EDITORIAL | Japan Must Respond to Population Decline with Urgency

A government-affiliated institute has taken a close look at Japan's population decline. It estimates that in 2070 — some 50 years from now — the population will shrink to 70% of today's numbers. By then, people aged 65 or over are likely to account for about 40%, according to the analysis. 

By 2070, the population of Japan will fall 30% from the last (2020) census, says the National Institute of Population and Social Security Research (NIPSSR).

The total population in 2020, including foreigners, stood at 126.15 million, according to the census. Under the new analysis, this could drop to around 87 million people in 50 years.

The pace of the population decline will slow down in the future. But the downward trend is likely to persist, NIPSSR analyzes. 

Facing this, the government must mobilize all available policy options. Its goal should be to materialize a social structure that keeps Japan's social functions intact, even as the population continues to decline — that is, it should seek a way to help each and every citizen feel a sense of affluence.

Focusing on Society's Survival

The Kishida administration has recently developed a draft package of measures to tackle this problem on a different scale. It aims to reduce the economic burden of childbirth and child rearing, as well as provide support balancing work and childcare. It would also expand childcare leave benefits. The government is urged to persevere in prioritizing and tackling these issues.

A society with a shrinking population is simply a super-aging society. The aging rate ー the proportion of the population aged 65 and over ー was 28.6% in 2020. But it is expected to jump to 38.7% of the total population by 2070, according to the institute.

There is a fear that local government finances could be depleted because of lagging tax revenues in regions suffering depopulation. If that happens, services currently provided to residents might no longer be available. 

Local finances are becoming tighter. And infrastructure such as roads and waterworks, which were intensively developed during the days of high economic growth, are aging. Meanwhile, the cost of corrective measures weighs on local governments.

Moreover, local supermarkets could lose their commercial position due to population decline. In such communities, this could lead to the withdrawal of supermarkets, one after another. And, in turn, we could see a rapid rise in the number of "shopping refugees," among other problems. 

Overall, the impact of population shrinkage on society and the economy is profound. Both the national and local governments must respond with a sense of urgency.

Achieving a Sustainable Social Security Net

In the long run, boosting labor productivity is important to overcome these national challenges. Society must adjust to survive even in the face of labor shortages. For this, accelerating DX (digital transformation) and incorporating other technologies to help enhance operational efficiency is a must. 

Local governments should also actively make use of artificial intelligence (AI) as they prepare for staff shortages. Moreover, the application of such wisdom and ingenuity is expected to lead to the creation of new regional industries.

There is also an imperative need to improve the sustainability of social security systems. These are what support a super-aging society, with pensions, medical care, and nursing care.

NIPSSR predicts that the number of people aged 65 and over will peak in 2043. However, the demand for medical care and nursing services will continue to rise in the future. 

Japan's public pension system employs a pay-as-you-go system, also known as a "levy system." Under it, premiums paid by the working generation are used to pay pension benefits for the elderly. Inevitably, if the number of working-age people supporting the system drops and the number of elderly eligible for benefits rises, pension finances will become stressed.

Preparing a Vision of Society's Future

To establish a social security system that can weather a super-aging society, the government must strengthen the financial foundation through continuous reforms. 

Under the reform of the social security system, the government is promoting the principle that people, including the elderly, pay according to their abilities. This should be thoroughly implemented for all generations.

Not All Gloom and Doom

Not everything about the declining population and super-aging society is negative. The shrinking working generation also provides an opportunity for experienced and energetic elders to play an active role in their second life. 

As the average life expectancy increases, the uniform definition of "elderly" as those aged 65 and over should also end. It is time to wipe out the conventional image of the elderly. 

The elderly should be encouraged to actively participate in and support society. Such efforts will also provide a great opportunity to revitalize the current stagnant image of Japan's future.

There are also other points of note in the NIPSSR estimation. For one, in its previous report in 2017, the institute had estimated the fertility rate, which is the estimated number of children a woman will give birth in her lifetime, at 1.44. But this time that estimate has been revised downward. The institute now expects the fertility rate will drop to 1.36 by 2070. 

Nevertheless, NIPSSR has forecast that the pace of population decline will ease. This is because of immigration. The number of "excess entries," which is the number of foreigners entering Japan minus those leaving, is expected to jump sharply from the current 69,000 or so annually to around 164,000.

But the influx of foreigners depends on the international situation. Other caveats should also be kept in mind. In the end, the population decline could progress faster than the estimate by the institute, depending on international conditions.

We hope that the government will soon come out with a future vision for Japan in which people can continue to enjoy affluence even if the population declines significantly.

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(Read the editorial in Japanese.)

Author: Editorial Board, The Sankei Shimbun