A Dire Situation of Japanese Demographic Meltdown

What happens when a country’s birth rate and death rate shrink at the same time? Japan knows, because it’s facing this catastrophe right now.

A Closer Look at the Japanese Demographic Time Bomb

Japan’s population is ageing and declining just because Japanese people have a higher life expectancy and living a healthier life i.e. an advantage under a usual situation but if it is followed by low birth rate and death rate, it becomes a crisis.

According to these stats, the Japanese population will be above the 100 million till 2040 but by 2065, it will have declined significantly. By 2065, the median age is 56 meaning half of this population would consist of retired people as Japanese employees were retiring at the age of 55. The working population will reduce certainly which raises problems of labor shortage unless they have the substitutes of technology or policies which might be used to balance it.

The total world population will continue to grow but Japan, the eleventh most populous country will decline to be to the seventeenth place in 2050. The two main reasons for the declining demographic is low fertility rate and a longer life expectancy.

Low Fertility Rate:

The total fertility rate (number of babies a woman has in her lifetime) in Japan is just currently 1.46, a total fertility rate for replacement of 2.1 would keep a population stable i.e. the babies who’ll grow and replace the elderly.

 

Causes of Decline in Birth Rate:

  • Later and fewer marriages
  • Higher Education
  • Urbanisation
  • Increase in nuclear family
  • Poor work-life balance
  • Increased participation of women in the workforce
  • High cost of raising a child
  • A decline in wages and lifetime employment

 

Orthodox gender roles suggests that women will have to stay at home to take care of their children and give up their careers.

Between 1980 and 2010, the percentage of the population who had never married increased from 22% to almost 30%, even as the population continued to age, and by 2035 one in four people will not marry during their childbearing years. Wikipedia

This trend was seen to begin by the 1990’s as this came into effect due to the Equal Employment Opportunity Act in 1986 which made the Japanese women have financial independence and making the unmarried life an accepting option. Therefore, the Japanese women often decide to choose careers over children.

However, women are marrying at later ages, never having children once married or never marrying at all and as almost all babies in Japan are born within marriage (single parents are not traditionally accepted), the delaying and not marrying pairs up to reduce the fertility rate.

 

High Life Expectancy:

Japan’s life expectancy in 2018 was 84 years. Japan’s overall population is declining due to the low fertility rate and the high life expectancy therefore resulting in an ageing population. Advanced healthcare and healthy nutrition reduced diseases therefore improving the standards of living. The massive economic growth also results to the longer life expectancy.

 

Causes of High Life Expectancy:

  • Japanese Diet:

The Japanese government projected a food guide for the citizens in 2005.

Around a decade later, researchers at the National Centre for Global Health and Medicine in Tokyo investigated how following the food guide affected the country’s mortality rate.

The team analyzed food and lifestyle questionnaires completed by 36,624 men and 42,920 women aged between 45 and 75, who had no history of cancer, stroke, heart or chronic liver diseases. The participants were tracked for 15 years. Researchers found that participants who closely followed the food guide had a 15 per cent lower mortality rate.

The study concluded: “Our findings suggest that balanced consumption of energy, grains, vegetables, fruits, meat, fish, eggs, soy products, dairy products, confectionaries, and alcoholic beverages can contribute to longevity by decreasing the risk of death, predominantly from cardiovascular disease, in the Japanese population.” Independent.co.uk

  • Advanced Healthcare:

Since 1961, Japan provides a healthcare system with equal access to all with an insurance scheme. Regular checkups are provided for everyone at school, work and community by the government which allows them to be health conscious. But, these all factors are risked by economic decline, rising costs and ageing population which threatens the universality of Japanese healthcare. Japan provides healthcare for 10% of its GDP which gives universal access as well as manageable expenditure for the government compared to US, which spends 17% of its GDP on healthcare but has a lifespan of  79 years.

 

Shrinking Workforce:

A smaller workforce and an ageing population means workers must support an ever larger proportion of retirees therefore increasing the age-dependency ratio.

Japan’s working-age population peaked in 1995 at 87 million and has been falling ever since. The government expects it to fall to 76 million in 2017 and to 45 million by 2065. Reuters

By 2030, demographers say, Japan will have just two working-age people for each retired one; by mid-century, short of a rapid and unlikely return to fecundity, the ratio will rise to three for every two retirees. Economist

Female Participation in the Workforce:

One factor that could delay the plunging population is the increased women participation in the workforce. Their participation is less than in many MEDC especially at higher level jobs. Simulations suggest that if Japanese women worked at the same rate as Swedish, there would be a 20 year delay to the population decline and including an increase in productivity and economic growth.

Key Facts:

By 2050, Japan will be losing 20 million people which means shortage of labor unless the total fertility increases significantly which possibly couldn’t happen.  In addition, half of the population will be almost 60 by 2065 i.e. the reduced working population will be half-retired therefore more work for the ones who are left. The high life expectancy means that working people will have to pay for the healthcare and pensions of the elderly. This is shown by the high age dependency ratio meaning that the employed people will have to support more retired and youths.

 

How does this shrinking population affect Japan?

Economy:

Deflation has affected the economy for two decades and policies to reverse it e.g. Abenomics which have failed. An increasingly ageing population and plunging workforce affects the economic growth as seen through:

Japan’s economy contracted by 0.2% in the first three months of 2018 over the previous quarter and is now the only major economy to start 2018 with a shrinking economy. Financial Times

 

The IMF calculated that “the impact of ageing could potentially drag down Japan’s average annual GDP growth by 1 percentage point over the next three decades.” Financial Times

A declining population suggests that a smaller domestic market leading to decrease in consumer spending as fewer people to buy goods. Weak consumer spending has caused Japan’s economy to contract in four of the past seven quarters. This puts a great pressure on Japan’s GDP and wages and in addition to that there’s the falling land prices and exchange rate appreciation (decrease in Japan’s buying power) which leads to reduction in foreign investments as it is not an attractive investing hub anymore therefore signifying the impact of demographic crisis.

