Escaping demographic destiny

The conventional wisdom is that population ageing results in a falling savings rate and rising interest rates. Yet Japan, despite the high average age of its population, runs a sizeable current account surplus, and real interest rates there have in recent years fallen to fresh lows. Higher savings among those of working age, the movement of more women into the formal labour force and reduced investment have helped to offset demographic factors. Real interest rates are likely to remain low for some time to come.