The Declining Birthrate in Japan: Part Eight Population Scenarios and Economic Consequences
J. Sean Curtin (Professor, Japanese Red Cross University)
A full list of articles in this series can be found here.
There are a number of research institutions worldwide that have constructed various population scenarios for Japan. These range from the United Nations to Japan's own National Institute of Population and Social Security Research.* While the predictions of each body are somewhat different depending on which set of variables are used, the general pattern of all the different simulations is basically the same. At present, Japan's ratio of elderly citizens as a percentage of the working population is among the highest in the world, whereas the fertility rate is one of the lowest. This means that the age distribution of the population will significantly alter in the coming decades as the population begins to rapidly decline and age.
Population Projections for Japan
Most demographic models predict that the Japanese population will peak sometime between 2005 to 2007 at somewhere in the range of about 127.5 million, from then on the population will sharply decline. Medium to low variant projections estimate that by 2050 the population will be somewhere between 100 to 92 million. The number of over 65s will increase from 18.3 million in 1995 to somewhere in the region of 33 million or more by about 2050. Simultaneously, the working population aged between 15 to 64 years will shrink during this period from 87.2 million in 1995 to somewhere in the region of about 57 million.
Japan's fertility rate has been declining since 1950, with the country experiencing its sharpest fertility decline between 1950 and 1960. In 1950, the average woman had about 3.65 births in her lifetime which dropped to 2.0 by 1960. Although the rate of decrease has slowed, the trend has remained persistently downward with the birthrate standing at an all-time low of 1.33 children per woman in 2001.
It is often difficult to conceptualize the decade-long timescale of demographic shifts and the challenges this creates for policymakers. For example, if there was currently a labour shortage in Japan and the government pursued a policy that successfully managed to increase the fertility rate of the average Japanese woman, it would still take about twenty years before these children had completed education and came into the labour market. This illustrates the forces that shape demographic movements are generational and therefore altering their trajectory is extremely difficult.
One variant that could radically alter population projections is the influx of a large number of immigrants, but the Japanese government presently has no plans to increase the current minimal rate of immigration. Thus, most simulations assume that present levels will remain about the same.**
Economic Consequences
As the underlying demographic forces unfold, Japan will face substantially greater fiscal challenges than most other industrially advanced countries. The IMF has produced some excellent long-term simulations for its world macroeconomic model, showing Japan's current demographics imply that the level of real GDP will fall by a cumulative 20 percent over the next century compared with a baseline simulation with a stationary population.***
The IMF estimates that the output costs of aging will reach almost 0.5% in lower annual GDP growth between 2025 and 2075, when the demographic shifts are expected to be most acute. Translated into per capita terms, this means that GDP is expected to drop by about 5% relative to the baseline scenario.***
Since Japan's public finances worsened dramatically during the nineties, the government has not been in a good position to cope with a rapidly aging population. Tax revenues plummeted after the collapse of the bubble economy in the early nineties, while public expenditure was driven upward. The prolonged economic downturn combined with the graying population has already begun to put considerable strain on the pension system.****
Conclusion
The dramatic demographic changes currently in progress will be a defining feature of Japanese socio-economic life for the foreseeable future. Since both the prolonged fertility rate decline and a rapidly aging society are trends that are almost certain to continue, Japan's population will be on a steady downward path long into the current century. This massive demographic shift will have a deep social and economic impact on the nation, which will consequently experience a much slower rate of economic growth for a considerable period of time. Even though the current high public debt combined with latent adverse population dynamics will increasingly restrict the government's ability to maneuver, eventually tough policy adjustments will have to be implemented in order to put public finances back on a sustainable track.*****
References
* National Institute of Population and Social Security Research
Fertility decline and family policy, National Institute of Population and Social Security Research
World Population Trends, United Nations Population Division, Department of Economic and Social Affairs (DESA)
Statistical Handbook of Japan 2002, Statistics Bureau & Statistics Center,
Statistics Bureau & Statistics Center, Ministry of Public Management, Home Affairs, Post and Telecommunications
Fertility decline and family policy
2002 World Population Data Sheet
** The Declining Birthrate in Japan: Part Four Immigration Scenarios
J. Sean Curtin, Social Trends: Series #20, GLOCOM Platform, 18 December 2002
Replacement Migration: Is It a Solution to Declining and Ageing Populations?
Japan, Replacement Migration (PDF)
*** Japan: Population Aging and the Fiscal Challenge, Martin Muhleisen and Hamid Faruqee,
Finance & Development (A quarterly magazine of the IMF), March 2001, Volume 38, Number 1
**** Population Decrease, Aging, and Japans Long-Term Economic Outlook to 2050
Tatsuya Ishikawa, Economic Research Group
***** The Impact of Population Decline and Population Aging in Japan from the Perspectives of Social and Labor Policy, Yukiko Katsumata
The Coming of a Hyper-aged and Depopulating Society and Population Policies: The Case of Japan, Makoto Atoh
Population ageing and Population Decline (United Nation)
Other Articles in the Declining Birthrate in Japan Series
The Declining Birthrate in Japan: Part One Numerical Targets for Childcare Leave
Social Trends: Series #17, GLOCOM Platform, 18 November 2002
The Declining Birthrate in Japan: Part Two Comments on the Proposed Numerical Targets for Childcare Leave
J. Sean Curtin and Len Schoppa, Social Trends: Series #18, GLOCOM Platform, 22 November 2002
The Declining Birthrate in Japan: Part Three Italy-Japan Comparisons
J. Sean Curtin, Richard J. Samuels and William T. Stonehill, Social Trends: Series #19, GLOCOM Platform, 11 December 2002
The Declining Birthrate in Japan: Part Four Immigration Scenarios
Social Trends: Series #20, GLOCOM Platform, 18 December 2002
The Declining Birthrate in Japan: Part Five German Immigration Policy Comparisons
Social Trends: Series #21, GLOCOM Platform, 24 December 2002
The Declining Birthrate in Japan: Part Six A Role for Returnee Emigrants
Social Trends: Series #22, GLOCOM Platform, 6 January 2003
The Declining Birthrate in Japan: Part Seven Debating the Influence of Immigration on the Birthrate
J. Sean Curtin and David J. Littleboy, Social Trends: Series #23, GLOCOM Platform, 15 January 2002
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