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China, Japan and their Demographic Time Bombs

Japan’s Nikkei index sold off 7% overnight on ugly China manufacturing news. But is this the beginning of the end for China and Asia, or just a short-term reaction after a red-hot market heads into a holiday weekend after some bad headlines?

A little of both, says Charles Sizemore. While winding down the short yen, long Nikkei trade is certainly a player here there are bigger demographic factors at play here beyond currencies and exports.

Specifically, the fact that China demographics are working against the workforce. The “one child” policy of the past has crippled the labor pool at a time when the transition from manufacturing to services and consumer goods is causing great pains.

But China demographics are  hardly the only time bomb in Asia. Japan suffers different demographic scenario, but one that is equally dangerous for the economy: An aging population that is drawing down savings and will no longer support the rock-bottom rates Japan has enjoyed with its sovereign debt in the past.

Asia is in turmoil this week, but could be for a long time to come based on these trends.

Watch Charles and me talk it over above, and check out the links below for more details.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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