There are ways of dealing with a shrinking labor force. More foreigners could be permitted to live and work in Japan and more women enabled to work by giving them more equal job opportunities. Given the record of the past century, Japan's insular society is unlikely to welcome a large inflow of foreigners. Changes in either area are likely to be slow and accompanied by divisive social and political debate. The second major dilemma for Japan's economy is excess savings.
People normally think of savings as a good and necessary activity.
But too much of a good thing is bad. Japan has too much money available for too few investment opportunities, leading to very low rates of return and poor investment decisions. Countries with excess savings face four difficult choices. A nation can ignore the problem, and suffer a shrinking economy until savings fall. The government can soak up the surplus by expanding the government deficit.