Japan is experiencing a rapid change in its population structure with accelerated aging and declining birthrate, as well as decline in productive population and labour force. In addition, the society is expected to face the problem of a declining population.

Since the fall of 2003, the country has experienced some degree of economic recovery. Although the pace of recovery has slowed down considerably recently, the Japanese economy is expected to maintain this positive shift, notwithstanding some remaining concerns.

As Japan expects to face changes in population structure and declining population, it is essential for the nation to foster development based on a sustainable economic growth. It is critical that the country focus not only on responding to declining population, population aging, and low birthrate issues, but also with globalization and an advanced industrial structure.

## (Changes in Population and Population Structure)

Looking at the changes in population structure in Japan, the ratio of elderly (proportion of people over 65 years old to total population) reached 7% in 1970, meeting the United Nation's definition for an aging society. In the following 25 years, Japan's rate of aging accelerated sharply to 14%, a pace experienced by no other developed country. Except for 1.58 in 1966 (the Year of the "Hinoeuma" when the possibility of giving birth to girls was generally avoided), the total fertility rate has increased moderately by 2 or more between 1960 and mid-1970s. Since then, however, the total fertility rate in 1989 dipped below the 1966 level of 1.58 to 1.57. This drop became known as the "1.57 shock", and has since fallen to 1.29 in 2003 (Table 12). Productive population (15 through 64 years) reached a peak in 1994, and then turned downward. The over-15 population willing to work, i.e. the labour force, also started declining in 1998.

While further acceleration of aging and declining birthrate and a decline in productive population are expected in the future, Japan's total population on October 1, 2004, was 127.69 million, of which 62.3 million were males and 65.39 million were females (Statistics Bureau, Ministry of Internal Affairs and Communications (MIC). Based on the information provided in National Institute of Population and Social Security Research's "Population Projections for Japan (2002)", the total population of Japan will reach a peak in 2006. However, the population, which has consistently increased since the end of World War II, is projected to decrease after 2006.

## (Changes in the Global Economy and Efforts to Build New International Relations)

An aging society, declining birthrate, issues of productive population and labour force, and a declining population are likely to become a serious problem in the future, confronting not only Japan but also other developed countries. In addition, in line with the recent changes in population and population structure, the positions of each country in the global economy and international relations have gradually but fundamentally shifted (Table 13).

According to the IMF's "World Economic Outlook Database, September 2004", Japan's growth rate since the second oil shock has hovered between -2% and +7%, that of other developed countries has also moved at the same pace of around -2% and +8%, China, however, other than in 1989 and 1990 when it had experienced slower growth than developed countries (Figure 14), achieved a significant economic growth with a rate between +4% and +16%.