Publisher’s Note

What’s at Stake with a Declining Population?
By Masakazu Toyoda
Japan’s decline in both its fertility (birthrate) and its mortality
rates is exerting strong pressures on public finances. Japan’s
declining birthrate, combined with an increasing proportion ofolder people (aging population), has become a major issue inJapan. It is no wonder that the Kishida administration isaddressing the declining birthrate from a different perspective ordimension. To this end, a variety of measures are being developed,including economic support such as child allowances and freecollage education for the third child, combined with reforms in theway people work. Naturally, many people support them. Is
resolving the declining birthrate enough to eventually alleviate theissue of an aging population?
Japan’s population peaked in 2008 and has been declining eversince. According to the National Institute of Population and Social
Security Research, Japan’s population (excluding foreignnationals) in 2022 was about 122 million. By 2070, almost 50
years from now, it will be 77 million. This means that thepopulation will decrease by 0.9 million people per year, 10 million
per decade, or 45 million people in about 50 years. That’s nearly
40% less than today. A population decline of around 50 million isalmost equivalent to the population of Spain or about twice that ofAustralia.
Despite major gains in productivity, if the population continues
to decline, GDP will inevitably shrink. “The national strength of
the Japanese economy will decline” and “Japan’s finances will gobankrupt” due to the increased burden of social security costs
caused by a larger ratio of the aging population. Many people are
accepting the idea that a slow population decline is unavoidable
and that the country will have to find ways to survive as a middle
power. As the media, the business and political worlds give theimpression to be sympathetic to the concept of a slow decline inpopulation, it seems that measures to increase the birthrate would
be appropriate and suffice.
I would like to raise two objections to this view.
First, among the G7 countries, only Japan and Italy show acontinuous decline in population while the others are maintaining
or even increasing their populations. Viewed from a fertility rate
approach, it is said to maintain population the fertility rate must be
around 2.07. Sadly, it is not the case in Europe where boldmeasures to combat their declining birthrates are introduced.
France reports the highest European birthrate at about 1.8,
Germany is at 1.6, the U.K. at 1.6, and Italy at 1.2. In theAmericas, the U.S. is at 1.7 and Canada at 1.4. As these rates are
all well below the required fertility rate of 2.07, why is it that mostof the G7 countries are maintaining or even increasing their
populations? The reason is that they are accepting a considerable
number of immigrants, i.e., they are increasing their humanresources. To stop the decline in population, it may be time forJapan to think seriously about how to attract and secure foreign
human resources.
Second, a declining population will not only bring about a“decline in national strength” and “financial collapse,” but it may
also lead to a “security crisis”. For example, the North Atlantic
Treaty Organization (NATO), with its primary purpose to provide
collective defense, was established 50 years ago with 12 countries.
https://www.jef.or.jp/journal/

It has over time more than doubled in size to 31 countries,including U.S. and Canada. Furthermore, Finland joined in March
2023, after the Ukraine crisis broke out, and Sweden is close tojoining. Why is this? It is because the era in which one
superpower, the United States, guaranteed peace and order in theworld is over. That was the era of Pax Americana, after postWorld War II. No one can stop the crisis in Ukraine nor theconflict in Gaza. Now, with relentless U.S.-China confrontation,with the uncertain developments in North Korea and with thepossibility of armed unification of Taiwan by China, the North
Asia region has become one of the most unstable andunpredictable regions in the world. While Japan cannot bereassured that the Japan-U.S. Security Treaty is still in place, theU.S. is placing high and more expectations on Japan to defend
itself. It may say that Japan is safe because it has its Self-Defense
Forces, however, we must not forget that Japan’s declining
population is one of the reasons why the Self-Defense Forces havedifficulties recruiting the desired number of personnel.
The declining birthrate and the fiscal implications of an aging
population are problematic, of course, but they are not the onlyproblems. A population decline means that its labor force is also
declining and that is a problem.
“Measures to deal with the declining birthrate in a different
dimension” are essential, but a second round of measures may
also be necessary to further enhance the situation, while learningfrom the European countries. The study group of Japan Economic
Foundation (chaired by Naoyuki Yoshino, professor emeritus atKeio University) has proposed increasing the income of working
people to reduce the burden of living expenses, making public
education free of charge for all the children, including graduate
school, and enhancing rural life by increasing remote educationand promoting remote work.
Furthermore, the policy proposal also calls for measures toincrease the labor force, pointing out the need to “increase thenumber of women in the labor force” and to “encourage theelderly to remain active throughout their lives”.
Even this, however, is not enough. The experience of Europe
has shown that there is a limit to improving the birthrate, and thetime has come for Japan to make a full-scale effort to secure (andintegrate) foreign human resources. There are, however, concernsthat the mass acceptance of foreign human resources will bringabout social unrest. Therefore, while a shift to a “specified skills”
system is welcome, a “point system” similar to that used in theU.K. should be introduced in order to accept highly skilled foreign
human resources while ensuring quantity and quality. In addition,
it is desirable to improve the education of their children, spread“easy Japanese”, and improve the English proficiency of Japanesepeople to create a better living environment so that foreign humanresources can live comfortably in Japan and easily assimilate into
the Japanese society.
Masakazu Toyoda is chairman and CEO of the Japan Economic Foundation(JEF). He previously served as chairman and CEO of the Institute of Energy
Economics, Japan, after having been vice minister for International Affairs at theMinistry of Economy, Trade and Industry.
Japan SPOTLIGHT • January / February 20241