COVER STORY • 1

W

hat Must Be Done to Maintaina Population of 100 Million in
Japan? (Nov. 7, 2023)

By the Working Group for Japan’s Population Challenges

1. The Current State & Challenges of Our Country’s
Declining Population(1) Current situation

hours spent in the workplace. This presents an obstacle forbalancing work and childrearing responsibilities.
With the restriction on time and income, an increasing number ofhouseholds want children but either cannot have them or have fewer
than they want. Japan is a notable case study in this dynamic. Many
young people migrate to major metropolitan areas like Tokyo. Theyleave behind a rural economy that struggles in the wake of urban

4 Japan SPOTLIGHT • January / February 2024%

10,000 people

The decline of birth rates and the aging of the population in Japan
have been particularly prominent compared to that of othercountries. This has resulted in projections of a drastic population
decrease in the years to come. As of 2022,
Japan’s population was 124.95 million,
CHART 1
according to projections by the National
Japan’s population trend, total fertility rate
Institute of Population and Social Security
80.0
14000
Research and the Ministry of Internal Affairs
124.95 million people
and Communications. However, the population
70.0
12000
is forecast to drop to 105.1 million in 2055, fall
151 million people
60.0
below 100 million in 2056, and further drop to
10000
87 million by 2070. In 1970, the birth rate was
50.0
over 2.1, but by 2022 it had fallen to 1.25. Not
8000
40.0
only did the actual birth rate decline, the
38.7
6000
number of children that people desire to have
30.0
7420
also dropped from 1.83 in 2010 to 1.55 in
4000
2020. In tandem with the overall population
20.0
4535
decline, the working-age population (15-64
2000
10.0
years old), which is currently around 75 million,
is expected to fall below 50 million in the early
0.001970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2022 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
2050s. Similar declines are projected in the
Population under 14 years old
From 15 years old to 64 years old
Over 65 years old
working-age population and labor force
0-14 years old
Proportion of population aged 15 to 64 years old
Ratio of seniors
participation rate (Chart 1).
The underlying context is that a significant
2.20
2.13
portion of the population choose not to getmarried. The 2022 edition of the Gender
2.00
Equality White Paper by the Cabinet Office
1.80
indicates that 40% of men and 50% of women
opt out of marriage because they want freedom
1.60
and independence. At the same time, there areworsening economic and employment
1.40
landscapes symbolized by economic
uncertainty and stagnant wages. Yet, despite
1.25
1.20
these economic pressures, educational costs,
including expenses beyond school tuition (such1.001970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2022 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
as cram schools on top of regular school fees),
continue to rise. In addition, the rigid work
Source: Created by research group members using statistics from the National Institute of Population and Social Seucrity
Research, Ministry of Internal Affairs and Communications, and United Nations
culture places a premium on the number ofhttps://www.jef.or.jp/journal/

concentration and economic stagnation. The resulting decline in ruralvitality has become a major issue. This manifests itself as a crisis in
the form of severe strains on local finances.
Furthermore, Japanese society as a whole lacks the collective
spirit of nurturing and watching over children. It is essential for thenation to cultivate such a consciousness on the national level.

As more seniors remain active, there could be a growing demand
for robots that assist them at work. This need may spur thedevelopment of new technologies and escalate investments aimed at
supporting older workers, fueling economic expansion. If Japan can
thrive in the senior care technology and export their expertise toother rapidly aging countries, it might mitigate any decline in Japan’snational power.

(2) Challenge
The biggest adverse impact of the population decline lies in thestunting of economic development due to the shrinking labor force.
That, in turn, leads to a loss of vitality in society, deteriorating social
security foundations, and other issues. Additionally, the reduction ofdomestic consumption will manifest as a shrinking domestic market.
This trend is likely to negatively affect corporate capital
investments. Although it may seem desirable to relocate business
operations overseas, there are limits given the current rise ingeopolitical risks.
Japan is also a global frontrunner in aging. According to UN
projections, the proportion of the population aged 65 and above will
be around 38% in 2065, placing Japan second after South Korea(Chart 1).
a) Decline in national power and economic strength

Supply side economic growth is driven by three forces: capital,
labor, and technological progress. A useful method to analyze thesefactors is “growth accounting”, which reveals how much technology(total factor productivity), capital, and labor each contributes toeconomic growth. It is clear that with a reduced workforce due to an
aging society and population decline, supply-side growth will be
negatively impacted.
Opinions differ on how population decline will affect aggregate
demand, and there is no clear-cut answer. However, surveys show
the elderly tend to spend less than working-age families, possibly
leading to a drop in overall demand for goods. This decrease in
consumption could signify a contraction in domestic demand for
producers, which in turn could dampen demand for capital
investments by companies. Corporations then would have reduced
financial leeway to innovate technologically, potentially leading to anegative impact on total factor productivity.
On the flip side, an aging demographic might actually fuel demandin sectors like health care, nursing care, and medical services.
Moreover, a surge in investments from businesses has the potential
to drive technological advancements. This could be spurred by a
growing global interest in Japanese products, a rise in tourism, andmore women entering the job market, all of which could offset the
dip in consumer spending typically associated with an older
population.

b) Increased fiscal burden

Increases in fiscal expenditures, such as growing social security
costs that arise from an older population, will pose significant
challenges (Chart 2). If technological innovation fails to progress andinternational competitiveness remains low, the current accountbalance will fall into the red from a decline in earning power. Coupledwith fiscal deficits arising from an increased financial burden, this
could result in twin deficits, potentially reducing the creditworthinessof Japanese government bonds. This, in turn, could trigger a plunge
in bond prices, and national bankruptcy could become an imminent
reality.
Some research also suggests that aging affects the efficacy offiscal and monetary policies. In the DSGE model where two groups
of working and elderly people coexist, it is pointed out that as the
proportion of the elderly increases, the effectiveness of monetaryand fiscal policy decreases (Naoyuki Yoshino and Hiroaki Miyamoto,“Declined Effectiveness of Fiscal and Monetary Policies Faced with
Aging Population in Japan”, Japan and the World Economy, Vol. 42,2017). The intuitive reasoning is explained as follows:
In the realm of monetary policy, reducing interest rates typicallyencourages corporate investment, which in turn can boost company
revenues. This often leads to higher wages for employees, who thenhave more to spend, further propelling consumption and aiding
economic recovery. However, in an aging society where retirees do
not directly benefit from wage increases, the stimulative impact of
low interest rates may be diminished.
Fiscal policy is also less effective in an aging society. Keynesianfiscal policy argues that increased income through the promotion of
employment leads to a recovery in total consumption, which,through the multiplier effect, leads to economic recovery.
However, as the number of retirees increases, fewer people will belooking for new employment opportunities, thus reducing thepolicy’s effectiveness (Hiroaki Miyamoto and Naoyuki Yoshino,“Effectiveness of Fiscal Policy in Aging Economies”, Policy ResearchInstitute, Ministry of Finance, Japan Public Policy Review, Vol. 17,2021).
In summary, the prospect of sustaining economic growth in theface of an aging and declining population hinges on technologicalinnovation that nurtures emerging senior-focused markets.
Japan SPOTLIGHT • January / February 20245

