Media  Finance and the Social Security System  2024.05.15

Japan’s shrinking population is a big problem for the nation

An expert panel sounds the alarm on the nation's declining birthrate and population crisis

The Japan times on Apr 11, 2024

Economic Policy

Of the 1,729 local municipalities in Japan, 744 are "likely to vanish" by 2050, according to a report released this week at a symposium by the Population Strategy Council, a group of private-sector experts.

The Tohoku region, for example, has the highest number, with 215 municipalities that are feared may "vanish.” How do I know so much about this? Because I am also a member of the PSC.

Japan has entered an era of full-fledged population decline. If current trends remain unchanged, the nation's population is expected to decline by about half from 124 million in 2023 to 63 million by 2100. If that happens, we will enter into a downward spiral, continue to lose national wealth and our social security system’s sustainability will be severely compromised. Japan will have no choice but to live as a "minor power" in the international arena. This was the sense of crisis at the time the PSC was launched.

Population decline is a national security issue. If Japan's population continues to decrease at its current rate, first, local communities will become exhausted and many municipalities will virtually disappear; second, the balance between the young and the old will become unhealthy and society will not remain sustainable. And most importantly, because the working-age population will decline, domestic consumption will decrease, innovation will slow and productivity growth will be impossible. This is why I joined the council.

Why is the population declining? What should we do? There are endless questions. Although I am not a demographics expert, I have learned a great deal sitting in various meetings since last fall. The council consists of about 30 experts in the fields of population, declining birthrates and child-rearing support. It is chaired by a former chairman of Nippon Steel Corporation and the vice chairperson is a former governor of Iwate Prefecture and incumbent president of Japan Post.

At the symposium, we had a discussion over the reasons for the nation's declining birthrate. Some participants criticized the “lack of seriousness among politicians," or even "lack of awareness on the part of the people themselves.”

But none of these are the cause or reason; but rather, they are the result. Perhaps, the public believes the country can manage or survive a declining population and does not consider it a crisis at this juncture.

The Japanese national character comprises many things, including a combination of "peer pressure" and "herd mentality," i.e., acting on the assumption that "even if you think something is wrong, others will not change it, so you will not change it, either," or "even if you feel it will eventually go bad, no one is saying it yet, so things will still be fine.”

One banker said that "the birthrate problem is like dealing with bad debts," and this kind of "collective irresponsibility" is undoubtedly one of the causes of the failure to take decisive measures against the declining birthrate.

However, a more significant reason may be a change in the attitudes of young people and their excessive concentration in the Tokyo area. Unlike when I entered the workforce in the 1970s, today's youth seek happiness now rather than in the future.

In order to maximize their current happiness they may not want children whose education can be time-consuming and expensive. Moreover, since they seem to find happiness living in the nation's bustling and exciting capital and not in their hometowns, they may not want to return to their quiet, mundane origins.

So, what should be done? The PSC's recommendations present a pragmatic approach. Pursuing outright population growth is realistically unfeasible; therefore, the council acknowledges that population decline is inevitable.

However, by implementing intelligent strategies, we should aim to maintain a population of about 80 million by 2100, thereby ensuring economic growth. This objective is entirely feasible. Though the population will decline significantly, the council deems this the most realistic goal for Japan to achieve.

The issue of declining birthrates and an aging population is both old and new. Many committees have been formed and various discussions have been held, but none has ever proposed a specific target of 80 million people by 2100. In this sense, the PSC’s proposal is groundbreaking and will serve as a starting point for future discussions and legislative measures. We can no longer afford to merely discuss the issue; the time has come to take action.

The conclusion of the proposal is clear, but its implementation is not as easy as it sounds. The demographic situation in neighboring South Korea tells us how difficult this will be. Japan's fertility rate currently stands at around 1.30 per woman and the country is struggling to raise it to 2.0, while South Korea's has fallen to a low of 0.72 — and this despite that government's earnest efforts to combat the declining birthrate.

So, what now? The PSC has proposed that, first, the Japanese government formulate and promote a comprehensive, long-term “national vision” for the year 2100, and second, the private sector take the lead in creating an organization to raise awareness of population issues and make policy recommendations. However, once again, there is a danger that these recommendations will result in "good but difficult-to-implement" measures.

It is not easy to change the public's mindset overnight in order to reverse a declining population trend that has continued for decades. If we suddenly ask people, especially the young, to take on more responsibility, it may be met with confusion. As young people are experiencing fear and anxiety about starting and raising families, one potential effective approach may be to utilize elements of the Japanese national character to nudge them in the right direction.

The peer pressure and herd mentality that permeates Japanese culture can also have positive effects. One idea is to foster the notion throughout society that having and raising children is fun and worthwhile. Such peer pressure along with the natural herd mentality may make young people think that “if others are doing it, I might as well do it too.”

To combat the declining birthrate, measures to overcome the problem require a long-term investment in young people, especially women and children.