Last Wednesday, the Ministry of Health, Labor and Welfare announced that Japan’s total fertility rate (TFR) — the average number of babies born to women during their reproductive years — rose slightly to 1.34 for 2007, even though about 3,000 fewer children were born last year than in 2006. Two years ago the TFR was at 1.26, a postwar low, and last year this country experienced a natural population decline for the first time since 1899, when data-gathering in this area began. If fertility remains constant at these levels — and projections for the next 50 years have it doing just that — the population of each successive generation will fall at a rate of approximately 40 percent.

To address this concern, administrations have implemented a number of programs over the past two decades. In fact, the cost per month incurred by the government to fund day-care services in Tokyo for one infant currently exceeds the average monthly wage of a male worker in the capital.

But have you ever wondered how the fertility rate ended up dropping so low in the first place? Well, follow along with me to gain a better understanding of not only that, but also why one of the actions government has since taken appears to be biased against non-Japanese — the very people who may be needed to reverse this trend and provide support for Japan’s rapidly aging society.

To fully understand the decline in the TFR, we first need to drop back a little over 60 years to July 1944. For three weeks that summer, representatives of 44 nations came together at Bretton Woods, N.H., to make financial arrangements for the postwar world after the expected defeat of Germany and Japan. Conference participants established a modified “gold standard” under which the exchange rates of most currencies were fixed against the gold-based U.S. dollar. In 1949, under the Bretton Woods system, Japan accepted a fixed exchange rate of ¥360 to the U.S. dollar — a rate that remained unchanged for 22 years.

The year that delegates met at Bretton Woods, 1944, Japan had a TFR of 4.12, and three years later the country’s TFR hit a postwar high of 4.54. In 1948 however, abortion was legalized, and by 1957 Japan’s TFR had fallen to 2.04, below the 2.07 needed for population replacement to occur. Over the next 16 years, through 1973, Japan’s TFR averaged about 2.06, but in 1974 a drop began from which the country has never recovered.

It is evident that the legalization of abortion led to the initial decline in the TFR. But what happened in 1974 that would cause the TFR to not only drop for a year but also keep it dropping for the next three decades?

Inflation. From 1956 to 1972, Japan’s economy grew 9.3 percent on average in real terms as all sorts of durable consumer goods were produced. However, imports continued to exceed exports. Prices rose. From 1969 through 1971, unions demanded wage increases in excess of 22, 23, and 24 percent, and companies met those demands by granting raises of 15, 18 and 17 percent, respectively.

The U.S. gold coverage, meanwhile, deteriorated from 55 to 22 percent; that is, the U.S. had printed so many dollars that it had the ability to convert only 22 percent of those dollars into gold on demand. Because the U.S. could no longer honor its commitment to pay gold for dollars, President Nixon announced on August 15, 1971, that the U.S. would no longer sell gold, thus ending the fixed exchange-rate system. The yen immediately appreciated to 340 per dollar and was at 315 by the end of the year.

In order to counter the deflationary impact of the yen appreciation, fiscal and monetary policy was relaxed. Bond issuance tripled. And the Tanaka administration spent, spent, and spent some more. Inflation roared, reaching double digits. In 1972 and 1973, unions demanded wage increases surpassing 25 and 39 percent, and received raises of 20.09 and 32.85 percent, respectively. And then, war. At noon on Oct. 6, 1973, on the Jewish Day of Atonement, Egypt and Syria staged a surprise attack on Israeli forces situated on the Suez Canal and the Golan Heights, starting the Yom Kippur War. Three days later, the members of OAPEC, comprising the Arab members of OPEC in addition to Egypt and Syria, announced that they would no longer ship oil to nations that had lent Israel support during this war — that is, the U.S., its allies in Western Europe, and Japan.

Japan’s CPI surged to 24 percent and inflation topped 20 percent, and struggling companies shifted to a policy that would greatly impact Japan’s TFR over the next three decades: They started hiring part-time workers at much lower wages. And guess who began taking these jobs in large numbers: women.

Japan’s TFR fell to 1.91 in 1975, 1.76 in 1985, 1.42 in 1995, and 1.26 in 2005.

Government here in Japan, however, has been rather active in its response to improve conditions. Since 1990, child-support allowances have been available for eligible families. For example, if a family’s highest earner is paying into a pension plan through his or her workplace (“kosei nenkin”), has three dependents, and makes less than ¥6.46 million a year after deductions, that worker is eligible to receive an allowance of ¥10,000 per month for each child until the child reaches the age of three, then ¥5,000 per month for the first two children and ¥10,000 per month for each successive child until the child completes elementary school.

Five to 10 thousand yen a child might not seem like a lot, but through six years of elementary school, that amount would eventually grow to around ¥876,000 for each of the first two children and ¥1.5 million for each successive child.

Moreover, since 1991 full-time employees at companies that have more than 30 employees have been eligible for up to one year of leave to care for a child under the age of one. In 1995, a provision was added granting the employee a monthly salary during the leave amounting to 25 percent of their average monthly earnings over the previous six months. Further, the employer had to continue to pay the employee’s share of social security contributions.

In 2000, the government started shouldering the employer’s as well as the employee’s share of social security contributions while the employee was on child-care leave. And in 2001, the Employment Insurance Law was amended, increasing the proportion of salary received by an employee on child-care leave to 40 percent.

But what about “nonregular” employees — part-timers, contract workers, and dispatched workers? About half of employed married women work part-time, and about three-quarters of part-time workers are women. A large number of non-Japanese are also employed on fixed terms. Japan’s English-teaching industry, in effect, has been built on the backs of such labor. In fact, Louis Carlet, deputy general secretary of the National Union of General Workers Tokyo Nambu, estimates that 90 percent of non-Japanese in this country are employed as nonregular employees.

Fortunately, a revision to the Child-Care and Family-Care Leave Law was put in effect from April 2005, and this revision guarantees nonregular employees utilization of child-care leave under two conditions: First, the person must have been employed by his or her employer for a continuous period of at least one year; and second, the person must be “likely to be kept employed after the day on which his or her dependent child reaches one year of age,” according to the translation provided by the Cabinet Secretariat.

“Likely to be kept employed?” For those who may have trouble reading between the lines, this provision affords the employee absolutely no protection at all. Basically, this “law” is telling the employer: If you really want to allow your nonregular employee to take child-care leave, sure, go ahead; but hey, if you really don’t, no worries — this “law” is not going to prohibit you from terminating his or her employment. For a country that needs a significant increase in its TFR, government would be wise to close this loophole.

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