Why assets alone won’t ease Asia’s demographic pressures

ONE in four people across the Asean+3 region – which includes China, Japan and South Korea – will be aged 65 or older by 2050, nearly treble the share recorded in 2010. Yet, the fiscal impact will vary enormously.

By then, population ageing is projected to create fiscal pressures equivalent to 0.9 per cent of gross domestic product in Indonesia and as much as 9.3 per cent in South Korea, reflecting the region’s sharply different demographic trajectories and levels of preparedness.

The conventional response is to depict a tale of two Asias: an ageing, asset-rich North, and a younger, capital-hungry South.

Japan, South Korea and China have accumulated vast pools of savings, while economies such as Indonesia, the Philippines and Vietnam still enjoy a demographic dividend and need financing for infrastructure and industrial upgrading.

Match the two, the logic goes and demographic divergence could become a source of regional strength rather than strain.

It is a compelling proposition, but an incomplete one.

A tale of two Asias

Japan illustrates why.

Its Government Pension Investment Fund (GPIF), the world’s largest pension fund, managed 293.6 trillion yen (US$1.8 trillion) in assets as at March 2026.

The country also remains one of the world’s largest net creditor nations, ranking third, behind Germany and China, at the end of 2025.

Yet the scale of Japan’s assets does not mean that it – or the wider region – is fully prepared for ageing. GPIF must invest in the best interests of its beneficiaries, and global diversification remains sound practice.

But Japan’s experience demonstrates a broader point: Accumulating assets is not the same as developing the institutions and markets needed to ensure that long-term savings support economic resilience at home and across the region.

South Korea offers a similar lesson. Its National Pension Service has grown into one of the world’s largest pension funds, and recorded exceptionally strong investment returns in recent years.

Even after the reforms adopted in 2025, however, South Korea’s pension system remains under significant long-term pressure as its population ages rapidly. A large, well-performing fund can buy time, but it cannot substitute for further reform.

China has also begun responding more decisively to its demographic transition by raising its statutory retirement age for the first time since 1978, expanding its private pension scheme nationwide, and transferring state-owned equity to the national social security fund.

These are important steps, but China is ageing exceptionally quickly relative to its income level. The development of retirement savings and pension coverage must keep pace.

Meanwhile, Asean’s younger economies face a different version of the same challenge. Their demographic dividend will not last indefinitely, yet pension coverage and long-term savings mobilisation remain relatively limited.

These economies are often portrayed as the natural destination for surplus capital from the region’s older economies, but countries cannot simply wait for capital to arrive.

They need the institutional infrastructure – pension systems, insurance markets and deep local-currency bond markets – to absorb long-term investment productively and eventually generate more domestic savings before their populations begin to age.

Singapore complicates this broad North-South picture. It is ageing rapidly and must continue strengthening retirement adequacy.

At the same time, its strong regulatory regime, financial innovation capabilities and advanced market infrastructure position it to help connect long-term capital with credible investment opportunities across Asean+3.

In 2027, Singapore will be well placed to advance this agenda, when it chairs Asean and co-chairs the Asean+3 Finance Process with South Korea.

Different demographic clocks across Asean+3

Taken together, Asean+3 is not neatly divided between economies with too much capital and those with too little. Instead, its demographic clocks are running at different speeds.

Japan is furthest along; South Korea, China and Singapore are following rapidly. Asean’s younger economies have more time but generally less developed savings and financial infrastructure.

Despite these differences, Asean+3 economies face two related challenges.

The first is domestic. Pension, insurance and capital-market institutions remain uneven in their ability to mobilise savings and convert them into productive long-term investment.

The second is regional.

Asean+3 has accumulated substantial savings, while many economies across the region require long-term financing for infrastructure and industrial upgrading.

Yet its financial markets are not sufficiently deep or integrated to connect these savings and investment needs effectively across borders.

Strengthening those links could help younger economies meet their development needs, while expanding the range of credible long-term investment opportunities available to the region’s pension and insurance funds.

This does not mean directing institutional investors towards regional assets at the expense of fiduciary duties or global diversification.

It means building deeper capital markets, reducing cross-border barriers and developing investments capable of attracting the region’s savings on their merits.

Doing so will require both national reform and stronger regional financial cooperation.

The Asian Bond Markets Initiative provides an important foundation.

Established following the Asian financial crisis, it was intended to develop local-currency bond markets, make better use of Asian savings for Asian investment and reduce the currency and maturity mismatches that had made the region vulnerable to external shocks.

In May 2026, Asean+3 finance ministers and central bank governors agreed to evolve it into the Asian Bond and Financial Markets Initiative, broadening its scope while retaining local-currency bond-market development as its anchor.

But deeper bond markets alone will not be sufficient. They must be accompanied by stronger market infrastructure, better disclosure and governance, more consistent regulatory frameworks and a wider pipeline of investable projects.

Regional cooperation can also help reduce barriers to cross-border investment, and make it easier for institutional investors to assess, price, and manage risk across different markets.

These financial-market reforms must proceed alongside domestic pension and savings reforms – not after them.

South Korea must continue strengthening its pension sustainability. China must expand funded retirement savings and coverage, and Asean’s younger economies must build contributory savings and insurance systems while their working-age populations are still growing.

The central challenge is timing

For Japan, decades of asset accumulation bought time, but not immunity, from the economic and fiscal consequences of ageing.

Nor did the existence of enormous savings pools automatically create an integrated regional system for channelling long-term capital where it could be used most productively.

Many other Asean+3 economies will age more quickly and at lower income levels than Japan. They will have less room for delay, and potentially fewer fiscal resources with which to respond.

The lesson for the rest of Asean+3 is then to build the institutions and markets capable of using long-term savings, well before demographic change sharply raises the cost of doing so.

The region still has an opportunity to align its financial architecture with its demographic reality. But the window to do so is narrowing.

The writer is the director and chief executive officer of ASEAN+3 Macroeconomic Research Office