Japan’s population is decreasing since it hit a peak in 2008. The total population in 2017 was 126.7 million; since 2010, the nation has lost about 1.4 million people. The shrinking population is having a major impact on our economy and society that will continue over a long-term period, while people tend to feel that its short-term effects are small and negligible — and therefore the policy response may come too late.

In addition, because of the myopic character of national politics due to the periodic cycle of elections, lawmakers’ interest in the population decline might be lower compared with day-to-day economic and social matters. However, the population decline puts the sustainability of Japan’s society and economy in danger. The list of issues caused by a falling population is very long, and we need to tackle each problem carefully.

According to “Population projections for Japan: 2016 to 2065” by the National Institute of Population and Social Security Research, the nation’s population in 2065 will be 88.1 million — almost two-thirds of what it is today. The aging of the population will have progressed so much that people 75 or older will account for 25.5 percent of the total. It is estimated that the number of people over the age of 100 will reach 547,000 — a tenfold increase from the 54,000 centenarians in 2015.

Optimists argue that 88 million was the very same level of population that Japan had 65 years ago — and that we don’t need to be that pessimistic about our future prospects. However, the situation surrounding the population’s aging in the coming decades is completely different from the past. Even today, it is extraordinary compared with other developed countries. Japan will be entering unknown and unprecedented territory as a society with a shrinking population.

Population changes can be broken down into two types. One is the natural change, which is the gap between the number of births and the number of deaths, and the other is international population movement. In the case of Japan, it is well-known that the number of international movement, including that of Japanese people, is relatively small. That is, the population decrease is mainly a result of natural change. In 2017, the number of births was 946,000 and the number of deaths was 1.34 million, and the natural decline of the population reached 394,000. Annual deaths have outnumbered births since 2007. The falling number of newborns is linked to the decline in the fertility rate, and the increase in the number of deaths is related to the rise in the number of people of advanced age.

The total fertility rate is an indicator showing how many children a woman will have in her lifetime. It was 1.43 in 2017 — up from the valley of 1.26 in 2005 but well below the replacement rate that can maintain current population levels. Japan’s fertility rate has been below the replacement level since the 1970s — the biggest reason behind the falling population. The low fertility problem has continued for more than 40 years.

Low fertility is not a problem unique to Japan; it has been observed in many other developed countries — including Germany, Italy and Spain. On the other hand, the United States, the United Kingdom and France have maintained relatively high total fertility rates in recent years. It is interesting that countries defeated in World War II have low fertility rates while the victors do not.

A declining fertility rate has also been observed in many other Asian countries in recent years. The rate in South Korea, Taiwan and Singapore is in fact lower than in Japan. The rate in Thailand is almost the same as in Japan, while in Vietnam it has rapidly declined in recent decades. China abolished its one-child policy a few years ago, but that did not reverse its falling fertility rate.

Low fertility rates are common not only in East Asia but also in Southeast Asia, and the United Nations predicts that many Asian countries will face future falling populations. A population decline in Asian countries could erode the geopolitical power of the region as a whole.

What factors are behind the decline in the fertility rate? One is the changes in marriage behavior. For example, the average age of Japanese brides at the time of their first marriage has changed from 25.2 in 1985 to 29.4 last year.

But we also need to consider more economic and social factors. It is said that the system supporting married women who hold a job while raising children is insufficient, leading to the high cost of having children in this country. Therefore, government intervention to reduce this cost can be expected to improve the fertility rate. Specifically, an increase in the supply of day care services for children and an improved work environment for women are deemed the key policy steps that can push up the fertility rate. Economic support for families with small children, such as child allowances, would also be important.

How much do governments spend on young families? According to the OECD’s Social Expenditure database, the ratio to GDP of social expenditure for families, including early child care and education or family allowance, and so on, was a mere 1.3 percent in 2013 in Japan. The figure is much lower than in other developed countries, such as Germany (2.2 percent), France (2.9 percent) and Sweden (3.6 percent).

According to my calculations about the impact of social expenditures on families on the total fertility rate, such spending has positive effects. More government spending on young families will be effective in improving fertility.

But things are not so simple. Since Japan’s government is saddled with massive public debt, spending more on young families is easier said than done. At the same time, Japan spends a lot more on its elderly population as compared with other countries. Of course, Japan, with the world’s most aging society, needs to spend on pension benefits and medical services for the elderly. Given the need to increase the fertility rate amid the budgetary constraints, however, spending on the elderly should be effective and selective. For that purpose, the Japanese people as a whole need to have a common sense of crisis over the population decline.

Hisakazu Kato is a professor of economics at Meiji University and former senior research fellow at the National Institute of Population and Social Security Research.

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