What does the future hold for the world’s ageing populations? When experts try to answer this question, they often look at Japan, a country whose demographic profile turned sharply older in the early 1990s. Growth fell, deflation set in and capital investment flatlined. Nominal interest rates stayed incredibly low for a long time.

That outcome, however, owed much to events outside Japan. At the precise moment that large numbers of Japanese people began retiring from the workforce, the rest of the world was awash with labour. People born in the 1970s were just entering the workforce. Hundreds of millions of workers in China and eastern Europe were integrated into the global economy. All of this allowed real wages to fall.

Meanwhile, China’s investment boom meant that less investment was needed in the advanced economies, calling real interest rates to fall and asset prices to rise. Taken together, lower wages and higher asset prices could mean only one thing: rising inequality.