NDLI: Demographic Shift and the Financial Sector Stability: The Case of Japan

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Demographic Shift and the Financial Sector Stability: The Case of Japan

Content Provider	Springer Nature Link
Author	Imam, Patrick
Copyright Year	2013
Abstract	The financial stability implications of a maturing population have not been much studied in the literature, a gap that this paper seeks to fill with particular reference to Japan. This paper illustrates that life cycle considerations tend to have important effects on the balance sheets of households and other entities, with four possible channels: First, banks business model will be affected, as their role in maturity transformation loses its importance, with regional banks in particular threatened. Expanding overseas or into ancillary services creates new risks. Second, older households will be shown to de-risk their balance sheet by substituting safe for risky assets, which raises the interconnection between households and the sovereign, creating a new source of risk. Third, households tend to shrink their balance sheet above a certain age, creating a negative wealth effect. This clogs the credit channel artery, by reducing the value of collateral and through its deflationary effect, while muting the monetary transmission mechanism further. Finally, older households are exposed to new types of risks, such as longevity risk, which if realized could have implications for sovereign debt and equity re-pricing, as well as impacting financial institutions such as insurance companies.
Starting Page	269
Ending Page	303
Page Count	35
File Format	PDF
ISSN	18747884
Journal	Journal of Population Ageing
Volume Number	6
Issue Number	4
e-ISSN	18747876
Language	English
Publisher	Springer Netherlands
Publisher Date	2013-09-10
Publisher Place	Dordrecht
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Japan Ageing Financial stability Balance sheets Deflation Demographic shift Risk Demography Aging Geriatrics/Gerontology Sociology Medicine/Public Health
Content Type	Text
Resource Type	Article
Subject	Sociology and Political Science Geography, Planning and Development Demography

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