Japan’s woes, Nepal’s fortune


By Sishir Devkota

Japan’s population is going down. A vast percentage of ageing population is about to dominate Japan’s demography. Japan’s fertility rate is shockingly dwindling so much as the number of childbirths in 2016 is at the mean level of 16 million1. The figures stood at 27 million in the year 2000. In 2013, 22-30 millions of Japanese amounted as “elderly” (above age 65) but 2018 will witness that figure race towards 34.17 million. The fact that these figures are projected by the Japanese themselves is a serious announcement to the world: they are in serious trouble but the worst is yet to happen.

Slumping Japanese Economy

Unlike others, Japan’s economic hurdles are unique. Japan has been long battling to implement economic policies in order to increase consumer spending. Lack of spending has seized the Japanese economy into a vicious deflationary catastrophe; where prices of goods and services have been chopped to lowest competitive levels. Yet, the Japanese people are not spending. There is a bit of history with Japan’s unwillingness to strip their wallets. Japan experienced an economic downturn in the 90’s; when their stock prices sank being subject to price bubbles.

Soon after the stock market bubble, the Japanese found out that their housing demands did not parallel economic expectations. Since then, Japanese companies have invested abroad, leaving their home economy into a strange atmosphere of uncertainty where per capita incomes are comparatively high but demands are staggeringly low. People in Japan are taking it safe and spending less; still hungover by their past fouls.

Nepal’s Fortune

Japan’s woes would have made Thomas Malthus proud; but in the wrong way. Japan has become the example of facing economic cum demographic problems, despite avoiding the Malthusian Trap2. Put Japan’s effort to increase inflation targets together with the picture of increasing rate of ageing population by the next decade. The picture will illustrate an economy where the prices are lowered to persuade elderly people to spend. This scenario is exactly where Nepal’s fortunes lie. Currently, 36.5% of the total Nepali citizens (age 25-54) make up the highest share in the population pyramid. Putting that in perspective with the annual average unemployment rate of slightly lower than 4%3 sends admonishing note to the coming generation (combined age of 0-14, 15-24), consisting more than 52%4 of the current total population.

With the current trend, a majority of those to-be citizens could opt for employment abroad; often in unskilled settings. But, this could change. Partly because of Nepal’s new found fame; as of 2014, Nepal’s net enrollment rate was at an enviable 93%. Education levels are showing promising signs. Judging with simple probability, the kids as of now will attain higher levels of education in the future. But, is there a future employment strategy to soak new brains into the Nepali economy? Not really! Nepal’s core industries are pre-modern, wages are low, business opportunities are scant and the economy shows signs of uneven growth patterns. If Nepal’s future (un)skilled labor were to be transferred into the Japanese market, how would that fare out? And why would Japan take in Nepali workers before others?

Japanese Yen’s nearest twin

Japan faces the problem of boosting its internal market mechanisms. Japan’s long term solution is to increase inflation rates so as to raise national revenues. It will be looking for equivalent currency exchange rates with other nations to import migrants and boost its production and service sectors. Japan has a deflated exchange rate; which was planned out to attract investment and improve exports. Japanese policy makers have realized the importance of taking the optimal approach; unlike reverse roads in the past. Transnational trading with not so high and not so low currency exchange rates will be Japan’s priority.

For the reason that it would attract foreign labor and capital in the receiving nation’s gain. Trading with lower exchange rates might increase revenues in the short term but lower rates will stagnate Japanese demands in the long run. Trading with marginally higher exchange rates might attract investment but it will not solve Japan’s deflationary problem. The current Japanese Yen ¥ to Nepali Rupee ₹ is roughly estimated to 1/1.3. Compared to other exchange rates, the Nepali currency is Japan’s optimum option where it can not only experiment steering its inflation targets but also persuade Nepali earners to spend inside Japan. Near equal exchange rates will encourage Nepalese workers to spend or invest inside Japan.

There are three reasons for why Nepal could be Japan’s best option. Apart from filling in the demographic demand, Nepal’s economy is still inside closed doors-that it has not opened up its markets to the world and largely depends on trading with India and other South Asian nations. Nepal’s economic history will provide security to Japan. In terms that there will be no apprehension regarding Nepal’s fluctuating exchange rates. Second, Nepal’s revenues originate from remittances. Nepal has the experience of emigrating workers abroad and cashing in from their earnings. Japan can confide in Nepal’s experience and set its future targets without any real danger of policy fluctuation.

Lastly, the currency exchange rates between the Yen and NPR will encourage Nepali citizens to spend in Japan. Working out the plan in bilateral settings could be a match made in heaven. For Nepal, it could add new avenues of remittances plus supplementary modern skills in exchange. The Nepalese government has often been criticized for its hollow policy of e-migrating Nepali citizens to the Middle East for life threatening jobs. The Japanese adventure could change Nepal’s e-migration story for good. Through systematic emigration policy, Nepal could be an exemplar economic powerhouse. Nepal’s strength could lie in how it can supply to the demands of saturated economies like Japan.

The Plan

The possible economic union between Japan and Nepal will have to be monetary. A monetary union will add assurances and limit risks. Nepal and Japan’s century old diplomatic ties will be Nepal’s leverage in persuading Japan to contemplate towards its South East friend. The plan is for the future when Japan will be having demographic problems and Nepal will experience a flock of educated young minds looking for jobs. But the work needs to be done at the present. Nepal needs to stick to its population plan, maintain its literacy/university pass out rates and improve its e-migration policies. Given Japan’s concerns for its future, it will take such plans into consideration. But, the ball is in Nepal’s court. Emigrating to the land of Emirs is on a close.The Land of the Rising Sun is calling.


1. The figures are Japanese projections from IPSS.

2. Malthusian trap as a concept was developed from the work of famous economist Thomas Malthus. Malthusian Trap is exclusively described in his book An Essay on the Principle of Population.

3. The percentages are derived via UNESCO’s data.

4. Data from CIA Factbook:Nepal

(Mr. Devkota is pursuing Masters in Democracy and Global Transformations at the University of Helsinki, Finland)

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