Japan, the land of the rising Sun, is one of the most developed countries in the world. Poverty rates hanging low, unemployment as low as 2.3%, literacy rate as high as 99%, and exceptionally low crime rates; Japan seems to be at the top of everything. Though Japan does not have such basic existential problems and displays a rosy picture, it is facing an unprecedented challenge, and its issues are what the world calls “the rich country problems.” With a birth rate of 8.07 births per 1000 people and a death rate of 9.38 deaths per 1000 people, Japan has lost its ability to naturally replace itself. The average life expectancy in the country is 83.98 years which is the highest for any country in the world. Two of the world’s oldest people who are aged 117 and 116 are Japanese. Though this figure portrays good general health and progressive standards of living among the citizens of the country, the problem is way deeper. The old dependent population consists of record-breaking figures, as high as 28.1% of the total population, while, the independent population is not choosing to have children thus lowering the birth rate. This is causing the population to turn grey quickly thus increasing the dependent population in turn, putting higher pressure on the human capital.
Japan is said to be on the fifth stage of demographic transition model. This is characterized by a decreasing birth rate, low death rate and negative rate of natural increase. Most of the countries in the fifth stage of demographic transition models are rich, wealthy, highly educated and advanced—technologically and medically. This kind of a demographic phenomenon has direct effects on the economy of the country. The major problem posed by the aging population of Japan is on its government spending, a huge chunk of which has to be diverted to healthcare. This paired with the dwindling workforce, reduced savings and investment levels and tax base is a prescription for economic stagnation. In addition to health care expenses, the aging society also puts substantial fiscal stress on Japan via its National Pension Program since more and more people have grown eligible for it. With ever growing expenses due to these benefit schemes and low levels of contribution, the gap between the insurance cost and revenues have been expanding. Thus it will be arduous for the government to meet its pension obligation. Due to the high age of life expectancy, the number of years spent drawing public funds (pension funds and health care) is now higher than paying into them and their productive years. This in turn puts more stress on the working-class people in the form of increased taxes and more liability in the form of increased social contributions.
John Maynard Keynes’ had proposed a beautiful analogy, namely the twin demons of the Malthusian trap wherein the population growth is more than the economy’s capacity for job creation and the anti-Malthusian demon wherein the demographic sluggishness results in lack of demand. Keynes believes that if one demon is captured, the other runs away. Linking this to Japan’s demographic crisis, it can be said that fifty years ago, Japan was an economically backward country with overcrowding in the agricultural sector and subpar capitalization in the industrial sector which manufactured basic retail goods whose incompetence was the target of all the farce. Cut to half a century later, Japan is now in the league of one of the most progressive countries in the world, proving to be a trendsetter and torchbearer for the Orient, owing to increased rates of saving in the transition period of the demography, after the War. But this decrease in the youth dependency ratio that gave an impetus to a higher savings rate is now climbing up the hill of aging, inversing this very effect and converting demography into a swollen elderly dependency ratio. Thus, this proves to be the paradoxical effect of the demographic component of Japan. By the time this effect is nullified, it will take another century or so of time. While tranquilizing the Malthusian demon after the 1950s, Japan erroneously though inevitably let slip the anti-Malthusian demon that it must bring under control in the present century.
This bloated aging population though seems harmful, is an asset for investors inclined towards healthcare technology; this will include telemedicine, apps that remotely monitor older, loved ones, that help in safe keeping a check on their day to day movements, temperature maintenance at homes and medical plan compliance. Japan has arrived as a super-aging society long before the rest of the world which will give it an edge over the rest of the world in terms of healthcare data base and other medical conveniences, especially for the aged. Societies and economies coping with this demographic crisis can look up to Japan as a pioneer; it is also an apt time for overseas investors and businesses to invest in these fields in Japan. This is only how this bane can be converted into a boon. But the question is, how far can sole investments in healthcare take Japan forward? The country will need to work towards balancing this demographic anomaly and it is the only way which can permanently help Japan out of this soup. The Abe government is trying its best to make amends but no amount of improvement in the fertility rate can change the fate of Japan’s demography any time soon. The problem of fertility is not only that of Japan but has also been observed in other developed countries too, like—Italy, Spain and Germany. Nevertheless, countries like UK and the USA have maintained a relatively high level of fertility rate. A general observation can be made that countries defeated in World War II tend to have falling fertility rates as opposed to the victor countries.
Ranking 110th in the gender gap index, Japan’s social position of women stands as a barrier to fertility of women in the country. As shown in the index results, there is a large wage disparity between men and women. Not only is the social standing of the women less, there is too much burden of housework, nursing for the elderly members of the family and child nursing; this weighs heavily on women, in turn reduces the fertility. Thus, the fall in the fertility rate is mainly attributed to the change in lifestyle, people marrying at older ages, economic insecurity of young couples which make them apprehensive about having any children at all. The average age of a Japanese bride at their first marriage has changed from 25.2 in 1985 to 29.4 in 2017.The Abe administration needs to take prompt actions on uplifting the current status of women, supporting young couples in raising children by making maternal and child health care free, concessions on pre-primary and primary education, priority in social security for families with a higher number of children and concessions on taxes for young parents. Though steadily implementing these may help the country in the long run, it is necessary to introduce policies which are directed towards the reality that graying of the population will continue. To make up for the tightening of the labour force, government should increase the bar for the age of retirement and allow companies to rehire the older, retired population to retain them in the shrinking workforce. To expand the work force, freer entry of blue-collared migrants should be allowed. This will not only help in relaxing the work force crunch but will also increase the competitiveness in the labour market. In all, it is essential for the Diet (the National Diet is Japan’s bicameral legislature) to take bold and quick-witted actions before the market for adult diapers overtakes the market for baby diapers and things go beyond repair.
Author: Della Desai
B.Sc. Economics (Hons.) Symbiosis School Of Economics