The Bank of Japan has warned of potential risks to the country's economic policy rulings as people get old and the population declines.
Haruhiko Kuroda of Bank of Japan warned other financial leaders during a G-20 meeting on Thursday that economic policies need to improve, Japan Today reported. The policy revamps, according to Kuroda, should help prevent a slowing economy due to population regression.
Kuroda further explained that some unconventional methods that the Bank of Japan adopted over the years can lead to consequences that will be difficult to control in the near future. These risks include cheap credit that could result in high-risk investments.
In the financial world, investments that promise greater profits can also be a cause of financial instability but if handled wisely, these could yield a lot of benefits for the Japanese economy.
"Policymakers need to manage prudential policy appropriately, taking into account the fact that the risk profiles of financial institutions could be dramatically transformed during times of demographic change," Kuroda said.
A couple of years back, data collected from the country revealed that Japan's population has started to decline. People are quickly aging and this has prompted the government to encourage companies to invest in projects outside the country for the meantime. The trick behind this strategy is to give time to focus on other markets that were initially ignored but are actually showing significant growth.
Meanwhile, Japan has also started resolving issues on health care costs as foreign labor continues to rise, increasing the need for additional health care spending. However, families of foreigners working in Japan are affected by new legislation that should help reduce rising expenses within the health care sect.
According to Nikkei Asian Review, a new legislative proposal expected to take effect in 2020 will have a direct impact on both Japanese and non-Japanese workers in the country. The legislation states that overseas dependents will be excluded from health insurance claims.
On the other hand, an exception will be handed out to Japanese nationals' children who are studying in a different country. For non-Japanese residing in the country, coverage would only be limited to dependents who live in the country.
If the new proposal is approved, municipalities will also be tasked to check the eligibility of non-Japanese residents who are applying for insurance. To improve eligibility checks, Japanese lawmakers are also pushing for the use of modernized technology in keeping track of medical records.