CHART 2

Trends in social security benefit payments(Trillion yen)
140
130
120

1970
Gross Domestic Product(trillion yen) A

1980

1990

2000

2022
Budget Basis

2010

75.3

248.4

451.7

537.6

504.9

564.6

Total Amount of Benefit
Payments (trillion yen) B

3.5 (100.0%)

24.9 (100.0%)

47.4 (100.0%)

78.4 (100.0%)

105.4 (100.0%)

131.1 (100.0%)(Breakdown) Pensions

0.9 ( 24.3%)

10.3 ( 41.4%)

23.8 ( 50.1%)

40.5 ( 51.7%)

52.2 ( 49.6%)

58.9 ( 44.9%)

0.6 ( 16.8%)

3.8 ( 15.4%)

5.0 ( 10.6%)

11.3 ( 14.4%)

19.5 ( 18.5%)

31.5 ( 24.0%)

Medical Care110

Welfare and Other

B/A

100

2.1 ( 58.9%)

4.7%

10.8 ( 43.2%)

10.0%

18.6 ( 39.3%)

10.5%

26.6 ( 33.9%)

14.6%

33.6 ( 31.9%)

20.9%

40.8 ( 31.1%)(10,000 yen)
131.1

100

105.4

23.2%

80

70

78.4

Medical Care60

Welfare and Other70

Pensions

Social Security Benefit Payments Per Capita

60

50Social Security Benefit Payments Per Capita (right scale)

50

90
80

90
Pensions

110

47.4

40

40

30
24.9

30

Medical Care

20

20
10
0

0.1

0.7

1950

1960

10

3.5

1970

Welfare and Other

1980

1990

2000

2010

0
2022
(Budget Basis)

Note: The numerical values in the figure represent social security benefit payments (trillion yen) for the fiscal years 1950, 1960, 1970, 1980, 1990, 2000 and 2010 as well as FY2022 (budget
basis).

Source: Ministry of Health, Labor and Welfare estimates for FY2020 – FY2022 social security benefit payments (budget basis) based on the “FY2019 Social Security Cost Statistics” from the
National Institute of Population and Social Security Research; FY2022 GDP is according to the “Economic Outlook and Basic Stance for Economic and Fiscal Management for FY2022”(Cabinet Decision on Jan. 17, 2022)

Additionally, it relies on establishing social systems and norms thatencourage the ongoing engagement of seniors in society andpromote an “active life expectancy”.
c) Security implications

Japan is experiencing a population decline driven by fewer births
and an aging population. The consequent decrease in GDP can alter
power dynamics in international politics and affect national security.
Countries with smaller economic power and fewer resources need toboost their diplomatic efforts to secure their influence and impact oninternational discourse and security. In particular, they muststrengthen their alliances to enhance their deterrence capabilities. To
offset the shrinking pool of young men who traditionally underpin
military strength, it is vital to invest in new military technology.
Japan had historically leveraged its technological and economic
advantages to attract top international students from across Asia and6 Japan SPOTLIGHT • January / February 2024

beyond. Many of these students attained prominent positions once
they returned to their respective countries. Their strong educationalties to Japan enhanced economic and diplomatic relationships with
their countries. However, with the waning of Japan’s national power,international students are choosing other destinations, such as
Europe, the United States, and China. Regrettably, this trend erodes
the strength of Japan’s foreign policy. The weaker yen has also
diminished Japan’s status as a “high-wage” country, which results ina smaller number of aspiring nurses immigrating from other parts ofAsia. Japan’s image as a hub for talented professionals from Asia isundergoing major changes.
We must mitigate Japan’s national security risks in Asia that arise
from a population decline and shrinking economy. The following aresome considerations we must bear in mind.
In 2005, Japan became the first “super-aged society” with over
20.2% of the population aged over 65. More than 20% of thepopulation are now classified as seniors. South Korea and Taiwan
are not too far behind, with China and Russia close on their heels. By
2035, these nations are projected to have average ages ranging fromthe mid-40s to mid-50s. In contrast, countries like India, Indonesia,
the Philippines, Vietnam, and Malaysia anticipate a growing youth
population with average ages expected to remain below 40.
This shift in demographics could mean a reduction in Japan’s SelfDefense Forces. They may well face serious problems in recruiting
personnel. However, Japan’s defense spending is actually increasing.
The administration of Prime Minister Fumio Kishida aims to raise it
to 2% of GDP by 2027. Japan’s fiscal deficit is already the largest
among developed countries created by an imbalance between the tax
burden on citizens and government expenditure. Increased defense
spending could exacerbate this trend.
In the context of Asian regional security, Japan faces not only
longstanding threats but also newer ones. These include cyberattacks, space security, pandemics, and climate change. China’s
growing military assertiveness and potential conflicts over Taiwan
are issues as well. There are also territorial disputes in the East andSouth China Seas, North Korea’s nuclear ambitions, the divided
Korean Peninsula, damage from piracy, and the proliferation of
weapons. These diverse threats mean that we must closely examine
how demographic challenges may influence the strategic perceptions
and reactions of the countries involved.
For cyber countermeasures, we must also address how Article 21,
Section 2 of Japan’s Constitution severely limits intelligencegathering and reconnaissance. This constrains information sharing
between Japan and the US. Among developed nations, the US stands
out in its resilience to the impact of population decline. It will no
doubt remain a central player in the regional security policies of its
Asian allies.
Furthermore, when evaluating security frameworks, it isincreasingly important to factor in shifting population trends inregions like Africa. As there are changes in the economic scale of the
US and China, it is critical to take into account the internationalsituation in regions outside of Asia.

2. Policy Direction & Measures to Sustain a
Population of 100 Million
The combined forces of a falling birth rate and an aging population
are expected to have a severe negative impact on economic vitality. A
contraction of the domestic market is likely, and as a result,consumption and investment may stagnate. This could then diminish
international competitiveness, potentially leading to a current
account deficit.
Concurrently, in an era of meager economic growth, the fiscal

burden heightened by an aging population may lead to chronic fiscal
deficits. Such circumstances could precipitate a situation known as“twin deficits”. Prices of government bonds plummet and trigger theflight of capital, which then endangers fiscal management. In theface of such a crisis, sustaining the social security system will pose
an increasing challenge. As the population continues to age,ensuring equitable distribution will become increasingly complicated.
Moreover, there will be significant difficulties in averting thedownturn of local economies.
Within the international arena, this shrinking of economic scale
will result in diminished clout. In the current climate of escalating
geopolitical challenges, such a contraction poses significant security
risks.
Some take the view that as long as per capita GDP does notdecrease, it will feel as if the economy is prospering. But the fact ofthe matter is that as the work force shrinks, the working-age
population will bear an increasingly heavier social security burden for
their elders. This brings to surface the inequality between
generations. Therefore, per capita GDP divided across the total
population is no longer a significant way to gauge the nation’s
prosperity.
When you take these factors into consideration, the national goalthat the Cabinet of late Prime Minister Shinzo Abe put forth in June2014 seems appropriate. His administration formulated a basic
policy (also known as the “Grand Design”) for economic and fiscal
management reform. Projecting 50 years into the future, the aim wasto sustain a population of approximately 100 million people in the
2060s. To achieve this goal, this policy needs to be carried out
across different areas.

