14  Jonathan D. Ostry, Andrew Berg and Charalambos G. Tsangarides, “Redistribution, Inequality, and Growth,” IMF Staff Discussion Note, SDN/14/02, 2014. 15  Thomas Piketty, Capital in the Twenty-First Century, Belknap Press, 2014. 16  Joseph A. Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, Harvard University Press, 1934. See also Philippe Aghion and Peter Howitt, “A Model of Growth Through Creative Destruction,” Econometrica, Vol. 60, No. 2, pp. 323–351, 1992; Katsuhito Iwai, “Schumpeterian Dynamics: An Evolutionary Model of Innovation and Imitation,” Journal of Economic Behavior and Organization, Vol. 5, pp. 159–190, 1984. 17  Hiroshi Nakaso, “Asian Economy: Past, Present, and Future,” Speech at Securities Analysts Association of Japan International Seminar, April 24, 2015. 18  The Wall Street Journal, “Asia Seeks to Reach the ‘Unbanked’,” March 18, 2015. 6  BIS central bankers’ speeches  therefore the prospects for further strong economic growth, will be completely different once the issue of limited availability of banking services is addressed. Conclusion In my presentation today, I have emphasized that productivity growth is crucial to sustaining hitherto robust economic growth in Asia. Among many other things, in my view, the continued accumulation of human capital, market-friendly institutional setups and strong financial sectors, all play an important role in productivity growth. We have seen many positive developments in this respect in Asia, but much more needs to be done. What I have discussed today could be broadly categorized as structural reforms.

Population aging implies a continued decline in the proportion of the working-age population, which in turn poses a challenge to sustaining per-capita income growth, as a given income earner has to transfer a larger share of his or her income to the retirees. Chart 5 shows how diverse the region is in this context, with some countries already facing serious challenges. In this chart, the horizontal axis is changes in working-age population, and the vertical axis is the proportion of the working-age population to the total population. A rise in this proportion is often called a “demographic bonus,” while the opposite is called a “demographic onus.” And the size of the bubble is proportional to the absolute number of the working-age population. As you can see, over such a long period of time, even glacial demographic changes seem dramatic. Japan has already entered deep into the period of demographic onus, with the absolute number of the working-age population declining at a significant pace. The NIEs, China and some ASEAN countries are about to follow Japan in this regard in the not-sodistant future. Meanwhile, India and other Asian countries are expected to enjoy a favorable demographic environment at least until the middle of this century. The third challenge is what I call the “Malthusian trap.” In Malthus’ original work, the existence of a limited resource – land in his case – constrains growth. Likewise, limitations in the supply of natural resources, such as oil, are thought to threaten global growth in the longrun.