Japan stares into a demographic abyss
By Hisane Masaki
TOKYO - Japan's population is shrinking and graying, at a rate probably
unprecedented in history, and there is no sign the trend will stop soon: the
nation's birth-rate figures for 2005, due to be released shortly, are expected
to hit a new record low. Not only is Japan's birth rate already among the
lowest in the industrialized world, but its pace of decline is the fastest,
raising grave concerns about a possible erosion of the economy's international
competitiveness as the population thins out.
In response, a number of Japanese firms have started to improve their child-
and elderly-parent-care programs, driven not only by
concerns about a possible labor shortage after the baby-boomer generation
starts retiring next year but also by growing awareness of the need to secure
qualified workers, especially women, over the long term amid the dwindling
working population. Some electrical appliance manufacturers have even
introduced programs granting their employees leave to receive fertility
Japan is at a historic juncture demographically, with the rapid aging of the
population and precipitously declining birth rates. Japan's population began to
decline for the first time since World War II last year, two years earlier than
expected. The working-age population had already begun to shrink several years
earlier. Japan's total fertility rate - the number of babies born to every
woman during their reproductive years - stood at 1.29 in 2003 and 2004. If the
current low birth levels continue, Japan's population, now 127.7 million, is
forecast to shrink to half of its present size in 70 years, and to a third in
100 years. The percentage of people aged 65 or over has reached 20% of the
total population, while that of children aged 14 or under has declined to 14% -
a phenomenon eerily apparent on the streets of Japanese cities, where the
laughter of children has become increasingly rare.
The Ministry of Health, Labor and Welfare will release this month or next the
2005 total fertility rate, which is widely believed to have hit a new record
low of around 1.26 or possibly even lower. A minimum rate of 2.07 is said to be
needed if Japan is to avoid a population decline, but the actual rate has been
lower than that minimum necessary level since logging 2.14 in 1973. The rate
dropped to about 1.5 in the early 1990s and below 1.3 in 2003.
Japan's birth rate has actually declined faster than government estimates. A
median forecast released by National Institute of Population and Social
Security Research in 2002 called for the nation's total fertility rate to stop
declining after dipping to 1.306 in 2007 and to stabilize at 1.387 from around
2035. According to the Cabinet Office, in 2003 the total fertility rate was
2.04 for the United States, 1.89 for France, 1.34 for Germany and 1.29 for
The Japan Aging Research Center in Tokyo predicts that the nation's total
fertility rate will plummet to 1.16 in 2020 from 1.29 in 2004, leading the
center to predict in a recent report that the population will shrink by about
30% to 88.3 million in 2050.
Inertia and ineptitude
Another record low birth rate, if confirmed, will highlight once again that a
series of measures taken - and highly publicized - by the Japanese government
in the past decade or so to reverse the declining trend have been a complete
failure. Among those measures are the Angel Plan, introduced in 1994, and the
New Angel Plan, introduced in 1999. Under those plans, wide-ranging programs
were implemented to encourage people to have children.
Critics point out that the government's measures taken to date have been almost
useless. They even claim that the government has not been serious enough about
the problem, citing the fact that 70% of the social-welfare budget goes to
programs for the aged, such as pensions and medical services, with only 4% set
aside for services for children, such as child benefits and child-care
services. The government's education-related spending is also the lowest among
industrialized countries in terms of its ratio to gross domestic product (GDP).
Japanese have become increasingly concerned about the future as social-security
costs, such as pension contributions and insurance premiums for medical care
and nursing care for the elderly, as well as tax burdens, are expected to keep
rising sharply amid declining birth rates and the rapid graying of society.
While having to pay more pension premiums today, current Japanese workers also
face the prospect of reduced pension benefits after retirement.
In addition, more and more Japanese are living alone. Even as Japan's
population began to contract last year, the number of households rose in all 47
of the nation's prefectures and hit a record high of 49.52 million, reflecting
an increase in the number of elderly citizens and youths who live alone.
A major reason for the falling birth rate is the growing trend to marry late or
not at all. The average age at first marriage in 2004 was 29.6 years for
husbands and 27.8 for wives. The average age when a woman gives birth to her
first child was 28.9 years in 2004, versus 27.5 in 1995. Marriages decreased
for the third straight year to 720,429, or 19,762 fewer than in the previous
year. And marriages per 1,000 people were 5.7, the lowest on record.
Economic factors are most often cited as the primary reason more and more
Japanese get married in later life or choose - or are even forced to choose -
to remain single. Working women in particular need or want to work, but it is
not easy to combine employment and child-rearing because of the poor quality of
child-care services available, unfavorable employment practices, and rigid
According to a recent Cabinet Office survey, only about 40% of Japanese parents
said they wanted to have more children, the lowest percentage among the five
countries surveyed (the others were Sweden, the US, France and South Korea). Of
the Japanese pollees who didn't want to have more children, 56% cited financial
reasons for their reluctance. Meanwhile, 81.1% of Swedish pollees said they
wanted to have more children, with the comparable number reaching 81% in the US
and 69.3% in France.
"In those three countries, there are good child-support services and tax
benefits," a Cabinet Office official said. "I think that's the reason for the
[high] birth rates."