(1) Policies to increase birth rate
It is not enough to simply implement economic strategies to boost
the birth rate. It requires cultivation of a national mindset thatrecognizes children as treasures of society. The government should
strive to foster this perspective beyond merely providing family
allowances. To address the root cause of low birth rates, theunderlying economic structure that leads to static wages must be
targeted. To enable the younger demographic to earn more, we mustat least implement the policies enumerated below.
a) Review of Japanese employment practices and policies toincrease labor market flexibility

The labor market should increase its flexibility so that individuals
can work in a way that suits their lifestyle, while also increasing theirproductivity.
In a dynamic labor market where jobs, workers, and resources canJapan SPOTLIGHT • January / February 2024

7

move more easily in response to market demands, workers are more
likely to be matched with jobs that suit them well. That should
increase individual productivity. Also, as the industrial structurechanges, labor is redistributed smoothly. This leads to a vibrant anddynamic economy that fosters high labor productivity, resulting inhigher wages.
At the same time, Japan should shift away from its traditional
lifetime employment and seniority-based systems. We should
instead adopt a system where employment is based on job roles
coupled with objective performance evaluations, thereby enabling aperformance-based pay structure. Currently, there is a significant
wage gap between regular and non-regular employees, which is a
key factor in Japan’s low wages. To rectify this issue, Japan needs toenforce the principle of equal pay for equal work.
In concrete terms, this means overhauling the evaluation systems
across the public and private sectors. This entails transitioning awayfrom wages based on seniority rather than performance. It is crucial
to abolish mandatory retirement. In point of fact, discrimination
based on age is not allowed in the US. For example, it is not unusual
to see academics actively contributing well into their 80s.
Furthermore, it is important to establish severance packages for
employees who have been dismissed. We must also reevaluate the“income wall” which effectively reduces a family’s yearly income if
the housewife obtains part-time work. Under current law, ahomemaker earning part-time income could increase the family tax
burden because her wages are excluded from her husband’s income
tax deduction for spouses.
The government is currently considering a temporary system thatwill allow the homemaker to be covered under her husband’s social
insurance without having to pay for her own even if her annual parttime wages exceed 1.3 million yen. This is meant to be a provisional
measure in place for about three years. More effective solutions arebeing considered. For example, the government might provide
subsidies to companies that give their employees bonuses toincrease their income or help with their insurance costs.
Developing personal skills is a vital task. It is important to support
this by introducing tax incentives. A “self-development preferential
tax system” would allow individuals to deduct some of their selfdevelopment expenses from their income taxes. This could replace
the “Special Deductions for Learning and Relearning Expenses
Provisions” that are currently in effect. Right now, the employer has
to provide proof of such expenses. Under the new system, acertification from a career counselor would be enough to qualify forthe tax deduction.
Skill development seminars can be very costly. It is essential toexpand remote education opportunities not only for students but forworking adults as well so that anyone can tap into the expertise of
8 Japan SPOTLIGHT • January / February 2024

Japan’s top instructors at any time, from anywhere, 24 hours a day,throughout the year.
The current system and policies that disadvantage labor mobility
must be phased out. These include the Retirement Allowance
Preferential Tax System and Employment Adjustment Subsidies,
which hinder labor mobility. The tax incentive for retirement
allowances works to keep lifetime employment in place, while
employment adjustment subsidies are meant to offset the costs
companies have to bear when employees have to take time off orrequire training. Because of these subsidies, employees’ wages often
remain unchanged, which can lead to less motivation to work. At thesame time, companies become more dependent on these subsidies.
Finally, to ensure equal pay for equal work, the Ministry of Health,
Labor, and Welfare is expanding coverage for employees’ pensions
by making it easier for part-time and other short-time workers toqualify. These policies are vital for enhancing labor market flexibility.
b) Creating attractive employment opportunities in ruralareas

The population is concentrated in major metropolitan areas. Whilerural regions face a larger decline in residents, their abundant tourist
resources give them a great potential for growth. It is therefore
crucial to create attractive employment opportunities, such as in the
tourism industry. Innovative approaches to shore up the tourism
sector are gaining attention. These include eco-tourism initiatives
that blend agricultural experiences, tours of renewable energy
industries, and educational programs to inform tourists about
environmental issues. Focusing on these approaches and actualizing
potential growth industries like tourism can help generate appealing
job prospects and increase the rural population.
Before the Covid-19 pandemic, tourism was a major source of
foreign income for Japan, second only to the automobile industry.
(In 2019, tourist spending came in second only to car exports.)
Looking to the future, international tourism is expected to rebound. It
is vital to promote travel across Japan’s diverse regions. The
government is actively working to stimulate tourism in these areas
by providing incentives for foreign tourists to spend two nights inmore remote districts. Support is also being channeled into new
infrastructure like hotels and transportation networks. The
government will also back training programs for local tour guides
and service staff, which include English language lessons. In
addition, it is crucial to enhance productivity in service sectors
beyond tourism, such as restaurants and hospitals. This effort
should extend to constructing universities that appeal to young
people, like Ritsumeikan Asia Pacific University in Oita Prefecture
and Kochi University of Technology in Kochi Prefecture.
Creating enticing employment prospects in the countryside will

give youth the financial means to raise children. Life away from theurban rush will also give them more personal time. These factors
should encourage young people, particularly those living in Tokyo, tomigrate to rural regions, potentially leading to a rise in birth rates.
It has been noted that lower birth rates tend to correspond withhigher population densities, where it is also typically more expensive
to raise children. Thus, if more young adults choose to settle in lesspopulated regions, it could lead to an increase in fertility rates.
The population decline in rural areas not only reduces resident tax
revenues, but it could also trigger a drop in property tax revenue
through falling land prices, which are affected by both the decreasing
working age population and long-term diminished expectations. Withsocial security costs expected to surge, alleviating the strain on local
finances becomes crucial. It is therefore extremely important tocreate attractive employment opportunities in these regions.
As the trend of retiring to rural areas grows and remote work
becomes more popular, it is likely that an increasing number ofpeople will be living in two locations. This raises the possibility of amismatch between where residents receive government services andwhere they pay taxes. It is therefore essential to develop a tax systemthat supports such a dual-region living arrangement to fortify local
finances.
c) Enhancing remote learning and work

