Japan ‘failed’ to fix its ageing problem and South Korea should avoid doing the same: central bank chief

South Korea’s central bank chief says Japan’s use of stimulus to combat the challenges of an ageing economy ‘can be a sideshow’ that’s best avoided

Instead, he recommends painful structural reforms, more women in the workforce, education improvements and foreign workers being better utilised

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Elderly people walk with others through the Asakusa area of Tokyo. South Korea’s central bank chief thinks Japan’s ‘sideshow’ of using stimulus to combat the challenges of an ageing economy is best avoided. Photo: Kyodo

Published: 10:04am, 28 Nov 2022Updated: 10:08am, 28 Nov 2022

South Korea should avoid following Japan’s lead of using fiscal and monetary stimulus to combat the challenges of an ageing economy, the central bank chief said, urging reforms instead to boost fertility.

Ageing is a rising concern in the developed world and South Korea is among the hardest-hit societies, together with Japan.

South Korea shattered its own record for the world’s lowest fertility rate last year, adding to long-term pressure on policymakers to keep interest rates low and fiscal stimulus ample to boost growth.

“It’s easier to say ‘let’s use the fiscal policy to stimulate the economy if growth is going down, let’s use the loose monetary policy to increase the inflation rate,” Bank of Korea Governor Rhee Chang-yong said in an interview. “It all failed.”

Rhee Chang-yong, governor of the Bank of Korea, looks out over the skyline of Seoul. Photo: Bloomberg

South Korea should instead embark on long-delayed structural reforms, even though they may be painful, while increasing female labour participation, improving the education system and using foreign workers more effectively, the Bank of Korea governor said.