What’s so good about Japan’s demography?

Pessimists obsess about Japan’s debt, deflation and demographics. The last on the list, they argue, acts as a drag on growth. Labor scarcity, aggravated by rapid technological change, makes it difficult for firms to fill available jobs—especially in new knowledge-based industries. Nicholas Smith, Japan strategist at investment bank CLSA, is an optimist. “I think demographics are the best thing that ever happened to Japan,” he says.