Expanding remote learning and integrating EdTech (Educational
Technology, a system that uses technology to support education)
more efficiently will provide people in rural communities, regardlessof their income levels, access to top-tier knowledge and hone theirskills. This is expected to boost productivity and, as a result,increase earnings. Teachers can then offer individual guidance inperson only on sections that students find difficult to understand justfrom online lessons.
EdTech allows each student to learn at his or her own pace andlevel and creates personalized education accessible from anywhere,anytime, according to the individual’s interests and proficiency. By
harnessing EdTech, we can cut the cost of meeting various
educational needs and ease the burden of on-site teachers.
For example, as pilot programs for proof of concept, we could
initially consider programming, where there is a severe shortage of
specialized teachers, and Japanese language lessons for children of
foreign descent who experience considerable regional discrepancies
in the accessibility and quality of language education. Yet anotherbenefit is that introducing individualized instruction through remotelearning and EdTech could prevent the downsizing of traditional
educational institutes in rural areas.
Incidentally, to avert a feared escalation in educational inequalities
in the era of widespread remote learning, it is critical to quickly tackle

the digital divide (information disparity) among educators. Thissituation came to light at the time of the Covid outbreak.
During this pandemic, touch screens were given to all children in
Japan. This meant that no matter where in Japan the children lived,
they had access to education that enhanced their motivation to learn
through remote means. It is believed that when taught by the best
instructors in their fields, the lessons are easier to understand, andstudents’ comprehension increases accordingly. If students canaccess these videos on demand any time, there will be no need toattend cram schools. The hope is that this will eliminate the impact
of income disparities on education.
If remote work, which expanded during the Covid-19 pandemic,
becomes more entrenched, people will have more options for whereto live, commuting times will be cut, leisure time expanded, and agreater variety of lifestyles possible. Single people will have more
opportunities to meet others, and married people more time athome. These changes, it is hoped, will result in a higher birth rate.
Long commuting times were one of the major barriers to
employment and full-time work for working parents. Remote work
could make better work-life balance possible. Relocating away fromcity centers can help individuals avoid soaring housing costs andencounter shorter waiting lists for childcare and afterschool services.
The pandemic made remote work possible for many jobs. In
traditional Japanese work culture, there was a perception that being
seen at the office was equivalent to being productive. But if we
promote remote work and switch to a system that measures eachindividual’s actual productivity rather than time put in at the office,people could move to rural areas. They could commute only a few
times a month to their workplaces in the city. This cultural shift could
act as the catalyst for enhancing the skills of the workforce in rural
regions.
During the pandemic, it became apparent that, even doing remote
work, women bore a larger share of domestic duties and child care.
It is vital that we move away from the male approach to work
centering around the number of hours spent. The focus should
instead be on performance. Also critical is proper education tomodernize outdated gender norms.
d) Policies for reducing educational disparities

Public schooling alone cannot ensure that students master basic
academic skills. Currently, higher-income families spend three times
as much on education compared to lower-earning ones, causing an
educational disparity. To tackle this issue, one idea is to give families“education vouchers”. These are coupons that can only be used for
educational expenses. Another point Japan must recognize is that
because its education has been too uniform, it has failed to unleash
individual talent through innovative education. Every effort should beJapan SPOTLIGHT • January / February 2024

9

made to shape creative thinkers who can tackle new technologies
like generative AI.
As stated earlier, remote education allows students, no matter
where in the country they live, to attend classes at no cost, and tolisten to lectures taught by the top instructors. Students are also free
to review any materials as many times as they want to clarify
concepts they personally struggle with.
Touchscreen rollout during the pandemic enabled nationwide
access for students. The advantage of remote education is that itprovides access to websites for different subjects that any student
can listen to any day of the year, regardless of income differences.
Another benefit of remote education is that students can revisit
challenging topics as often as needed.
e) Policies to change gender norms by correcting women’s
underrepresentation in politics

The scarcity of women in electoral races can lead to the neglect ofconcerns such as falling birth rates. Male politicians aren’t typicallyfaulted for overlooking issues like shrinking family sizes. However,there is an expectation for female politicians to have a stronger grasp
on matters related to family demographics.
Women make up half of the population, yet they account for only
about 15% of Japan’s parliament members. It is crucial that we
increase the percentage of women in politics. To do so, we canintroduce quota systems and use proportional representation. At thesame time, local politics should establish systems that encourage
the recruiting of female candidates, thus removing psychologicalbarriers to women becoming politicians. These should reform
systems that keep birth rates stalled, and in particular change gendernorms.

(2) Policies to increase the workforce
Innovations centered around digitization should enable greaterlabor productivity. This is critical for support of all willing workers,
including women and the elderly, so that they can achieve theirpotential.
The fact is that some seniors feel pressured because the age at
which they can draw a pension has been raised. Women, for theirpart, feel that they are forced to work while juggling the triple burdenof child care, housework, and employment. To relieve suchindividuals from their pressures, allow them to fully realize theirpotential, and achieve fulfillment in work, the following measures
should be expanded:a) Policies to encourage the elderly to stay active for life

We should move towards eliminating mandatory retirement andseniority-based pay systems, shifting instead to a pay system based
10 Japan SPOTLIGHT • January / February 2024

on productivity. This would encourage older people to continue
working as long as possible. Since Japan’s pension payout duration
exceeds that of other countries by an average of five to 10 years,
raising the starting age could be considered. Incidentally, the US has
been working to eliminate age-based employment discrimination. It
is important to create workplaces that fully utilize the abilities ofolder workers. For instance, the tourism industry in Japan’s regional
cities has a high growth potential. They are expecting an increase in
inbound tourism, where we hope that the experience and knowledgeof retired managers from large corporations can be utilized.
b) Promoting women in the workforce

Changing the gender norms mentioned earlier will empower
women to participate more fully in society. There must be newstandards so that both men and women can balance work and childrearing. The “income wall” previously discussed must be also
reviewed in terms of promoting women’s participation in theworkforce.
The deep-rooted assumption in Japan is that the woman handles
housework, childrearing, and caregiving. This societal expectation
effectively limits job opportunities for women, who are unable to use
their skills and abilities fully. Fundamental changes are crucial in thissituation. In general, women who aim for managerial positions findthe prospect of overseas transfer a significant obstacle to theircorporate ambitions. While it’s common practice for a wife toaccompany her husband when he is transferred abroad, the reverse
situation is not met with a similar understanding. Instead, the wife
may be forced to resign or change jobs. Adopting more flexible work
practices where both spouses continue to work, the family chooses aplace to live together, and partners are able to adjust theirworkstyles, would make it easier for people to have and raisechildren. This could contribute to solving the issue of declining birthrates.
c) The active participation of foreign workers: introducing apoints-based system

The active participation of more foreign workers can compensate
for a shrinking population and lead to greater diversification of theworkforce. This diversity is the key to making Japan morecompetitive in the era of globalization.
The direct investment in Japan (Invest Japan) policy that theJapanese government has been implementing up to now sought tobring in more skilled workers from abroad by making it easier forinternational companies to set up branches, factories, sales offices,and research and development centers in Japan. Moreover, boosting
tourism was expected to raise Japan’s profile, potentially leading to asurge in international business activities within the country.

