Due to a sharp decline in the fertility rate and a rapid increase in longevity, Japan's population aging is the furthest advanced in the world. In this study we explore the macroeconomic impact of population aging using a full- ‡edged overlapping generations model. Our model replicates well the time paths of Japan's macroeconomic variables from the 1980s to the 2000s and yields future paths for these variables over a long horizon. We …nd that Japan's population aging as a whole adversely a¤ects GNP growth by dampening factor inputs. It also negatively impacts on GNP per capita, especially in the future, mainly due to the decline in the fraction of the population of working-age. For these …ndings, fertility rate decline plays a dominant role as it reduces both labor force and saver populations. The e¤ects of increased longevity are expansionary, but relatively minor. Our simulations predict that the adverse e¤ects will expand during the next few decades. In addition to closed economy simulations, we examine the consequences of population aging in a small open economy setting.In this case a decline in the domestic capital return encourages investment in foreign capital, mitigating the adverse e¤ects of population aging on GNP.JEL Classi…cation: E20, J11