (2016) “The Effectiveness of the Negative
Interest Rate Policy of Japan”, Credit and Capital Markets, Vol. 50, No2.
Yoshino and Miyamoto (2017) “Declined Effectiveness of Monetary andFiscal Policy faced with Aging Population of Japan”, Japan and the World
Economy, 42.
Yoshino, Mizoguchi and Taghizadeh-Hesary (2018) “Optimal Fiscal Policy
Rule for Achieving Fiscal Sustainability: the Japanese Case”, Global
Business and Economic Review, UK.
Yoshino, Hesary and Shimizu (2018) “Impact of Monetary and Fiscal
Policy on Income Inequality of Japan”, No. 837, Working Paper, ADBI
26 .