This raised a question, would adding foreign workers offset thedrop in population?
Foreign workers have a more significant presence now. Across allindustries, the number of workers from other countries rose from
1.17% in 2010 to 3% in 2020. The National Institute of Populationand Social Security Research forecasts that by 2070, foreigners will
make up 10.8%, or 8.8 million, of Japan’s total population. (Theestimated average is based on the net number of foreign workers
entering Japan from 2016 to 2019, with the assumption that thistrend will continue. Because of the impact of Covid-19, the year 2020
was excluded from the calculation.) This figure is relatively high incomparison to Germany’s data. According to Eurostat, from 2014 to
2019, Germany’s foreign-born residents comprised 16.2% of the
population, the largest share in Europe. It is important therefore tohave a system that accepts foreign workers and helps them integrate(Chart 3 & Table 1).
Some problems have been associated with the existing TechnicalIntern Training Program, which was created so that “foreigntechnical intern trainees in Japan could enter into an employment

CHART 3

Ratio of resident foreigners to total
population in major countries
Refer to JETRO HP General Overview: “The Reality and Significance of Accepting
Foreign Talent as Seen Through Data, March 2, 2019”.
Germany

France

(%)

Spain

14.0

UK

Japan

South Korea

US

12.2

12.0

9.5

10.0
8.0

9.3

7.1

6.9

6.0
4.0

2.3

2.0
0.0

1.9

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017
(Year)

Note: No data for the year 2017 for France and South Korea.

Source: Created from (OECD) “International Migration Outlook 2018”

TABLE 1

Foreign population stock
Refer to the website of the Independent Administrative Institution of Labor Policies Research and Training Organization. Data Book: International Labor
Comparison 2022 (PDF) 2 Population Labor Force Population P. 089 Tables 2-14 Foreign Population (Stock)
2005

2010

2015

2016

2017

2018

2019

2020

Per 1,000, % (lower row, ratio to population)Japan
US
CanadaUK
Germany
France
Italy

1,974

2,185

2,122

2,232

2,383

2,562

2,731

2.933

1.6

1.7

1.7

1.7

1.9

2.0

2.2

—

19,85821,641

22,26322,426

22,415—22,519

—

6.7

7.0

6.9

7.0

—

—

—

—

—

—

—

2,405

—

—

—

—

—

—

—

6.6

—

—

—

—

2,857

4,524

5,592

5,951

6,137

5,991

6,227

—

4.7

7.2

8.6

9.0

9.3

9.0

—

—

6,717

6,695

8,153

9,108

10,03910,624

10,915

11,228

8.3

8.3

10.1

11.1

12.2

12.9

13.1

—

—

3,821

4,335

4,542

4,704

4,617

4,763

—

—

6.1

6.7

6.8

7.0

7.1

7.3

—

2,402

3,648

5,014

5,027

5,047

5,144

4,996

5,040

4.1

6.1

8.4

8.5

8.5

8.7

8.7

—

The Netherlands

699

735

847

901

972

1,041

1,111

1,192

4.3

4.4

5.0

5.3

5.7

6.1

6.5

—

Sweden

481

603

739

783

852

897

932

941

5.3

6.4

7.6

8.0

8.6

9.0

9.3

—

South Korea

491

921

1,092

1,143

1,162

1,172

1,951

2,025

1.1

2.0

2.3

2.3

2.3

2.3

2.4

—

Note: Persons with foreign nationality. Precise definitions vary by country (see OECD database for details).

Source: OECD International Migration Database (http://stats.oece.org/) (as of February 2022)

Japan SPOTLIGHT • January / February 2024

11

relationship with their trainers for the purpose of acquiring, utilizing,and mastering skills and knowledge that are difficult to obtain in theirhome countries.” But the unintended consequence was that the
program was at times used to fill jobs with low-waged foreign labor,
as well as create a dependency on that labor. It has also been linked
with human rights abuses and missing trainees. Therefore, thedecision was made to transition to a system focused on securing anddeveloping human resources. Under the new system, workers will beallowed to transfer to a different employer, where before they were,in principle, forbidden to do so. More jobs from different industries
would also be added to the program. The new rules and regulations
will be reviewed by the fall of 2023. We hope to have as flexible asystem as possible.
More than ever, Japanese companies are searching for foreign
experts with specialized skills and knowledge. A new system now
allows foreigners with a master’s degree and an annual income ofover 20 million yen to acquire the residence status of Highly Skilled
Professionals (Type 2). They can acquire this after just one year ofstay, with no renewal requirements. Thus, Japan is transitioning
from a country that merely accepts “foreigners” to more actively andstrategically attracting them. We need to push this agenda further.
It is important to consider adopting a “points-based system”
similar to what the United Kingdom and other countries use. Because
the UK system has only been introduced recently, we need to see
how it unfolds. But it seems to be well-suited for giving priority tohighly skilled foreign talent. Under the system, points would be
assigned and calculated for skill level, Japanese proficiency, andpossession of specialized knowledge. Workers with high scores areprioritized. We would like to make this our working group’s basic
recommendation for promoting the introduction of foreign workers.
Furthermore, we need to recognize that Japan’s employment
environment and acceptance of workers’ families do not compare
favorably to other OECD countries.
These are the reasons why Japan is a challenging place for skilled
foreign professionals to settle: (1) career advancement is difficult;(2) Japan has certain unique employment practices, such as themass hiring of new graduates; (3) integration and assimilation into
the workplace is difficult; (4) schools are not multicultural; (5) there
is no work-life balance; (6) salary level may be inadequate; (7) needfor high proficiency in Japanese.
There is an urgent need to correct these issues and build an
economic and social system that does not discriminate against
foreigners.
To make settling into Japan easier for foreign nationals, it isimportant to create and promote policies that: (1) support the family(unite the family and educate children) (2) improve the work
environment (ban discrimination, ensure transparency in career
12 Japan SPOTLIGHT • January / February 2024

development, and offer Japanese language lessons).
Whether the foreign talent is unskilled or highly skilled, it isimportant to build an adequate infrastructure for supporting them.
First, the government should set up a central hub to oversee andfacilitate the integration and coordination of data-related activities.
This should involve the use of DX (digital transformation) for
immigration and residency management tasks. For example, entry
and exit procedures at immigration can be made digital, andresidency application procedures can be streamlined through further
digitization.
Furthermore, we must work towards mid-to-long-term social
integration. To establish improved living conditions, we will: (1) use
digital technology to provide multilingual support at government
offices and hospitals, including implementation of measures topromote the spread of “Easy Japanese”; (2) set up systems forJapanese language schools and teachers; (3) streamline procedures
related to children’s education and for caregiving, insurance, andpensions; (4) allow people who have lived in Japan for five years tobe eligible for permanent residency; (5) accelerate initiatives of theaccepting companies, such as performing due diligence (DD) withrespect to human rights, ensuring that management respects diverse
values.
For foreign workers, the first generation can continue to live inJapan based on their individual skills. But if we look at examples
from Europe (such as France and Germany), considerable monetaryinvestment will have to be spent in order to improve education forthe second generation. When parents speak imperfect Japanese, it isharder for their children to learn kanji and Japanese grammar in theirearly years. And once they start elementary school, they have a hardtime keeping up with the curriculum. To make it easier for foreign
workers to integrate into society, we must continue to support theirchildren’s education through public funding. In addition, we need tohave community-based activities to make sure that foreign children
are not bullied at school. The recent unrest in France and theNetherlands, along with the UK’s Brexit decision, underscores thecomplexities of assimilating foreign workers into the societal fabric.
Stable, well-thought-out measures are essential for successful
integration.
Of concern is the effect of yen depreciation. Foreign workers findthat their income is reduced when converted to dollars. There arereports that the number of applicants from overseas, such as nurses,
has drastically decreased. It has become necessary to consider
measures to ensure that excellent talent from abroad continues to
see Japan as an attractive choice for employment.
d) People-to-people exchange

