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Japan’s Shrinking Population and
Its Economic Implications
As I sat waiting in the lounge of a hospital for an appointment with my physician, I lazily watched a couple of children who had accompanied their mothers. The children, around four years old, were behaving like children – trying to climb the chairs or crawling under them. The mothers were having a tough time handling them.
A common enough sight anywhere you would say? Not so anymore in Japan. The country is facing what is feared to be the worst demographic dilemma. For the first time in recorded history, which is more than a century old, the country is faced with an abysmally low birth rate, a rate so low that its population growth may actually be in the negative within the next couple of years. The Government and all its political leaders are trying to grapple with a rapidly aging society.
The falling trend in birth rate is not something unique to Japan. Many industrialized nations have been witnessing a low birth rate. While in the other countries the trend has reached a plateau, and the birth rate has more or less stabilized, in Japan it continues to fall. This has resulted in a sharp fall in the proportion of population in the 15 – 65 age group - the group that is responsible for the production of goods and services - and a rise in the ratio of elders. The dependency ratio, the number of workers supporting the elderly, is continuing to shift, putting a strain on the economy.
Japan is known for its high work ethic and superior technology. It literally came to life from ashes like the proverbial phoenix. Its economy grew at an impressive rate in the first three decades after the Second World War and it became the third richest nation after USA and China. All this may just be history if the falling birth rate is not reversed.
What caused this?
It has been a combination of low fertility rates and higher life expectancy. The country is going through a phase of SHOSHIKA – a trend of having fewer children.
Fertility rates are low in many industrialized nations. The main cause appears to be late marriages. Female education and adoption of family planning methods have led to delayed or no marriages. Many women have entered the professional sphere and prefer to pursue a career rather than start a family. Reduced living spaces, insufficient childcare facilities and the increasing cost of children’s education have also acted as deterrents for raising a family. Japanese men, workaholics as they are, seem to be more interested in their careers and believe like a family would be a hindrance to their working life. Women would rather stay single than have such partners.
Life expectancy in Japan is the highest in the world. It keeps increasing due to better life styles, higher incomes, and improved medical facilities. The elder people tend to live longer and longer. The number of people above the age of a hundred years is the highest in Japan. At this rate, it is feared, that one in every four Japanese would be above the age of 65 by 2030. This shift would have taken place in a much shorter span of time than in any other country.
What are the economic implications?
The economy will not be able to get enough skilled work force for its manufacturing and services sectors. Labour would become costlier, increasing the cost of production. There will be more elders to tend, straining the medical and pension systems. The social sector expenditure by the Government will have to increase. By 2025, it is expected that there will be two dependents for every three workers. A drastic fall indeed from 1:12 in the year 1950. The dwindling work force would also result in lower purchasing power and reduced demand for goods and services. The domestic market will shrink, production will fall, as will the Government’s revenue, forcing it to manage higher medical and pension expenses with a lower income.
The demand for all the goods consumed by children will fall. Also, the demand for goods consumed by adults at the behest of children would also fall. Who will sell and buy all the chocolates, and confectioneries, schoolbooks and pen and pencils, toys, games? Where will the amusement parks and sports clubs look for their customers? Already there is talk that a number of schools have been closed for want of enough children. The whole situation would get into a vicious circle of low demand and lower supplies.
The Government of Japan has expressed concern over this situation and is trying to take corrective measures. The Angel Plan of 1994 was aimed at providing better support for child rearing and at halting the fall in birth rate. This initiative has not really borne significant results. The Government is relentlessly pursuing other programs in this direction.
Is there an opportunity for India?
If Japan has the oldest population in the world, India has the youngest. The average age of an Indian is 27 years while that of a Japanese is 48 years. The dependency ratio is one of the lowest. Japan will have to look towards India for getting its work force. Skilled and semi-skilled labor in India will find abundant opportunities either in the way of outsourced jobs or through migration. It is for us to make the best use of this opportunity. People interested in cashing in on this would do well to learn the Japanese language, understand the work culture and adapt to the requirements of the country.
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