The Future of Japanese Society and the Vulnerabilities of Population Decline Michael Sutton, Ph.D. College of International Relations Ritsumeikan University,

The Future of Japanese Society and the Vulnerabilities of Population Decline

Michael Sutton, Ph.D.

College of International Relations

Ritsumeikan University,

Kyoto, Japan

4th International Conference on Population Geographies,

10th -13th July, 2007

The Chinese University of Hong Kong

In recent years, population decline is causing anxiety in Japan.

Japan is ageing and the birthrate is declining which will mean a smaller labor force, pressures on aged care and less economic growth.

These trends are causing great anxiety in official and public circles. Many believe that Japan has done something terribly wrong to reach this stage and something or someone in Japan needs to change in order to reverse these developments.

Everyone is trying to find a solution to ‘reverse’ the transition to an aged society

The Japanese Government and bureaucracy strongly support efforts to increase fertility and measures to encourage women and elderly people to work.

A critical alternative is that Japan needs substantial immigration numbering in the millions as soon as possible.

Both the Government and its critics see the cost of inaction as causing irreversible injury to the Japanese economy and national pride.

But is there cause for alarm?

What do the statistics tell us about the crisis?

The year 2006 marked the beginning of population decline. One estimate is Japan will reach 100 million by 2050 Japanese fertility has already declined for 25 years. The Japanese Labor force has already been declining since

1995 (87.17 million). It will reach 53.89 million by 2050 The elderly in Japan will reach 35.86 million in 2050 Due to longevity and fertility decline, Japan is the pioneer in

the demographic transition (UN, 2001)

If Japan is the pioneer, this suggests that the ‘crisis’ is not a crisis.

The declining birthrate is not the result of unique, old-fashioned or special features in Japanese society and/or the economy.

Japan is the first to experience this part of the demographic transition.

Post-industrial societies will ALL experience the demographic transition of an ageing population and declining birthrates.

What is the ‘demographic transition’?

The demographic transition is a process that occurs in all countries as a result of economic development, from high fertility and mortality to low fertility and longer life expectancy (UN, 2006).

In this model, there are two stages which are vital: the slowing of the birthrate to manage economic growth; and the transition to an ageing society.

The first is essential to secure national prosperity, while the second is a consequence of prosperity.

In the post-industrial society, long life expectancy, low infant mortality and prosperity are aspects of life to be celebrated.

But why is everyone depressed?

The demographic transition is a ‘future-based’ model: Japan is the first

Japan is the first to experience this stage of the demographic transition due to increased life expectancy and declining fertility.

The ageing society will put downward pressure on economic growth and lead to higher burdens of care for the elderly.

The expert opinion (e.g. OECD, UN) suggest a comprehensive revision of economic policy.

But, an ageing society will not lead to disaster.

The demographic transition is another adjustment for the evolving modern society.

But, the Demographic Transition Model doesn’t answer all the questions…

For example, is there a point of critical vulnerability, a time during which vital changes need to be made?

Are there periods during which certain policies (e.g. immigration) will be more productive or even counterproductive?

Unfortunately, the answers are ambiguous. Countries could address short-term population vulnerabilities

e.g. pensions, and labor market inflexibility. Countries could also establish priorities for addressing long-

term population vulnerability such as social and economic frameworks in an ageing society.

For example, the relationship between demographic change and economic growth is

ambiguous The conventional wisdom (UN, OECD etc) is that during the

last stage of the transition, the size of the labor force will decline, bringing down GDP. This will occur irrespective of policy.

However, according to the Ministry of Economy, Trade and Industry (2005) “There is no clear relationship” between economic growth and population change.

The year 1960 in Japan saw 13.1% growth but labor input increases remained stable during this time. So, size of labor force was not a crucial variable for Japan’s economic growth.

The following graph charts the relationship between real GDP growth rate and labor force population growth rate.

If METI is right, what is the relationship..

…between the Demographic Transition and Economic Growth?

The extent or ambitions for economic growth involve social and political boundaries.

Growth is informed by societal expectations which are conscious decisions about the purpose of society and priorities for life.

