Editorials

Face challenges of a shrinking, aging population

The latest population estimate by the Health, Labor and Welfare Ministry, released late last month, points to the accelerating decline of Japan’s population with ever fewer births. The number of babies born in this country in 2018 is estimated at 921,000 — down 25,000 from the previous year and falling short of 1 million for the third year in a row. The lowest annual number of births on record since the government began taking comparable statistics in 1899 was outnumbered by 1.36 million deaths — a postwar record — thereby resulting in a record decline in the population — 448,000 people — for the 12th year-on-year fall in a row.

The Abe administration has vowed to tackle this “national crisis” by taking steps to support young couples in raising children, such as making preschool education free. However, the statistics indicate that it will be extremely hard to alter the demographic trend anytime soon. While those steps should be steadily taken over the long term, the government also needs to introduce policies geared toward the reality that the aging and shrinking of the population will continue.

The number of annual births in Japan hit a record 2.69 million in 1949 during the postwar baby boom. When the second baby-boomer generation was born in the early 1970s, the number still topped 2 million each year. But then it began to decline — dipping below 1.5 million in 1984, 1.1 million in 2005 and 1 million in 2016. The total fertility rate, the estimated number of children a woman gives birth to in her lifetime, fell below 2.07 — the level deemed necessary to maintain a population — in the mid-1970s and has never recovered that threshold.

The decline in the fertility rate has been attributed to a combination of various factors: changing lifestyles, more people marrying later in life or not marrying at all, the economic insecurity of younger generations in recent decades, which leave couples balking at having more than one child or any kids at all, and so on. The health ministry notes that after the second baby-boomer generation passed their mid-40s, the number of women of primary child-bearing age declined significantly.

The Abe administration has set a target of raising the fertility rate back to 1.8 by 2025. That is still far out of reach considering that the rate of 2017 was 1.43. Moreover, the shrinking population of women of child-bearing age means that even a near-term pickup in the fertility rate would not result in a substantial recovery in the number of births. The fertility rate hit a record low of 1.26 in 2005 and has since recovered a bit. But the annual number of births was higher in 2005 at 1.06 million than in 2017 at 946,000.

To make up for the tightening domestic manpower shortage in the aging and declining population, the government passed an amendment to the immigration control law through the Diet last year, opening the door for foreign workers to engage in manual labor, which it had banned earlier, at least officially. The government expects to accept up to 345,000 workers in five years under the program that begins in April. However, government figures show that the nation’s population is declining at a much faster pace, and that rate is expected to accelerate.

Policy efforts to a build a secure environment that helps younger couples raise children must continue. At the same time, the government needs to pursue policies that sustain the economy and society as the population shrinks and grays. Those should include structural reforms of the economy and labor reforms aimed at increasing the nation’s productivity despite the declining manpower supply, as well as measures to get more elderly people and women to play active roles in the labor force.

In a recent proposal on Japan’s policy on employment of its elderly workers in response to the decline in the primary working-age population, the OECD called for a phaseout of the mandatory retirement age system that is prevalent in Japanese businesses and organizations. The government is now weighing measures to extend the age through which companies would be required to rehire their retired workers — from the current 65 to possibly 70 — to encourage more elderly people to remain in the labor force. But the OECD proposal calls for abolishing the mandatory retirement system after gradually raising the retirement age — which remains at 60 among a majority of Japanese firms. It also calls for improving workplace conditions for elderly employees, who are currently given unstable, low-paying jobs, by introducing a mechanism that properly evaluates their experience and capability, and offering them new job training.

The needed policies will also include fundamental reform of the social security system that can be sustained by a shrinking and graying population. We must face the challenges caused by demographic changes head on.