Japan and Germany will celebrate the 150th anniversary of bilateral diplomatic ties in 2011. The first commemorative events will kick-off this October, with the grande finale planned to take place in October 2011 in Yokohama.

Both countries were defeated in World War II but re-emerged strongly from the ashes of war. Over the decades that followed, they became the undisputed economic powerhouses of Asia and Europe. Cooperation and exchange between Japan and Germany has always been intense, whether in economic and political spheres or in culture and science, so there is a lot to celebrate in terms of their common past.

But leaders in both countries may have less reason to celebrate when they realize the huge macro challenges they face in the future.

Just last year, Germany lost its long-standing title as the global export champion to China. This year, Japan will similarly lose its status as the world’s second-largest economy to China (it was actually overtaken in the second quarter). Both developments seem irreversible if we take into account China’s sheer size and its population.

These changes, however, do not directly threaten the welfare or living standards of Japan and Germany. Both are still far ahead in GDP on a per capita basis, ranking 20th and 23rd, respectively, compared with China at 99th, according to IMF data. But the absolute size of any single country’s population does matter when it shrinks suddenly and substantially.

This is exactly what is happening with Japan and Germany. Both the Japanese and Germans are already aware they are aging societies. Birth rates in Japan and Germany are at an international low of 1.3 to 1.4 babies per woman, and there are few signs this will change any time soon.

Few in those countries, however, know that the actual size of their populations will shrink over the next 40 years, spanning just over one generation.

Japan’s population is about 127 million, but most forecasts say it will decline to less than 100 million by 2050.

Germany meanwhile is expected to shrink to 71.5 million by 2050 after losing 10 million people, according to the Population Reference Bureau in Washington.

Germany’s population decline is especially remarkable because it contradicts the trend seen by the EU, which is projecting the population will increase to 510 million by 2050. Countries like France and Britain are expected to grow by more than 10 percent, with Britain overtaking Germany as Europe’s most populated country long before 2050.

As previously mentioned, a rapid rise in the natural population does not seem to be in the cards for Germany or Japan. This leaves foreign workers and immigration as the only remedies available to prevent those figures from becoming reality.

The future remains quite dark. Germany was very successful decades ago in attracting foreign labor, but the flow of immigration has stopped and actually gone into reverse. Since 2003, more than 180,000 qualified Germans have left to work and live abroad on a net basis, even accounting for those who return after a few years.

In Japan, immigration policy has traditionally been very restrictive. It was only in April 2009 that former health minister Jiro Kawasaki said Japan should never become a multiethnic society.

The Democratic Party of Japan has so far taken a more open stance on immigration, although real change is occurring at a snail’s pace due to stubborn opposition to foreigners. The ongoing plight of health care workers from the Philippines and Indonesia shows how difficult it is to change perceptions and long-established practices in Japan.

The strongest proponents of a proactive immigration policy are to be found in the business sectors of both Germany and Japan. The Japan Association of Corporate Executives (Keizai Doyukai), for example, is pushing for an increase in immigration, and its committee on immigration policy is one of the most active in the country.

In Germany, the demands in business are the same. But business always seem to “lose” to politicians who speak in favor of safeguarding jobs, a short-term claim that neglects the country’s long-term macroeconomic needs.

There is nothing wrong with having smaller populations in Germany or in overcrowded Japan. But in any country, there is a clear need to have a strong and skilled labor force with a size significant to the rest of the population.

Achieving this balance will be a common challenge for both Japan and Germany over the next 40 years. Let us hope that 150 years from now they will be able to at least celebrate having a combined population of 150 million.

Jochen Legewie is president of German communications consultancy CNC Japan K.K.

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