April 29, 2010


Japan’s Geriatric Future: How will a shrinking economic power handle a rapidly aging population? (Duncan Currie, 4/29/10, National Review)

Which brings us to Japan’s calamitous demographics. According to one set of projections from the country’s National Institute of Population and Social Security Research (NIPSSR), the Japanese population will shrink by roughly 25 percent between 2010 and 2050, plummeting from 127 million down to 95 million. In 1970, people over the age of 64 made up only 7.1 percent of the Japanese population; today, they represent t23.1 percent; by 2050, they will account for 39.6 percent. Meanwhile, the population share of those aged 15 to 64 will drop from 63.9 percent in 2010 to 51.8 percent in 2050. Over that same period, the population share of those under age 15 will fall from 13 percent to 8.6 percent.

The United Nations Population Division (UNPD) notes that Japan has the world’s longest life expectancy at birth — which is a good thing, except that the country is relying on an ever-shrinking supply of workers to support an ever-growing number of retirees. Using medium-variant estimates of birth levels, the NIPSSR reckons that Japan’s old-age dependency ratio — that is, the number of elderly divided by the number of working-age Japanese — will increase from 36.2 percent in 2010 to 79.4 percent in 2055. By then, the NIPSSR calculates, female life expectancy at birth in Japan will be 90.34 years.

Japan already has the oldest population on the planet — it has the highest median age, followed by Germany and Italy — and the UNPD projects that it will still be the grayest in 2050 (apart from the Chinese territory of Macau). At the midpoint of the 20th century, Japan was the world’s fifth-most-populous country, behind only China, India, the U.S., and Russia. Now it is the tenth-most-populous; by 2050, according to UNPD calculations, it will be the 17th-most-populous, with fewer people than the Philippines and Vietnam. Only a handful of countries — all of them in Eastern Europe — are expected to experience a steeper population decline over the next four decades. Even Russia, with its myriad demographic woes, inferior health care, and lower life expectancy, will lose a smaller share of its population than Japan will.

The nature of Japan’s demographic challenge is hardly unique among advanced industrial democracies, all of which must address societal aging and strained welfare systems, and some of which (such as Germany and Italy) are entering a period of major population contraction. In certain ways, however, Japan is sui generis: It must deal with the triple whammy of exceptionally low birthrates, relatively low levels of female labor participation, and minuscule amounts of immigration.

Japan’s total fertility rate has been below replacement level (2.1) since the mid-1970s, and it hit an all-time low of 1.26 in 2005. This can be explained partly by marriage trends. Only a tiny fraction of Japanese births are non-marital, and Japan’s marriage rate peaked in 1971 (prior to the first global oil shock, which triggered a vicious recession), before declining steadily through the late 1980s. The Japanese are also delaying marriage longer than ever before. In 1970, just 7.2 percent of Japanese women aged 30 to 34 had never been married; by 2005, that figure had climbed to 32 percent. Among Japanese men aged 30 to 34, the never-married segment grew from 11.6 percent in 1970 to 47.1 percent in 2005. By that point, 30 percent of Japanese men in the next age cohort, 35 to 39, had never been married, compared with only 4.7 percent in 1970.

Thanks to these factors and others, Japan’s population has been shrinking for several years now. In May 2008, the Washington Post reported that “Japan now has fewer children who are 14 or younger than at any time since 1908.” Hatoyama has advocated pro-natalist measures, such as offering cash payments to families with kids. But Overholt expects such initiatives to be “ineffectual, because the system makes it so impossibly difficult for women to have children and a job.” A 2005 Goldman Sachs study found that if Japanese women participated in the workforce at the same rate as American women, Japan’s GDP would begin to grow much faster.

Higher levels of immigration would also have an impact. Today, foreign-born residents make up less than 2 percent of the Japanese population. (By comparison, they accounted for 12.5 percent of the U.S. population in 2008, according to the Census Bureau.) The country “doesn’t have a future without workers from overseas,” Hidenori Sakanaka, director of the independent Japan Immigration Policy Institute, told the New York Times last year.

Solving its demographic problem may require Japan to embrace a fundamentally new set of economic and social policies — policies that are less protectionist, less hostile to foreign investment, more growth-oriented, more supportive of female employment, and more welcoming to immigrants.

Posted by Orrin Judd at April 29, 2010 2:14 PM
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