We must continue welcoming international students and technicalinterns. The goal is to allow these individuals to learn about Japanand acquire skills that they can take back to their home countries tosupport economic development. To achieve this, it is important tomake sure that they have a fruitful stay in Japan. We need to
implement policies that encourage as many people as possible in
Asia and all around the world to entertain a favorable view of Japan.

(3) Minimizing Japan’s security risk in Asia from population
decline and economic contraction
To reduce the risk to Japan’s security in Asia, two main strategies
are considered.
a) Utilizing high technology

We may use unmanned systems, including robots and artificial
intelligence (AI), to maintain military strength despite having fewer
troops. Or we may place Self-Defense Forces personnel in morelabor-saving positions. However, new types of responses are needed
when bringing in such high-tech solutions. Technologies such as AI,
cyber warfare, and swarms (groups of drones used in combat) arechanging the nature of regional security measures.
Moreover, mastery of these new technologies will require new andlonger periods of training. New personnel capable of designing,assembling, and using such complex technologies will be necessary.
As the population grows older and the demand for new types of
weapons systems increases, countries that are already struggling to
pay for their defense because of a decreasing population will have toconsider taking on even more financial responsibility to come up
with the money needed for these costs.
Moreover, when private companies become involved in developing
new technologies with allies like the US, implementing thoroughsecurity clearances will be vital, considering the potential conversion
of such technologies for military use.
b) New regional economic security cooperation

We must deepen relationships with nearby nations like South
Korea and the Philippines. At the same time, we must fortify ourbond with the aforementioned highly populated Asian countries, aswell as reinforce mini-lateral cooperation, like the Quadrilateral
Strategic Dialogue involving Japan, the US, Australia, and India.
Populous countries like India and Indonesia are not threatened byshrinking demographics. Their military budgets have room to grow.
Security partnerships with such nations are expected to play a bigger
role.

(4) Population trends in Africa and other areas outside of Asia;changes in scale in the economies of the US and China
Looking ahead, it is vital to consider security with international

relationships outside of Asia in mind. For example, in the context of
the Indo-Pacific initiative, which is a vital pillar of security in the
Asia-Pacific region, it will become important to collaborate with the
African region, where population growth is anticipated. Moreover,because of China’s declining birth rates and aging population, it
seems increasingly unlikely that China will overtake the US in
economic size. Even if that were to somehow occur, the situation willprobably reverse itself again. The US shares Japan’s democraticvalues and is likely to remain a long-term security partner.

3. Policies that Should Be Referenced in
Countermeasures for Declining Birth Rate & Aging
Population in Other Countries
Although there are differences in degree, other developed
countries, like Japan, face an aging society and are likely at risk of
future population decline. We will refer to and introduce policies
from these countries (Table 2).

(1) Francea) Policies regarding fertility rate

In 2020, France’s fertility rate was 1.82, which is considerably
higher than Japan’s 1.35. The following five policies can be cited asreasons:
1) A stable, long-term birth promotion policy – family allowances(benefits) are linked to the cost of living, not GDP.
2) Tax policy rules (N-fraction N-power method)First add up the total income of the family. Then divide it by thecomputed family coefficient (where adults count as one, the first twochildren as 0.5 each, and the third and subsequent children as one to
get the total) to determine the tax amount per coefficient of 1. With
this method of calculating the tax amount by applying a family
coefficient, the more children in a family, the less tax they have topay.
Numerical example: the husband earns 30,000 euros; the wife,
20,000 euros, for a combined family income of 50,000 euros.
For one child, the family coefficient is 2.5. When you divide 50,000
euros by 2.5, the result is 20,000 euros.
For three children, the family coefficient is 4 (1+1+0.5+0.5+1=4.)
Dividing 50,000 euros by 4 gives you 12,500 euros.
Before adjusting for family coefficient, the tax rates are:
0% for income up to 11,000 euros
11% for income from 11,000 to 27,000 euros
30% for income from 27,000 to 79,000 euros
For one child, with a family coefficient of 2.5, income up to 27,500
euros (11,000 x 2.5 = 27,500) will be taxed at 0%. The remaining
income of 50,000 – 27,500 = 22,500 euros will be taxed at 11%.
Japan SPOTLIGHT • January / February 2024

13

TABLE 2

Overview of policies from various countries addressing low birthrates &aging population that should be referenced
Reforms regarding birth rate
Childcare assistance

Education cost
support

Housing policies

Addressing theaging population

Foreign labor policies

FranceFamily allowancepayments indexed to costof living, N-power tax rules.
Inclusive family policies
supporting all types offamilies (children born outof wedlock, low income,single parent, etc.)

Free public
education
includinguniversity

Priority housing
benefits forfamilies withchildren

Prohibition of age
discrimination

Policies such as birth promotion policies and othersocial policies are applied equally to foreign workers.
The education provided to the children of foreign
workers is more substantial than that for the general
population. For the children of highly educatedforeign talent in particular, there have been efforts toprioritize their admission to elite educational facilities.
As a result, there has been some backlash from thegeneral citizenry.

UK

Paid parental leave forboth parents until child is
6 years old. Allow flexible
work arrangements. Fullcoverage of childbirthcosts, 80% of childcare
expenses tax deductible

Free public
education untilage 16

Generous housing
cost support
for families withchildren

Prohibition of age
discrimination

The UK: Brexit ended the free movement ofBritons within the EU. A “points-based system” wasintroduced to issue a new “Skilled Worker Visa” topeople of all nationalities. Priority is given to higherskilled workers, while lower-skilled workers are notissued visas unless they reach a certain number ofpoints. In principle, 50% of occupations are open
to foreign workers. The majority welcome foreign
workers as supporting economic recovery.

SwedenStrong paid leave support
for both parents, generous
childcare subsidies

Free public
education
includinguniversity

Housing financesystem that favors
married couples

Mandatory
retirement age of
67 years old

Previously, the policy on foreign workers was close
to free flow, but recently, due to the rise of rightwing forces, there has been a notable movement to
reduce the numbers of refugees and foreign workers.
As a social integration policy, significant weight isgiven to language education. However, the presenceof many foreign workers in impoverished areas tends
to exacerbate disparities and increase social unrest.
Therefore, an inclusive economic policy is required.