Japan’s ageing population not only has bad effects but also profits the large corporations like Lawson, which has sections for elderly that have adult diapers, wipes, etc. But the decline in the young working population affects the military force which affects the national security of the country. The government increases the employment rate in the medical areas where it recruits and retains more older population into the work force. A UN study released in 2000 found that Japan would need to raise its retirement age to 77 (or allow net immigration of 17 million by 2050) to maintain its worker-to-retiree ratio.

The declination of the population means that even if there’s a flat productivity growth there will be a decline in the GDP output year to year. If ceteris paribus, Japan would see positive GDP growth if there’s an increase in the population. Japan will continue to see the negative GDP growth if it doesn’t correct its demographics.

Political:

As the population ages, the voting landscape drastically changes. In 1960, young voters made up 40% of the electorate while the elderly just less than 10%. But by 2060, the elderly will be accounting for almost half of the voters. This growing power imbalance results to the necessities of the younger voters and families such as employment and childcare which may not be focused upon compared to the needs of the senior citizens.

Social:

The aging population is having the biggest impact on Japanese society. The migration of young people to the cities, women participation in the workforce and increased cost of old and young dependents needs new solutions like nursing home and programs.

Nursing Homes:
 As the population is ageing, there is an increase need for nursing homes.  A lack of these centers result for the families to look for substitutes that are unauthorized.

In 2015, over 15,000 seniors were found in unauthorized nursing homes. Japan Times

It is considered as a last resort to the low income retirees as they have no other place to go. The other reasons might be to claim the nursing insurance money or the worst case scenario, for abuse.

Primary Schools:

In 2016, there were about 2,300 fewer kindergartens than seven years earlier as the number of pupils dropped by 18 per cent. Nearly 2,000 primary schools have been shut over the same period while the number of children of primary school age dropped by 8%. Financial Times

The number of children younger than 14 is projected to halve by 2050 according to the government as there is a fewer fertility rate hence, nearly half of the public elementary and high schools in Japan are ordered to close and shut down therefore might affect the employment rate as well as Japan’s economic growth.

 

Housing Construction:

There is a reduction in the construction of houses as demand falls due to the plunging population affecting the economic growth and infrastructure of Japan. If the relationship between demographics and housing is taken into account, there is a very disappointing outlook for the Japanese housing industry.

 

Abandoned Homes:

As Japan’s population declines, there’s an increase in the number of abandoned houses.

By 2014, 8.2 million homes in Japan were empty and 40% of them weren’t offered for sale or rent. Japan Times

Societies started to attract buyers by offering cash to whoever willing to move into the community suggesting the shortage in demand but a surplus in supply.

 

How to fix all the problems led by Japanese Population Decline?

1. Pro-fertility Policies:

The first basic solution to the declining population would be to increase the birth rate i.e. have more babies.

A 2007 Cabinet poll showed that women were more willing to have additional children if their husbands helped with child-rearing and housework. National Interest

Due to which Abe imposed a policy where he increased paternity leave by 13% which wasn’t effective as only 1.72% of husbands took advantage of paternity leave in 2009.

2. Women in the Workforce:

To increase the shrinking workforce, the simple solution is to increase the women participation in the workforce.  Government policies like ‘Womenomics’ was imposed to encourage this by creating more adaptable working space and increasing the GDP by 15% and make it easier for women to have careers.

The problems that Womenomics will have to overcome will be:

  • Tax incentives
  • Maternity Harassment
  • Wage Gap
  • Lack of Daycare Services

3. Labor Markets:

Even if Womenomics works, Japan will need more workers to occupy the labor markets.

  • Immigration:
    The economy is already dependent on foreign labor to a significant degree.

The Government is proposing a five-year visa program that would allow foreigners to fill positions in unskilled labor markets. They have also promised highly-skilled foreign workers with a permanent residency, as an incentive for top talent to choose Japan over others therefore for whoever looking for new opportunities. Tofugu

  • Robots:

To substitute human workers in the shrinking workforce, the other solution is robots.

Prime Minister Abe is also promoting a “robotics revolution” in the form of a five-year program to increase the number of robots in manufacturing, construction, and other industries. He wants the robotics market to grow fourfold by 2020,from 660 billion yen to 2.4 trillion yen. Bloomberg

4. Elderly Care:

With an ageing population, there is a need for enhanced old age care. The Japanese government created long-term care insurance in 2000 where people pay the system at age 49 and choose to start receiving their pensions at any point between the ages of 60 and 70 — with greater monthly payments offered to those who only start at age 65 or older.

 

The Bottomline:

It may look like a disaster now but Japan is under construction and can counter the demographics crisis to ensure a bright future for the next generation. Just give it time.

 

4 thoughts on “A Dire Situation of Japanese Demographic Meltdown

  • mm
    15 Nov 2018 at 1:17 am
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    Wow this is a very detailed article and nice analysis, with many interesting facts about Japan’s shrinking population. How much time did you spend on writing this?

  • mm
    15 Nov 2018 at 1:21 am
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    I don’t understand why an increase in “nuclear family” is a cause of the decline in Japan’s birth rate. Can you explain this to me?

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