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There has been a growing consensus in Japan that greater efforts are needed to address the adverse effects of demographic changes. These efforts are expected to provide new growth momentum for Japan's economy. For example, there has been progress in initiatives to raise the labor participation rate of women and the elderly, to address the decline in the number of workers. There have also been initiatives to attract more highly-skilled foreign workers. Firms are also making headway in areas such as retail, tourism, medical and nursing services in an effort to provide goods and services for the elderly and families with small children.
While demographic changes can be predicted quite accurately, reversing them is extremely difficult. However, as is often the case when problems seem too serious or difficult, initiatives to address those problems tend to be put off. Although Japan's working-age population started to decline in the mid-1990s, concrete action was taken only after the total population started to decline in the latter half of the 2000s. Japan's experience thus suggests that it is crucial not only to debate the challenges posed by the demographic onus, but also to take the necessary action at an early stage. Prompt action is needed to preserve the growth momentum of the domestic demand-led economy in Asia.
IV. Global Monetary Accommodation and Domestic Credit Growth High economic growth is often associated with an increase in domestic credit. The current growth in domestic demand in Asian economies is mainly driven by domestic structural factors such as the increase in the middle consumer class. But, it has also been reinforced by a combination of global monetary accommodation and the concomitant expansion in domestic credit.
History tells us that bubbles often arise when people's expectations become bullish due to the experience of continued high growth and domestic demand expansion. Examples of such situations where domestic demand growth became excessive and ill-balanced are now all too familiar. We saw this in the bubble economy in Japan, in the housing bubble in the United States, and in the overheating in real estate markets in peripheral European countries. These economies eventually fell into financial crises. And the symptoms were common in each case: a rapid increase in credit and an emergence of euphoria based on the belief that