Japan’s Aging Population: Impacts and Potential Solutions

Heather Qin '24

On January 23rd, Japanese Prime Minister Fumio Kushida delivered a speech before Parliament that forecasted a grim future of population decline and urged legislators to act on the severity of the problem. Kushida claimed that it was ‘now or never’ that the country must address its declining birth rates, lest Japan begin to struggle “[maintaining] its societal functions” [1].

Japan has long been praised as ‘living in the future’ as the country has among the world’s highest life expectancies, futuristic cities, a low homicide rate, excellent hygiene, and a harmonious social atmosphere. However, many of these facades perpetuated through social media belie the conflicts that Japan faces. In 1990, Japan’s real estate and equity bubbles burst, flatlining an economy that enjoyed an incredible post war industrial boom. This led to a ‘lost decade’ where marriages were delayed out of economic uncertainty and real wages remained stagnant for the last thirty years [2].

Japan has one of the world’s highest average life expectancies as a result of an advanced healthcare system, low obesity rates, small meal portions, and a diet high in plant material and fish but low in red meat and saturated fats [3]. Yet, in 2022, the number of births in Japan plunged below 800,000 eight years earlier than government estimates predicted [1], and the country’s population could decline by as much as 20% in the next three decades [4]. Since 1974, Japan’s fertility rate has dipped below the replacement level of 2.1 children per woman, which is necessary to sustain the country’s population. Nearly thirty percent of its population is over the age of sixty-five, and its median age of 48.7 clocks in much higher than the world’s at 30.2. Such trends have significant effects on Japan’s population distribution, healthcare industry, and economy. An aging population drives up the cost of benefits such as social security, straining the economy as a smaller workforce struggles to sustain a greater number of dependents [5]

This correlation between long life expectancy and a low fertility rate is not a coincidence; Japan is in the late stages of the demographic transition model, which predicts population change based on socioeconomic factors. According to the model, fertility rates usually decline as a result of improved access to contraceptives, education, and womens’ social status [6]. Many developed countries such as South Korea, Italy, and Germany are headed for the same trajectory. 

To solve the problem, the Japanese government has attempted to incentivize couples with cash bonuses and workplace benefits [1]. However, Japan remains one of the world’s most expensive countries to raise a child, and a demanding work culture with long hours continues to discourage parents from having children. South Korea, also struggling with record-low birth rates, plans to provide families with newborn children a monthly allowance of 1 million won ($740). The country’s population decline is so severe that the United Nations predicts its population will more than halve by the end of the century [7].

Other countries, such as Germany and Turkey, have attempted to bolster their workforce with benevolent immigration policies. Germany has increased the national minimum wage to 12 euros ($13.60) per hour in an effort to make employment prospects more attractive to workers [8]. Besides cash incentives, the government has vastly improved childcare provisions to alleviate the burden on parents. For example, Germany guarantees public childcare beginning at age one and education beginning at three, along with a generous policy that allows parental leave up until the child is three. However, such policies have had minimal impact on fertility rates. In addition, Germany’s current population includes twenty percent of which are migrants, helping to offset, but not remedy population decline and a shrinking workforce [9]

Meanwhile, Japan has a large service sector in which womens’ participation is high, so women see themselves in roles outside the traditional home. Historically, the country has been a closed society with a restrictive stance on immigration [9]. Consequently, the population is ethnically homogenous as only about 3% of Japan’s population is foreign-born [3], which would not be conducive to policies countries like Germany have established. 

Government measures such as raising the retirement age, accelerating job automation, and involving more women in the workforce can only go so far. Even when taking automation into account, a study by a Japanese agency found that the country will need at least 6.7 million foreign workers by 2040 to remain on course for government GDP growth targets. Similarly, a study found that South Korea also needs at least 4 million foreign workers by 2030 to maintain its labor force. Yet while the Japanese have become more vocal regarding the necessity of foreign workers, a 2020 poll in South Korea found that less than half the population supported a more multicultural nation [10]. Clearly, the consequences of declining birth rates are not easily addressed as they would involve not only structural changes in the economy, but also an overhaul of social norms, cultural norms, and stigma surrounding women and immigration. 

[1] https://www.reuters.com/world/asia-pacific/its-now-or-never-stop-japans-shrinking-population-pm-says-2023-01-23/

[2] https://www.investopedia.com/articles/economics/08/japan-1990s-credit-crunch-liquidity-trap.asp

[3] https://www.indiatimes.com/trending/social-relevance/japanese-longest-lifespan-study-554555.html#:~:text=Due%20to%20the%20low%20prevalence,meat%2C%20specifically%20saturated%20fatty%20acids.

[4] https://www.bbc.com/news/world-asia-63830490

[5] https://www.nationalgeographic.com/magazine/article/japan-aging-adapting-shrinking-population-feature

[6] https://www.intelligenteconomist.com/demographic-transition-model/

[7] https://www.bloomberg.com/news/articles/2022-08-31/korea-to-triple-baby-payments-in-bid-to-tackle-fertility-crisis

[8] https://www.reuters.com/world/europe/germany-needs-greater-immigration-avoid-labour-shortages-minister-2022-01-11/

[9] https://www.asianstudies.org/publications/eaa/archives/aging-populations-a-comparison-between-japan-and-germany/

[10] https://www.economist.com/asia/2022/11/03/japan-and-south-korea-are-allowing-in-some-foreign-workers