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“Rabbit hutch” is a stereotypical term coined years ago by outsiders referring the cramped dwellings of crowded, urban Japan.

Smaller in area than California, the nation of 127 million people long ago earned the reputation of being densely populated.

This crowded image, however, is likely to change steadily from 2006.

In 2005, the nation’s population will peak at 127.51 million and then start to fall dramatically, according to the latest report on long-term trends issued by the National Institute of Population and Social Security Research, a think tank under the Health, Labor and Welfare Ministry.

“If the average birthrate remains the same at 1.36, as in 2000, then 2006 will be a turning point when the population starts to plunge rapidly,” said Shigesato Takahashi, director of population dynamics research at the institute.

The population in the subsequent 100 years will decline at nearly the same pace as its dramatic increase in the last century, he said, and the decline, if simply calculated in one-race terms without any other factors, would translate into a Japanese population of 89.70 million in 2050. He stated that, under these terms, the population would halve every 50 years over the following 2 1/2 centuries until 3300, when there would be two people left and the race would become extinct in 3387.

Although most people would swallow this scenario with a grain of salt, the rapidly aging population will indeed greatly change Japan’s socioeconomic circumstances, according to experts.

“Some people worry about the expected contraction of the overall economy,” said Atsushi Seike, a professor of labor and economics at Keio University. “But from the point of view of economists, what counts most in measuring a country’s wealth is the average per capita income.”

The most important thing for the country is to produce more value-added products and prevent the gross national income from dropping at a rate faster than the population plunge, Seike said.

To this end, he believes the nation must strive to increase every worker’s productivity and promote technological innovation.

The country must also encourage more women and seniors to join the workforce by abolishing the rigid corporate retirement system and seniority-based pay, he said.

The social security and tax systems established just after the war during a time of rapid economic growth with a predominantly male workforce must be retooled to encourage more women to take jobs, the professor said.

Keeping pensions afloat

More women and able-bodied seniors must join the workforce to help cover the cost of ballooning pensions, he added, calling it a matter “of great urgency.”

Of the expected 82 trillion yen in fiscal 2002 social security costs, or about 22.5 percent of the national income, pension payments will account for 44 trillion yen, according to the latest outlook issued by the health ministry.

In fiscal 2025, pension payments are expected to reach 84 trillion yen, while total social security costs are expected to climb to 176 trillion yen.

The ratio between the working population in the 20-64 age bracket and those 65 years old and older was 3.58-to-1 in 2000, meaning 3.58 workers supported one senior. But in 2050, the ratio is expected to be around 1.39-to-1, the ministry’s research institute said.

“The question is who will finance such massive pension payments as well as other social security costs, like medical care, when the society has a smaller working population and more senior citizens,” director Takahashi said.

Under the present pay-as-you-go financing plan based on a pyramidal population structure, pension premiums paid by workers go to pensioners. To sustain the system in an aging society, premiums must either be boosted or individual pensions drastically cut, he said.

Professor Seike wants to see a supplemental pension plan phased in so working people start putting away more funds for their retirement, even if that means higher premiums for current working generations.

Impact on industries

As the population ages and shrinks, this will have a profound negative impact on schools, urban transportation services, a mass media dependent on a large population and scores of other industries, experts believe.

“The population plunge will exacerbate the gap between winners and losers in many industries in the country, which has already suffered a decade of recession,” said newscaster Akira Nishimura, who specializes in economics, consumer behavior and marketing.

Businesses that have unique strategies targeting the elderly will have a better chance to survive, but amid a dwindling population many others will lose in the coming cutthroat fight for survival, Nishimura said.

Seike believes more companies should cater to the demands of healthy elderly people who have paid off their homes, finished educating their offspring and possess a large chunk of the 1.4 quadrillion yen in individual financial assets in the country.

Take NYK Cruises Co. for example. World cruises aboard its luxury liner Asuka have been almost fully booked, mainly by seniors, every year since it began offering the tours in 1996, according to Yuko Komatsuzaki, manager of sales and public relations.

A 100-day cruise costs at least 3.6 million yen per passenger, she said.

“Most passengers are seniors — retired salarymen and their wives — who can now finally afford a luxury cruise together,” said Takayuki Kikuchi, manager of Yusen Travel Co.’s Cruise Center Tokyo.

“Cruises are not only costly but time-consuming. Younger, working people can’t afford such trips.”

Teruo Matoba, 79, a frequent passenger aboard the Asuka, said: “My son and daughter have grown up and have their own life. So my wife and I go on cruises and other trips by ourselves now.

“I enjoy getting away from the bustle of everyday life and closely associating with people our own age from around the country on cruises,” remarked the certified public and tax accountant from Tokyo’s Taito Ward.

Other firms have seized the initiative in targeting children and their parents, managing to take advantage of the dwindling number of kids.

Apparel maker Narumiya International Co. is successfully marketing six fashion brands, including Angel Blue and Daisy Lovers, designed for the “junior generation” of 9- to 15-year-olds, in collaboration with fashion magazines targeting that age bracket.

“The declining number of children has worked in our favor, although many businesses seem to be depressed by the recession and aging population,” said Yuzo Narumiya, president of the Tokyo-based firm.

The fewer the children, the more parents spend on each child, buying items marketed by Narumiya at higher prices, he said.

“Those who can come up with something original and create quality, consumer-oriented products will still win.”

While many companies sell mass-production items without sounding out consumers about their preferences, Narumiya said his firm directly asks kids their opinions on fashion and incorporates these ideas into its products.

Narumiya’s fashion brands enjoy the patronage of more and more in the junior generation who have money in “six pockets,” he said, referring to parents and grandparents.

Health minister Chikara Sakaguchi has submitted to Prime Minister Junichiro Koizumi a set of measures to counter the nation’s declining birthrate, including promotion of paternity leave.

Under the plan, the Health, Labor and Welfare Ministry hopes to raise the proportion of men taking paternity leave to 10 percent from the 0.4 percent recorded in fiscal 1999. The new target for women taking maternity leave is 80 percent. Sakaguchi asked the government to promote child-care leave at companies and local governments.

“The government must accelerate efforts in the field of social reform in a way that makes more people feel it’s worthwhile having children,” said Takahashi at the National Institute of Population and Social Security Research.

Takahashi said society must reduce the burden on women who marry, have children and end up quitting their jobs and thus lose a source of income.

Incentives such as income tax breaks should also be granted to families with many children, Takahashi said, citing France as a country that uses such a system.

Others say there is little the government can do as far as offering incentives for having children, especially at a time when its pension financing is already facing collapse.

Finding the silver lining

But some experts believe there is much to be gained from an aging society.

“Although the demographic shift means a dwindling number of children, the life expectancy in Japan is getting longer,” said Yutaka Harada, executive research fellow at the Cabinet Office’s Economic and Social Research Institute.

“This trend will lead to less-crowded conditions, and hence a more comfortable society to live in.”

If more living space becomes available at a reasonable price, there will be more personal disposable income to buy luxurious household and other consumer goods, he said.

Harada went on to note that a smaller working population will lead to reforms in such labor-intensive sectors as the public works industry.

“The question is what will make the Japanese population happy. I don’t believe we’ll become happier simply by trying to increase the population,” Harada said.

“Society should be redesigned so that all members can nurture and demonstrate their talents, and produce more quality products. I believe it is better than relying on the sheer size of a population and economy.”

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