Commentary / Japan

Countermeasures for Japan's changing demographics

by Shinji Fukukawa

The shrinking and the aging of Japan’s population are accelerating at a rapid pace unprecedented in other countries. This transformation makes savings shrink, national economic growth potential weaken and the financial structure deteriorate while giving rise to various other social problems. Although the shifts in Japan’s demographic situation as shown by relevant future predictions are fairly certain, the Japanese government has avoided dealing with this problem in a proactive manner and thus has exacerbated it.

According to the National Institute of Population and Social Security Research, it is estimated that the nation’s population will decrease from 128.05 million in 2010 to 116.62 million by 2030, 86.74 million by 2060, and 49.59 million by 2100. The bonus from this country’s population increase in the 20th century will end up as an onus in the 21st century, causing the economy to shrink drastically.

The graying of Japan’s population is progressing at a rapid pace. The ratio of people aged 65 and older is expected to rise from 23.1 percent to 31.6 percent between 2010-2030 while the ratio of the productive-age population comprising people aged 15 to 64 is expected to fall from 63.8 percent to 58.1 percent in this period.

As a result, by 2030 there will be two workers supporting each elderly person, and by 2060 there will be just 1.2 workers supporting each elderly person. This situation will require the nation to implement drastic reforms of its social security system, including medical and nursing care services and the system’s financial structure.

The change in Japan’s population structure is also likely to cause stagnation in rural communities. The declining population of young people might even result in the disappearance of some rural cities, towns and villages, and accelerate the concentration of the nation’s population in large cities such as Tokyo.

In the past, various policy concepts designed to revitalize rural communities have been proposed by the nation’s leaders. Those concepts include the Plan for Remodeling the Japanese Archipelago of the late former Prime Minister Kakuei Tanaka (1971-1972), the Garden City Concept of the late former Prime Minister Masayoshi Ohira (1978-1980) and the Hometown Creation initiative of the late former Prime Minister Noboru Takeshita (1987-1989).

But none of these initiatives have succeeded in helping revitalize rural communities.

The factors held mainly responsible for the decline in the birth rate are the trends of delaying or forgoing marriage and a decrease in the number of children born. This symbolizes the discrepancy between individual choices and a desirable direction of Japanese society. Detailed sociological analysis is needed to determine the specific causes. Because the declining population is an urgent issue, it is necessary to enact effective countermeasures, starting with what can be done practically.

At first, efforts should be made to build an environment in which couples find it easier to raise a family. For this purpose, it will become necessary to help alleviate the burden on household budgets by raising allowances for child rearing and child care, and increasing assistance to cover education costs. Child care facilities should also be improved. In addition, it will be necessary to make rules concerning child-rearing leave and the conditions for employing women more flexible to make it easier for working women to raise children. Men’s cooperation in raising children will also be indispensable.

Elderly people’s social participation will also need to be diversified. As the number of healthy elderly people is increasing, it will be worthwhile to create an environment in which elderly people can continue to work into their 70s and contribute more to their local communities.

Studies should be done to prepare for accepting foreigners who want to coexist with Japanese society and culture into intellectual activities such as education and research and development as well as into such fields as medical treatment and nursing care for the aged.

Reforms of the nation’s social security system are wide-ranging and complex. To improve the management of social security budgets, it will be necessary to undertake steps to help optimize the ways to collect and spend funds related to social security, initially by accurately grasping people’s incomes and assets through the Social Security and Tax Number System, which is scheduled to be introduced next year. And there will be a need to conduct studies to create a workable mechanism to redistribute pension benefits and medical expenses between elderly people with higher and lower incomes.

In carrying out pension reforms, it will be necessary to raise the age of eligibility to receive pension benefits while increasing employment opportunities for the elderly.

The basic goal of reforms of the medical and nursing care systems should be the enhancement of people’s health. It will be necessary to improve preventive medicine with a view to prolonging people’s healthy years. Hence there will be the need to expand health checkup systems and improve the living environment for people.

In the medical and nursing care systems, the vicious cycle of soaring medical costs, an increase in the number of solitary elderly people and the collapse of local communities must be staved off. To achieve this goal, it will be necessary to expand home-based medical services and nursing care, and to change community designs to improve the health maintenance system in people’s daily lives. It will also be necessary to rationalize the outlays for medical and nursing care services and to improve coordination of these services by utilizing advanced information and communications technology (ICT) such as a big data system.

Even if these reforms of the social security systems are carried out, it will be difficult to reconstruct the nation’s financial structure by such efforts alone. Therefore it will be important to implement drastic tax system reforms, including an increase in the consumption tax rate, with a view toward building financial structures comparable to those in advanced Western nations so Japan can restore its financial sustainability.

Another important point should be to promote multifaceted innovations. In addition to the promotion of research and development in basic technology, it will be necessary to step up the development of products capable of playing a leading role in the market, utilize ICT, including a big data system, carry out reform of management skills, strengthen human resources and promote revitalization of rural communities.

The phenomenon of population decline and aging is one that advanced countries in Europe and emerging economies such as China will all encounter to varying degrees. Should Japan succeed in overcoming this problem, it could serve as an effective role model for the international community.

Shinji Fukukawa, formerly vice minister of the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry) and president of Dentsu Research Institute, is currently senior adviser of the Global Industrial and Social Progress Research Institute.

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