Japan: Coping with the Challenges of a Hyper Aging Population

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Several factors were responsible for the aging population in Japan. One of the major problems was the decline in the birth rate . Since the 1950’s, the birth rate in Japan had been below population-replacement level (that is, the number of births needed to replace the number of deaths). According to political economist, Nicholas Eberstadt (Eberstadt), “Japan has had a lower childbearing level for longer than any other society ever tracked in history. Factoring this trend into long-term projections, the Japanese government estimated that more than half of the women born in 1990 would not marry till the age of 50. Around 25 percent of women belonging to this group would never marry and around 38 percent would never have babies. If these patterns continued, Eberstadt opined that each generation in the country would be smaller by 35 percent than the previous one. In addition to late marriages, working married couples chose to have fewer children due to work pressures...

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Japan’s aging population was expected to have several consequences for its economy. This segment of the population was putting a strain on Japan’s public finances at a time when the country’s debt was increasing and the economy was struggling to gain momentum. Japan’s debt had increased to more than twice the size of the country’s economic output, due partly to expanding health and social security costs associated with its aging population...

The Japanese government was coming up with solutions to deal with the consequences of an aging population. The Prime Minister of Japan, Shinzo Abe, was seeking to encourage more women to enter the workforce to bolster the economy and government coffers. Other also felt the need to address Japan’s workplace gender inequality, which discouraged women from pursuing both a career and a family. The World Economic Forum’s Global Gender Gap Report ranked Japan 105 out of 136 countries based on a series of gender equality indicators...

While there were several adverse consequences of an aging population in Japan, some economists felt that there was a silver lining to the whole issue. In recent years, the country’s elderly had emerged as big spenders compared to people under the age of 40. According to government data, households headed by people aged 60 or over accounted for over 40 percent of total consumption in 2011, from 30 percent in 2000...

Despite several efforts by the Japanese government to tackle the problems of population aging, in 2014, it was reported that the country’s population was continuing to shrink. According to a 2014 report released by Japan’s Health, Labor, and Welfare Ministry, the estimated number of new born babies stood at 1,001,000, an all time low for the fourth consecutive year. An official at Japan’s Health, Labor and Welfare Ministry said, “The number of reproductive-age women is on the decline,” leading to a subsequent drop in the number of children. The Japanese government felt that with the current trends continuing, Japan’s population would shrink to 87 million by 2060 from its current 127 million. Of those 87 million Japanese, around 40 percent could be 65 or older. This would not just be a social security disaster, but would hamper Japan’s capacity to remain competitive in the world.

Exhibit I: Changes in the Population Pyramid in Japan (1950-2050)

Exhibit II: Age Structure of Population by Country

Exhibit III: Mean Age at First Birth in Japan

Exhibit IV: Life Expectancy at Birth for Men and Women (2012)

Exhibit V: Healthcare Expenditure in OECD Nations

Exhibit VI: Old-age Dependency Ratio (2012)

Exhibit VII: Savings Rates for Different Age Groups

Exhibit VIII: Working-age Population in Some Countries (1950-2050)

Exhibit IX: Foreign Workforce Composition in Japan (2013)

Exhibit X: Life Expectancy in the World between 1950 and 2050