A think tank affiliated with the Keidanren business federation is predicting that South Korea will pass Japan in gross domestic product per capita around 2030.
The 21st Century Public Policy Institute also says in a report issued Monday that Japan could even be dropped from the category of developed countries by 2030 unless the low birthrate and dwindling population are addressed.
“A declining population and the world’s fastest aging society will combine to have significant effects on the economy,” the report says.
“Unless something is done, we are afraid Japan will fall out of the league of advanced nations and again become a tiny country in the Far East.”
The institute assumes the population will drop to 116.6 million in 2030 from 128.1 million in 2010, with the percentage of working age people falling to 49.1 percent from 51.4 percent. Under these assumptions, the institute laid out four scenarios in GDP per capita.
In all but the most optimistic one, South Korea tops Japan in GDP per capita.
In the worst-case scenario, the economy begins shrinking in the 2010s due to worsening government debt.
In terms of GDP per capita, South Korea would rise to 15th and Japan would fall to 21st in 2030. In 2010, South Korea ranked 24th and Japan 20th.
The second-worst scenario sees the country’s low productivity levels continuing, causing a repeat of the so-called Lost Decades.
In the second-most upbeat scenario, Japan’s productivity levels rise to those of other developed countries. However, GDP per capita would still trail South Korea in 2030, ranking 17th to Seoul’s 15th.
In the best scenario, where Japan’s female labor force rises to the level of Sweden’s by 2040, it would be ranked 15th and South Korea 16th.