Economic growth ambitions are revised by internal or external shocks, the passage of history, relationships with other countries and political culture.

Many countries have experienced similar revisions, such as the early growth rates, the creation and effects of the middle class, the rise of environmental consciousness and more recently, population decline.

Japan has often revised expectations for growth during its modern history

From 1868-1945 the emphasis was on building strong industry, strong military and national pride

From 1947-1970s the emphasis was on export-led growth, national prosperity

The 1970s saw adjustments to oil shocks, inflation and environmental ills

The 1990s saw Japan adjust to recession and the Asian financial crisis

At the present time, Japan is adjusting to the rise of China and the demographic transition

In Japan, the talk is only of the population ‘crisis’, which threatens the future economy and

society The temptation is to find someone to ‘blame’. A popular view is that women who choose to marry later in

life (or not at all) are responsible for the declining birthrate and therefore responsible for the future decline of Japan.

Japan therefore needs childcare and more children….But

Increased childcare will not necessarily lead to increased births

Children born in 2007 will not be ‘productive labor’ until about 2023 onwards.

Immigration is also not the antidote

While women are often blamed, some view mass immigration as the only solution. But…

Multicultural societies like Australia will also experience the demographic transition.

Immigration into Japan will not be able to accommodate labor shortage from fertility decline (OECD, 2006).

Immigration influences the size, not the structure of the population (Productivity Commission, 2005)

Immigrants will also age along with the rest of the population. Age-based immigration will require greater supplements over time, leading to greater burdens of care (Australian Government, 2004)

What is business thinking? (NIPPON KEIDANREN)

The Japan Business Federation argues that immigrant labor could not compensate for the population decline, but could revitalize industries experiencing labor shortage.

One proposal is closer integration with East Asia – goods, services, capital, information and people. The Japanese Government could pursue deregulation.

Childcare facilities, child support and residential policy would facilitate increased fertility in Japanese communities.

What is the Government thinking?

For the Japanese Government, the highest priorities are social reforms for elderly, youth employment programs and childcare to promote fertility (Japan, 2007)

The Government will remind Japanese of “the importance of family” (Japan, 2006)

Promoting labor productivity and employment creation will help the economy in the era of ageing society. Japan should promote a ‘Multicultural Society’ (Council on Economic and Fiscal Policy, 2006).

What is the bureaucracy thinking?

“It is not appropriate to consider using foreign workers to cope with labor shortages” (Ministry of Health, Labor and Welfare, 2005)

“we notice the emergence of large strains in the work and living environments and frictions between foreign workers and regional communities” (METI, 2005).

The root cause of frictions is the lack of national coordination of foreign workers following the Immigration Act revision of 1990 (Nippon Keidanren).

Japan should pursue East Asian regionalism using the European Union Single Market Model (METI, 2005).

Women should be encouraged to work (with childcare assistance) and the mandatory age of retirement should be increased (METI, 2005)

Largely absent from the Japanese debate is the recognition that Japan is not alone.

A focus on birthrate policy and/or immigration policy is unbalanced.

The demographic transition is caused by declining birthrate and increased life expectancy

Longevity is the ambition of all societies and should be celebrated.

The overall focus of discussion in Japan ignores the sources of economic growth that could counterbalance the decline of growth caused by the demographic transition.

Japan needs a New Population Policy…There could be four elements:

First, the superficial debate on women and immigrants, promotion of anxiety, easy solutions and the blame game

Second, accept the demographic transition as a common experience, not only for Japan.

Third, adopt comprehensive childcare facilities and welfare security for the elderly.

Fourth, confront post-recession inefficiencies in the Japanese economy; pursue innovation and productivity.

Japan lacks a culture of growth due to the recession that impedes confidence in the future of the economy.

There is life After the demographic transition

A strong economy would help Japan create sustainable economic and social frameworks to prevent population vulnerability.

Japan could lead the world with innovations, ideas and policies that could be useful for other countries experiencing birthrate decline and higher life expectancy.

If Japan could reclaim a culture for growth, celebrate longevity and accept the decline in the birthrate, it would be a model for societies on the path to a world beyond the demographic transition.

Thank You!