Japan is now into year 24 of economic underperformance. Since 1990 average GDP growth has been just over 1% per annum. This year the new PM has installed a new central bank head, who has promised to double the money supply in an effort to push inflation up to 2 percent. The PM is also planning to spend over $100 billion on new and upgraded infrastructure in the next 15 months in an effort to stimulate aggregate demand. Will this finally push Japan out of the doldrums? I doubt it. Japan already has excellent public infrastructure. The marginal benefit of extra infrastructure is likely to be very small, and even proponents of the infrastructure spend admit that the multiplier is likely to be small. Japan faces two major impediments to higher growth. The first is a lack of private investment, driven in large part by a lack of economic reform. Since 1990 private investment has fallen by about 0.8% per year. The second issue is demographics. An ageing and declining population is already having an effect on the Japanese economy, and construction in particular has been badly affected by these changes. Dwelling investment is now at late 1960s levels, and other measures of construction activity are well down on 1990 levels. Other forms of investment are at 1990 levels – enough to stifle growth without the drag from construction. Demographic change provides new opportunities and challenges. Japan has shown how not to manage these challenges, and much of Europe is following the same road – lack of reform, too much debt and to0 little focus on private investment as the driver of economic growth.