Japan – and then there was one

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Population: 127.4m

65 years and over: 23.9%

Life expectancy at birth: 83.9 years

Population in 2050: 99.7m

Everybody knows that Japan is ground zero for global ageing. The youngest of the developed countries as recently as the mid-1970s, it is now the oldest – and its age wave will continue to roll in for decades to come. 

By 2050, the proportion of Japanese who are 65 or older is on track to reach 39 per cent, up from 23 per cent in 2010 and only 9 per cent in 1980, when Japan Inc seemed poised to conquer the global economy. Japan’s total population, which is already contracting, will enter a precipitous decline, shrinking by over a half by the end of the century. Extending this dismal forecast even further into the future, the Japanese Government projects, half seriously, the date when there will be only one Japanese citizen left living.  

It is easy to understand why many contemplate Japan’s future and see nothing but fiscal crisis, economic stagnation, and geopolitical decline. Japan’s massive age wave – the result of its chronically low fertility rate, world-record life expectancy, and aversion to migrants – poses a daunting challenge. Its flagging productivity performance, creeping deflation, and Greek-sized government debt all compound the dire demographic outlook.

Yet Japan enjoys a number of enviable advantages that may better position it to cope with its ageing population than many western countries – at least for a while. To begin with, its welfare state is not especially generous. All told, government benefits account for just under 40 per cent of the total income of the average Japanese elder. In most European countries, 50, 60, or even 70 per cent of elderly income arrives in the form of a government cheque.  

The relatively low dependence of the elderly on benefits, together with a cultural tradition that stresses consensus and shared sacrifice, makes it easier for Japan to rewrite the social contract than it is for most western countries. State pensions have been cut repeatedly since the 1980s and are now indexed to the country’s demographics, meaning that, even as the population ages, spending is projected to remain constant as a share of the economy. Yet despite the magnitude of the cuts – a 40 per cent reduction in relative benefit levels over the next 25 years – there has been no hint of the social turmoil that convulsed France in 2010 when former President Sarkozy proposed a modest two-year hike in the retirement age.  

The long working lives of the Japanese constitute another comparative advantage. Fifty five per cent of Japanese men aged 60 to 74 are still employed, a larger share than in any other developed country except Iceland. In Germany, the equivalent share is 23 per cent, in Italy 17 per cent, and in France 11 per cent. 

Then there is the extended family. In Japan, nearly half of old people live with their grown children. This custom not only allows relatively poor Japanese elders to live with their more affluent children, but allows poor young adults to live with their more affluent parents. Multigenerational living not only mitigates the burden of oldage dependency by providing an extra source of support for the old, but also by providing a source of ‘trickle down’ support for the young. While the rate of multigenerational living remains high in southern Europe, it is less than 15 per cent in most western countries. In the Netherlands it is less than 10 per cent and in Sweden it is less than 5 per cent.

All this gives some hope that Japan may ride out its gathering demographic storm for another decade or so. In the very long run, however, it is hard not to side with the pessimists. At 1.3 births per woman, there is simply no way for it to balance its demographic and economic books.  

If Japan is to prosper in the long run – indeed if Japan is to survive – it must raise its fertility rate. Doing so will require the radical transformation of workplace and family cultures. In today’s rich world, it is no longer true that more working women means fewer babies. In fact just the opposite is true. Those countries that facilitate a dual role for women get more of both crucial inputs – workers and babies. Those that do not, get fewer of both. It is no accident that Japan has both one of the very lowest fertility rates in the OECD and one of the very lowest female labour-force participation rates.  

While Japan often clings to tradition and resists reform, when faced with great national challenges it has sometimes shown itself capable of sweeping transformation. This happened in the 19th century during the Meiji Restoration that catapulted Japan into the ranks of industrial powers. It happened again after the Second World War when the nation rose from the ashes of defeat and reinvented itself as Japan Inc. The social and cultural transformation that Japan must now embrace may lack the drama, but the stakes are no less momentous.

Richard Jackson is a senior fellow at the Washington based Center for Strategic and International Studies (CSIS), where he directs the Global Aging Initiative. This post was originally published in The World Today, a Chatham House publication.

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