In South Korea, 43.7% said they wanted to have more children.
Acceptance of foreign labor
The rapid demographic changes have alarmed Japanese policymakers. In addition
to a further shrinkage in the working population, the continuous decline and
rapid graying of the population are matters of deep concern because they will
ultimately mean lower consumer spending as well as a drop in the savings rate.
All of this poses a serious potential threat to the future competitiveness of
what is currently the world's second-largest economy.
Meanwhile, pressure is also growing, especially from domestic industries, to
accept more foreign workers to alleviate an anticipated serious labor shortage.
Late last month, the Council on Fiscal and Economic Policy, headed by Prime
Minister Junichiro Koizumi, released an interim report on the government's
global strategy to reinvigorate the economy, which calls for the acceptance of
foreign workers in fields that are not currently open to them, to help maintain
high economic growth in light of the low birth rate and the graying of society.
The global strategy is to be finalized this month. It will be incorporated into
the annual basic policy on economic and fiscal management and structural reform
to be compiled in June.
According to the interim report, the government should review the types of jobs
open to foreign nationals and allow greater flexibility to hire foreigners in
service fields, such as the nursing-care industry, as demand for workers in
such areas has increased because of the graying of society. The report also
calls on the government to establish an environment that will attract more
foreign workers. In mid-May, the council will draw up guidelines for a system
to increase the number of foreigners employed in Japan.
The council's call to allow more foreigners to work in Japan highlights its
deepening concerns over the possibility of maintaining high economic growth
without allowing more foreigners to land jobs here. According to estimates by
the Health, Labor and Welfare Ministry, by 2030 the number of workers will drop
by about 10 million from its current level to about 56 million. The Cabinet
Office also believes that one in every 20 people will have to be employed in
the nursing industry in 2030 to provide the current level of care.
But many Japanese are still concerned about a possible influx of foreign
workers. They fear, among other things, that public security would deteriorate,
as the number of crimes committed by foreigners has been rising sharply in
Japan. Echoing such concerns, Health, Labor and Welfare Minister Jiro Kawasaki
cautioned recently against allowing more foreign workers. Kawasaki said the
government should expand employment opportunities for senior citizens, women
and young men for the time being.
Kawasaki also indicated concerns that a rise in foreign workers would reduce
employment opportunities and lower salary levels for Japanese. Experts point
out that if the government decides to allow greater numbers of foreigners into
the country, it must first take measures to prevent public discord or disorder
that could result from cultural differences. The council's interim report says
the government will map out general guidelines this year for solving potential
problems foreign workers might face, in areas such as health and education, as
well as measures to prevent friction between Japanese and foreigners.
On April 30, one piece of bright news came from the Ministry of Health, Labor
and Welfare, which said Japan's labor force - those currently employed or
seeking jobs - rose to 66.54 million in fiscal 2005, up 150,000 from fiscal
2004 and marking the first increase in eight years. The gain came as the
ongoing economic recovery encouraged women and retirees to re-enter the job
After falling to a recent low in fiscal 2002, 220,000 women joined the labor
force over the following three years, bringing the total number of female
workers to 27.52 million in fiscal 2005. Meanwhile, the number of those aged 60
or older who are either employed or looking for jobs reached 9.67 million in
fiscal 2005, up 450,000 from five years earlier. The country's labor force is
expected to remain under downward pressure, however, as the population of prime
workers - those aged between 15 and 64 - will likely keep declining.
Competition for domestic labor
Meanwhile, many major Japanese companies have recently begun to compete for a
better work environment to secure qualified workers, especially female ones,
amid the ever-shrinking working population.
For example, Matsushita Electric Industrial Co has extended the period during
which both male and female employees can take child-care leave. Employees are
allowed to take leave twice, for up to two years in total, to care for
preschool children. Some other companies have extended paid child-care leave or
are allowing employees to work fewer hours. Toshiba allows workers to take paid
leave for child care by the hour. This allows parents to take their children to
and from kindergarten or attend to sick children.
Mitsubishi Electric and Ishikawajima-Harima Heavy Industries used to let their
employees work reduced hours only to take care of preschoolers. But both firms
have changed their programs to allow them to do so until their children become
third-graders in primary school. Sharp has promised to rehire any female
employees who quit after childbirth to care for a child, any time up until the
child enters primary school. Some electrical-appliance manufacturers, including
Matsushita and Toshiba, have gone so far as introducing programs under which
their employees are granted leave to receive fertility treatment. Matsushita's
"child plan leave system" allows such leave to be taken for up to one year.
In addition, Toyota Motor opened its third nursery for employees in its home
base of Aichi prefecture. Nissan Motor Co has set up what it calls "maternity
protection leave", which allows female workers in factories or other
manufacturing facilities to take leave as soon as they learn of their
pregnancy. Kawasaki Heavy Industries Ltd introduced a system under which
employees' leave period for child-rearing or nursing care can be counted in the
years of continuous services they have given to the company, based on which
retirement allowance is calculated.
Hisane Masaki is a Tokyo-based journalist, commentator and scholar on
international politics and economics. His e-mail address is email@example.com.