an increase in their population reduces total national savings and pushes interest rates up. on the other hand, if population aging is accompanied by an increase in longevity, this will positively affect savings. since world war ii, longevity has been increasing in developed countries through advances in medical technology, and we are now likely to live longer than our parents and grandparents. therefore, even if the proportion of elderly people increases, they may spend less than before or work longer to earn income, both of which will contribute to pushing interest rates down by reducing spending or by increasing savings. how about the impact on investment? a declining and aging population can again either increase or decrease investment, although this also depends on the prospects for the economy and technological progress. a decrease in working - age population and thus in labor input raises the level of capital stock per labor input, and makes capital input relatively abundant. 2 this reduces the need for additional investment. investment is also reduced when firms expect that the population, and therefore the future demand for production, will decline. these are the factors that push interest rates down. meanwhile, when technological progress or labor - saving investment is prompted to compensate for decreased labor input, this pushes interest rates upward. in this way, a declining and aging population can either push up or push down interest rates. recent studies suggest that the equilibrium real interest rate in the medium to long run is on a decreasing trend in advanced economies, and a declining and aging population has contributed to this trend to some extent. 3 based on the discussion so far, we can assume that a declining and aging population is likely to increase savings, or decrease investment, or both, at least for the time being. 2 the situation where the level of capital stock per labor input increases is referred to as " capital deepening. " 3 sudo and takizuka ( 2018 ) suggest that about 270 out of the 640 basis points decline in real interest rates over the past 50 years in japan can be attributed to demographic changes. sudo, n. and y. takizuka " population aging and the real interest rate in the last and next 50 years, " bank of japan working paper series 18 - e - 1, 2018. ii. impact on banking business since inflation expectations in advanced economies have moved around a small positive value with some variations across countries, a decreasing trend in the equilibrium real interest rate is translated into a decreasing trend in nominal interest rates. let me now turn to how the demographic changes accompanied by a decreasing trend in nominal

at japan's low growth from an international perspective. in what follows, i will divide growth into growth in capital input ( information and communication technology [ ict ] capital as well as other capital ), labor input, and tfp. the reason for dividing growth into these three factors is that considering each factor individually provides some understanding of how the growth rate could be raised. let us take a moment to have a look at the estimates for member countries provided by the organisation for economic co - operation and development ( oecd ). specifically, chart 1 presents the average growth rates for three subperiods for each of the seven major oecd economies and the averages for these economies as a group. 1 the blue line in the charts shows that, while japan still enjoyed comparatively high growth during 1985 - 95, growth subsequently stalled, and from the mid - 1990s it registered slower growth than the other countries except italy. however, following the introduction of bold monetary easing - - quantitative and qualitative monetary easing ( qqe ) - - in 2013, japan's growth rate recovered somewhat, and with growth in the other countries slowing, japan's low growth is no longer that conspicuous. 2 data provided by the oecd are also employed in chapter 1, section 3 of the 2018 white paper on information and communications in japan released by the ministry of international affairs and communications. figure 1 - 3 - 2 - 2 of the white paper arrives at similar conclusions to my speech today. using the dataset employed by the bank of japan's research and statistics department and the cabinet office to estimate the output gap and potential gdp, somewhat different results from those using the oecd data are obtained regarding the contribution of growth in tfp and capital input. 2 to simplify the chart, the period 1985 - 95 is shown. since the high growth registered in japan during the second half of the 1980s was due to the bubble, combining this period with the first half of the 1990s, when the bubble burst, provides a better representation of the underlying growth trend. see harada yutaka, " jissho keizaigaku wa ikanaru shinjitsu o terashi dashi taka, " in ushinawareta 10 nen no shinin wa nanika, ed. iwata kikuo and miyagawa tsutomu ( tokyo : toyo keizai, 2003 ). chart 1 decomposition of structures of economic growth in major countries based on growth