This paper examines the effects of population aging on the Korean economy, including the macro economy, labor market, government budget, public pension system, and financial market. Korea's population reached the ‘aging’ stage in 2000 and will be ‘aged’ by 2018 and ‘super-aged’ by 2026. The rate of aging is much more rapid than in any other country around the world. As a result, slowed growth, reduced consumption and low investment may cause an economic downturn as early as 2010. A sound capital market is essential toward mitigating the effects of aging. However, the Korean capital market still does not effectively channel surplus funds to promising production projects. This calls for significant structural reform of the public and private pension systems. Furthermore, the long-term bond market needs to be improved through steady issuance of long-term government bonds to facilitate and encourage longterm investments regarding housing mortgages and MBS, as well as to build up the infrastructure of the bond markets. Population aging also makes the role of benchmark long-term government bonds more important. If progress can be made to rationalize the capital market to counter the negative effects of aging, population aging may well be a blessing in disguise.