Opening remarks at Bank of Korea-CEPR-OECD joint conference

'Demographic change among most important issues facing central banks'

Bank of Korea Governor Shin Hyun-song speaks at a press conference on monetary policy direction last month. [Bank of Korea]
Bank of Korea Governor Shin Hyun-song speaks at a press conference on monetary policy direction last month. [Bank of Korea]

Bank of Korea Governor Shin Hyun-song said South Korea should use the investment boom driven by semiconductors and AI as an opportunity to prepare for demographic change.

Speaking Wednesday at the opening of a joint conference on "The Economics of Aging and Longevity: From Challenges to Opportunities," co-hosted by the Bank of Korea, the Centre for Economic Policy Research and the OECD, Shin said Korea is "benefiting from unprecedented semiconductor production and AI-driven investment" and that "now is not the time to delay, but to prepare."

He identified demographic change as one of the most important long-term challenges facing central banks, citing its role as a key driver of productivity, potential growth rates and the long-run equilibrium interest rate.

"It would not be an overstatement to say that what is happening in Korea today offers a preview of what many other countries will soon face," Shin said. "Demographics are a powerful force, but as the saying goes, demography is not destiny." He added that history shows how much productivity and long-term growth depend on the creation and spread of knowledge, and that "in the age of AI, the questions that follow from this are sharper than ever."

Shin also stressed that demographic shifts, unlike short-term shocks, can be anticipated decades in advance. "It is a formidable challenge, but one we can prepare for in time," he said, calling the current moment — with Korea at the center of the AI ecosystem — an ideal time to act.

The conference's first session featured a keynote address by Fumio Hayashi, professor emeritus at the National Graduate Institute for Policy Studies in Japan, on the root causes of Japan's three-decade-long economic stagnation. Hayashi attributed much of the prolonged slowdown to population aging that began earlier in Japan than in other countries, and warned that similar growth slowdowns could repeat across East Asian nations including South Korea, China and Taiwan. He projected that South Korea's pace of aging between 2020 and 2025 would be the second fastest in the world, behind only Hong Kong.

The conference also discussed research suggesting that, without competition through private tutoring, the average number of children would have been 28 percent higher, as well as a study showing that over the past 70 years, countries with lower fertility rates have paradoxically recorded higher growth rates per working-age person.

Additional research presented at the conference examined how aging depresses growth rates and real interest rates, constraining monetary policy; how population concentration in the Greater Seoul area reinforces both regional decline and low birth rates in a self-reinforcing cycle; and how AI adoption is concentrated among younger workers, making it unlikely that AI diffusion alone can resolve the labor market imbalances caused by demographic change.


kimstar@heraldcorp.com