Singapore

Increased Baby Bonus
cash gifts; expanded
government-paid paternity
leaveChildcareand parenting
subsidies can beused for educationand medical costs

Support forchildcare andparentingassistance funds
that can be used
for educationaland medical
expenses

Retirement at age
63 but can work
until 68 if able to

The provision of long-term stay visas is limited(for those who have a spouse or parent who isa Singaporean citizen or permanent resident,
about 10% of the total visas granted). There arestrengthened measures to acquire highly skilled
foreign workers. It is characteristic that about
40% of the labor population are foreign, of whichapproximately one-quarter are permanent visa
holders.

Source: Prepared by the Working Group for Japan’s Population Challenges Secretariat

Therefore, income tax due will be: 0 x 27,500 + 0.11 x 22,500 =
2,475 euros.
In contrast, for three children, the family coefficient is 4.
Therefore, income up to 44,000 euros (11,000 x 4 = 44,000) will betaxed at 0%. The remaining 6,000 euros (50,000 – 44,000 = 6,000)
will be taxed at 11%. Therefore, income tax due will be: 0 x 44,000 +0.11 x 6,000 = 660 euros.
3) Education policy – Provide free public education, including at theuniversity level.
4) Housing policy – Policies take family size into account. Includes
public housing provided preferentially to families with children.
5) Inclusive family policy implementation (achieving equality ofopportunity and inclusive social security policies that cover poor
14 Japan SPOTLIGHT • January / February 2024

families, single-parent families, children born out of wedlock, etc. A
social security system that does not discriminate against children
born inside or outside of legal marriage). Measures include special
benefits to single-parent households.
The policies above give everyone the choice to have children under
different conditions. In this way, anyone in a variety of situations –for example, after completing certain job experiences, and whether
they are married or not – can have the option to have children. Allsuch policies will play a role in a higher birth rate.
b) Measures against age discrimination

The EU’s General Employment Equality Directive prohibits direct
and indirect discrimination based on age. In France, a provision inthe Labor Code prohibits discriminatory treatment based on age.
c) Policy regarding foreign workers

Since 2000, the number of foreign workers in France has
increased by 36%. Integrating them into society presents achallenge.
1. Application of social policies to promote fertility
Among adults between the ages of 18 and 60, 31% have at least
one grandparent born abroad, which makes them eligible for social
policy benefits including housing allowances, back-to-school
funding, and subsidies for expenses such as babysitting. Whether or
not the worker is a foreign worker is irrelevant to the application.
2. Education
Educational policies are implemented to save children from failingacademically, regardless of whether they are the children of foreign
workers or French citizens. The reality is that the children of foreign
workers are better educated than those of the average French citizen.
There is also a system in place that gives highly educated foreign
professionals preferential admission to special higher education
facilities. But this can result in animosity and backlash from thegeneral public in France.

(2) United Kingdom

Brexit, which signaled opposition to the free movement of workers
within the EU. After Brexit, Britons could not travel quite as freely as
before within the EU states.
The UK introduced a “points system”, started giving out “Skilled
Laborer Visa” (work visa) to people of all nationalities, and lowered
the minimum yearly income required for skilled foreign workers from30,000 pounds to 25,600 pounds. The skill requirements have been
lowered from a university graduate level to a high school graduatelevel. The cap on the number of skilled workers that can be accepted
has also been lifted. Also abolished was the so-called “resident labormarket test” which prevented foreign workers from being admitted ifthey were thought to hurt the domestic labor market. Workers needmore than 70 points based on criteria such as English proficiency
and the appropriate skill level for the proposed job. However, therequirement is lower for a doctoral degree holder. Workers withhigher skills can get visas without a job offer, but for lower-skilledworkers, visas will not be issued unless the above points are met. In
principle, therefore, approximately 50% of jobs have been opened up
to foreign workers.
This has impacted public opinion; 10 years ago the issue of
foreign workers in the UK was a source of economic stress for most
Britons. Now 59% of people believe that foreign labor and skills areneeded to help the economy recover.

a) Birth rate policy

The birth rate was 1.6 in 2020, down from 1.93 in 2010.
The ratio of seniors to the working-age population was just under
30% in 2020 and is projected to be about 50% in 2070. (In Japan,
the numbers are just below 50% and around 75% respectively. Bothare estimates by the United Nations.)
Thirteen weeks of childcare leave are guaranteed for employees
until their child turns one year old. Mothers are entitled to ninemonths of leave benefits and up to 12 months of maternity leave.
Fathers can take 26 weeks of paid leave if they apply within eightweeks of the birth of their child. Parents with children under the ageof six have the right to request flexible working arrangements fromtheir employers. Regarding maternity and childcare services, there is
full financial support for childbirth costs and, starting with the firstchild, child allowances are provided until the age of 16 without any
income restrictions. 80% of childcare costs, such as the use of
daycare centers, are tax deductible. Public-school tuition and related
fees are free for children up to the age of 16.
These policies make it easier for both men and women to raisechildren, and additionally allow men to participate in housework at a
relatively high level.
b) Policy regarding foreign workers

The issue of foreign workers was a significant issue just before(3) Swedena) Birth rate policy

The current birth rate is around 1.5, which has been higher thanJapan’s for the past 40 years. This is partly due to higher birth rates
among foreign workers. In addition, the relative youthfulness offoreign workers has helped forestall aging of the population. All
children under 18 receive a universal allowance, a generous incomecompensation during parental leave (80% of salary paid for oneyear), and substantial childcare subsidies ($150 per month per
child). The government strongly enforces gender equality norms.
Financial measures are also in place to help couples secure housing.
b) Foreign worker policy

Sweden has long been concerned about labor shortages and thecountry’s future as the population trends downwards. It recognized
the need for a policy that allows for the acceptance of foreign
workers and for utilizing refugees as a strategic labor force.
It is especially noteworthy that in 2008 the government stopped its
labor market testing when bringing in non-resident workers. (Acheck was required to see if there actually was a domestic labor
shortage before accepting applicants from abroad.) However, farright parties who advocated against foreign labor grew more
influential. As a result, refugee acceptance became more restrictive
Japan SPOTLIGHT • January / February 202415

with bans on permanent residency and strict visa requirements.
Meanwhile, to promote social integration, non-EU foreign workers
are required to receive union-approved wages. There are no
limitations on the kinds of jobs that can be held. There areregulations to prevent the cost of housing from being prohibitive for
immigrant employees.
Meanwhile, as part of a policy for integrating foreign workers,
Sweden emphasizes language education, as well as adult education
for those who have not received schooling. Given that a large
number of them live outside major urban areas, support for finding
housing is stressed. Many live in poverty. Female foreign workers
with children are less likely to be employed compared to Swedish
women. Stark income disparities exist in large urban areas, while
poorer areas are turning into a breeding ground for crime. These andother significant challenges remain. The smooth integration offoreign workers into society is a major task.

