With flashing red eyes and a swiveling head, Yuuji Ohta’s robot wolf bares its white canines and lets out an array of ghastly growls. A matted coat of brown synthetic fur covers its life-size body.

This futuristic creature is part of everyday life for Ohta, president of a company that manufactures machine tools in rural northern Japan. While he started making mechanical wolves as a hobby, the side venture has become a serious business in recent years. As the country’s human population declines, the number of boars, bears, deer, monkeys and other wildlife is rising, encroaching on areas where people live and work. This version of the robot wolf is stationary, but the next will be able to chase animals away.

Ohta’s fake wolf illustrates a silver lining of Japan’s demographic retreat — or the potential for a big missed opportunity. The country desperately needs to pour investment into robots and other technology that caters to its aging and diminishing population. The big question is whether Japan can wring out the advantages from the circumstances it faces.

By 2050, almost 40 percent of Japanese people will be over 65, and the population is expected to shrink by about a third in the next five decades. The situation is even more dire in the countryside — including places like Naie, Hokkaido, where Ohta has set up shop. The country’s rural population is projected to fall by nearly 20 percent in just 12 years.

This labor shortage has the potential to transform Japan’s economy for the better by ushering in a new era of technological advances. Just look at Yoshiyuki Sankai, chief executive officer of Cyberdyne Inc. His company makes a bionic suit, called HAL, to assist elderly people with trouble walking, or those with disabilities caused by stroke or accidents.

These robot exoskeletons read bio-electric signals from the patient’s muscles and help them move. Cyberdyne also makes strap-on lumbar-support devices that prolong the working lives of employees in agriculture and construction, as well as robot cleaners that he says are now working the midnight shift at Tokyo’s airports.

“In the near future, Japan will be in a very severe situation,” Sankai said one recent evening at Cyberdyne’s offices in Tsukuba, Ibaraki Prefecture, an industrial research suburb about 90 minutes from Tokyo. A Pepper android shuffled in the corner of a conference room. “To maintain a society, we need to meet technological challenges.”

Japan has had a tough time replicating the success of Sony Corp.’s Walkman some 40 years ago. As innovation started to hit a wall in the late 1990s, Silicon Valley became the “it” place for technology, with the rise of portable computing and Apple Inc.’s iPhone. To its credit, the country remained a leader in the industrial robotics space. Japan is the world’s No. 1 manufacturer in this sector, and sales rose 21 percent in 2018.

But even that edge is slipping, by some measures. Just 10 years ago, Japan had the highest robot density in the world, with 331 industrial robots per 10,000 employees. In recent years, however, other Asian countries have closed the gap as Japan stalled. Singapore now has a robot density of 831 and South Korea, 774. Japan, meanwhile, comes in at 327, just around where it was in 2009.

A big hurdle is getting money to the right places. Ohta, the robot wolf manufacturer, is fortunate that he had the resources to dabble. Regional banks have become more conservative since the Bank of Japan took interest rates negative, and have little interest in helping, he said. Japan is also proving a tough place for unicorns. The country has only a handful of private startups with a valuation of at least $1 billion, according to CBInsights.

Robots have long been a fixture of Japanese popular and commercial culture: Astro Boy, an android, first appeared in manga in 1952. That probably helps explain why I met few Japanese who were troubled about jobs being taken from humans, or the idea that machines may one day enslave us. “You mean like the ‘Terminator’ movies? Japanese people aren’t so concerned,” said Ohta.

The policymakers running Japan’s economy need to be equally open-minded. Regional banks need more, not less help, especially given the emptying of the countryside. Financing greater use of automation that can assist everyday lives ought to be a no-brainer. Humans and machines will soon interact in the same space, if they aren’t already, says Cyberdyne’s Sankai. “This isn’t science fiction.”

Daniel Moss is a Bloomberg Opinion columnist covering Asian economies.

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