Recent studies suggest that the equilibrium real interest rate in the medium to long run is on a decreasing trend in advanced economies, and a declining and aging population has contributed to this trend to some extent.3 Based on the discussion so far, we can assume that a declining and aging population is likely to increase savings, or decrease investment, or both, at least for the time being.
These benefits are expected to flow primarily from opportunities for diversification, non-interest cost reduction, and cross-marketing for those banks, investment banks, and insurance companies that find ways to profitably merge their businesses in the wake of legislation permitting expanded powers for banking organizations. But the longer financial reform is delayed, the less important and useful it will be.