bubble burst of 1991, while the united states is about to face its own version with a somewhat milder population ageing. there are many consequences of population ageing, such as differences in consumer preferences and technological adaptability between the young and the old, but i will concentrate on one particular issue that is pertinent to balance sheet adjustments, namely, the possible effects of population ageing on property prices. in figure 4. 1, the real land price ( national average, for all purposes ) is juxtaposed with the inverse dependency ratio from 1955 to date. this figure shows, firstly, that the relative abundance of young people coincided with sharply higher property prices. secondly, in contrast, the relative abundance of old people seems to be leading to lower property prices. it should be noted here that declining property prices greatly aggravated the balance sheet adjustments of japanese corporations. the us case is illustrated in figure 4. 2. in the united states also, an increasing reverse dependency ratio seemed to coincide with the property bubble. after the bubble burst of 2007, property prices seem to have followed the long run movement of the inverse dependency ratio, although it would be premature to draw any conclusions from this at the moment. 3. prolonged balance sheet adjustment under population ageing : consequences what then are the consequences of severe and prolonged balance sheet adjustment under population ageing? three adverse consequences can be identified. declining mobility first, mobility declines, or in other words, the economy becomes “ inflexible ”. since de - leveraging firms or households have to pay back all their debts before “ moving ” from their current position, they are often stuck with an “ underwater ” property. population ageing strengthens this tendency. in the case of japan, de - leveraging took place in the corporate sector, and thus firms became less mobile between industries and regions. in the united states, the household sector is de - leveraging, and thus household mobility has been reduced. figure 5. 1 depicts declining entrepreneurial mobility in japan. this figure shows the creation and destruction of enterprises between pre - bubble ( 1981 – 1986 ), bubble ( 1987 – 1991 ), and post - bubble ( 1992 – 1996 ). it can be seen in this figure that, after the bubble burst of 1991, creation of enterprises was sharply reduced. in contrast, the increase in the rate of destruction was relatively mild. these two imply a “ sticky industry structure, ” a tendency to hang on to the past. declining mobility is

found in the household sector in the united states. figure 5. 2 shows changes in the householder mobility rate between 2005 and 2009. a sharp decline is found across all age groups. since there is no such change in renters, this sharp decline suggests that the housing crash reduced householder mobility rates. loss of non - tangible / human capital the second consequence of severe and prolonged balance sheet adjustment is the loss of non - tangible or human capital. de - leveraging firms and households suffering long underutilization or under - employment tend to lose their non - tangible or human capital. in japan, this has been observed especially in small to medium - sized enterprises : loss of entrepreneurship, loss of human networks in skilled manufacturing, and loss of access to technological advances. in the united states, the long - term unemployed or underemployed risk losing their human capital.. bis central bankers ’ speeches problems in financial intermediation the third consequence of severe and prolonged balance sheet adjustment is the deterioration in financial institutions ’ efficient functioning as financial intermediaries. this was most acutely observed in japan during the several years after the bubble burst : a pile - up of non - performing loans seemed to lead to a breakdown in the “ market selection mechanism ” around 1997. figure 6 shows the result of a large - scale panel analysis of japanese firms, in which the total factor productivity of exiting and surviving firms is compared. survival of the fittest is a basic premise of the natural selection mechanism. thus, if the market mechanism works well, the productivity of successful and surviving firms should be higher than that of failing and hence exiting firms, at least on the average. in this figure, the shaded areas show cases where the productivity of failing and thus exiting firms is higher than that of surviving firms, which is an anomaly. in fact, the shaded areas are rather exceptional most of the time. however, if we look at the period 1996 – 97, the period of the financial crisis, we see many shaded areas indicating that more productive firms were exiting in many industries. this strongly suggests a breakdown in the natural selection mechanism. results of acute b / s adjustment under population ageing : japan in the 2000s so, what are the end results of acute balance sheet adjustment under population ageing? some of these consequences can be seen in the japanese situation in the 2000s. first, growth prospects declined. the average real gdp growth fell from 5 % to 4 % in the 70s and 80s to around 1 % in the 90s