(4) Singaporea) Birth rate policy

Singapore’s birth rate was 1.03 in 2022, lower than Japan’s 1.3.
Attention has been drawn to the negative effects of low birth rates
since the mid-1980s. A variety of incentives were introduced tocounter the declining birth rates, but the rates continued to fall
despite a temporary increase. Marriage and Childcare Support
packages were introduced in 2004, 2008, and 2013. They granted
significant subsidies for married couples to purchase houses,
substantial subsidies for families with children, extension of paternity
leave, assistance for childcare, matchmaking support programs, andtax deductions for households with children.
By 2030, one in four people is projected to be elderly (an aging
rate of 25%, the proportion of the population aged 65 and older.)
Although the official retirement age is 63, to promote theemployment of elderly people, employers are mandated to offer
re-employment opportunities up to the age of 68. Part-time
re-employment subsidies will be extended until 2025.
b) Foreign worker policy

Approximately 40% of the labor force consists of foreigners(combining just under 10% who are permanent residents and justover 30% who are non-residents). Policies are strengthened to
attract highly skilled foreign workers. The Expert Pass is issued to
non-residents who earn a fixed monthly salary of 30,000 Singapore
dollars (1 SGD = 100 yen) or more, which places them in the top 5%
among Employment Pass holders. The pass is valid for five years
and allows holders to work for multiple companies simultaneously.

16 Japan SPOTLIGHT • January / February 2024

4. Conclusion
Japan’s declining birth rates and an aging population are longterm trends that highlight the need to correct underlying structuralproblems. It is essential to correct this structure over the mediumto-long term by setting population targets. “Maintaining a populationof around 100 million people in 50 years (2060)” was set out in the
Basic Policies for Economic and Fiscal Management and Reform (theGrand Design), a target set by the Abe administration in June 2014.
These are suitable goals to prevent negative economic growth due topopulation decline, avoid further devastation of regional economies,
maintain the social security system, and ensure security in the faceof rising geopolitical risks. Social and economic systems such as
lifetime employment and seniority systems, previously predicated on
population growth and a large number of young people, must
fundamentally change to accommodate the shrinking and aging
population.
To halt the trend of population decline, it is critical to both improvethe birth rate and expand the intake of foreign workers. From a
medium-to-long term perspective, we must implement policies thatprovide incentives for having children and allow people to appreciate
the benefits of accepting a global workforce, while also encouraging
foreign workers to see the benefits of immigrating to Japan andworking here.
The current Kishida administration’s extraordinary measuresagainst declining birth rates are based on the medium-to-long term
perspective: 1. Increase the income of the younger generation; 2.
Change the structure and consciousness of society as a whole tosupport childrearing with the participation of companies, men, andthe community; and 3. provide seamless support regardless ofparents’ employment or family situation, aligned with life stages.
While this is the right direction to take, Japan is still only halfway toachieving these goals, compared to other countries.
Furthermore, Japan should promote 1. Structural income growththrough a more flexible labor market; 2. Creation of attractive job
opportunities in regional areas through the stimulation of tourism
and other industries; and 3. Improvements to work-life balancethrough enhanced remote education and work. Japan should also
consider implementing other measures such as tax rules (N-fraction
N-Power) adopted by France, policy support that includes children
born out of wedlock, and expansion of free public education,
including university studies.
According to the 2021 version of the White Paper on Measures to
Cope with the Declining Birth Rate, Japan’s child-related budget isrelatively low at 1.65% of GNP, compared to around 3% for familyrelated expenditures in the UK and France. There is room forsignificant expansion. It is important to form a national consensus

TABLE 3

Policies not covered in Prime Minister Fumio Kishida’s unprecedented
countermeasures for the declining birth rate & foreign talent recruitment
strategies①

Spread of remote education & remote work
Spreading remote education means that whether people live in rural areas or belong to low-income groups, they can access the best knowledge toimprove their skills. This raises productivity and income so that people can better afford having children. Additionally, more options for remote work
give people more choice over where they live. Saving commuting times and having more leisure time means people can afford to have children. For
women with children commuting times had been an obstacle to working or working full-time, but remote work allows them to avoid expensive big
cities and work in areas with shorter daycare waiting lists.

②

Labor market reforms
Making the labor market more flexible creates better matches between workers and jobs, consequently improving worker productivity and raising
wages. This gives people the economic means to have children.

③

Promoting industries like tourism to create attractive employment opportunities in rural areas
Japan’s rural areas have abundant untapped tourism resources. Developing the tourism industry could create many jobs for youths and accelerate
young people settling in or moving to rural areas. An affluent life in the countryside with few time constraints would make child rearing possible.

④

Raising children born out of wedlock
In France, 61% of total births are to unmarried parents, while in Japan the rate is just 2.4% (both 2020). France offers the same subsidies from thegovernment to assist in raising children, whether the parents are married or not.

⑤

N-fraction N-power tax rules
France’s tax rules sum up all family income, divide that by a family coefficient (1 for each adult, 0.5 for the first two children, 1 for each childthereafter) to determine the tax amount per coefficient of 1, then multiply by the family coefficient for total tax amount owed. More children means
less taxes owed overall.

⑥

Accelerate the acceptance of highly skilled foreign workers• Singapore’s Specialist Pass System• The UK’s “points-based system”• France’s social integration education for foreign workers’ children

Source: Prepared by the Working Group for Japan’s Population Challenges Secretariat

on funding sources, recognizing that Japan’s consumption tax isrelatively low.
The expansion of foreign labor, which is another measure to stop
population reduction, involves transitioning the current TechnicalIntern Training Program into a new system driven by the need to“secure and nurture talent”. Japan should commit to a full-scale
expansion of highly skilled international talent and to support this,improve the environment for welcoming their families. They shouldhave ready access to Japanese language lessons and quality
education for their children. Additionally, job discrimination should
be prohibited in the workplace. Japanese society as a whole should
create an environment that is more open to foreign workers (Table
3).
According to the National Institute of Population and Social
Security Research, the birth rate for maintaining the current
population should be 2.07. This is a much higher rate than 1.26,
which was the figure the Ministry of Health, Labor and Welfare
announced on June 2, 2023. Birth rates under 1.50 are considered“ultra-low”, a situation for concern. We might assume that thereason for the current low birth rate is that fewer people were getting
married during the Covid-19 crisis. But even if the pandemic impact
eases, and the current measures to raise the birth rate gradually
begin to work, the Research Institute still predicts a low birth rate of
1.64. According to its calculation, by 2070 there will be just under
100 million people – 95.49 million, of which 8.8 million will be fromother countries. Therefore, to ensure a long-term population of 100
million, it is necessary to implement all policies, including those
aimed at foreign workers. Raising national awareness of the issue
through large-scale social mobilization will be an important step
towards Japan becoming a “child-friendly society”.
Article translated from the original Japanese by Cherryl Chow.
The Japan Economic Foundation (JEF) initiated the Working Group for Japan’s
Population Challenges with prominent Japanese experts in January 2023 andpublished policy recommentations in Japanese in November 2023.

Japan SPOTLIGHT • January / February 202417