Current Issues: Challenges and Opportunities
For over two decades, Japan has been facing the challenge of economic stagnation.
This stagnation has traditionally thought to have had three main culprits: (i) lack of population
growth, (ii) lack of productivity on capital growth (The rate at which goods or services are
produced) and, (iii) labor shortage. The second and third problems are deeply intermingled with
the first.
“Japan’s population has been falling since 2011. In 2014 Japan’s total fertility rate
stood at 1.42 children per woman — one of the lowest in the Organisation for
Economic Co-operation and Development (OECD). Population decline has led to
labour shortages, decreased consumption and a related hit to the economy, with
GDP growth at an anaemic 0.8 per cent in 2015.” (Koshi, 2016)
Population Decline
Between 2010 and 2015, Japan’s population declined by almost one million people, from
128,057,352 to 127,110,000. (Taylor, 2016). The reasons for this decline are it’s falling birthrate
and aging society.
First, out of wedlock children are rare in Japan – they comprised less than 2% of all
births. This is important because the marriage rate has plummeted. In 1975, just 21 percent of
women and 49 percent of men under 30 had never been married; by 2005, the figures were 60
percent of women and 72 percent of men (Eberspacher, 2014). With lower and later marriages
the birthrate has declined. Next, many women are hesitant to have a child (or children) because
daycare is prohibitively expensive. Others because they choose not to leave their jobs to raise a
child, knowing they would lose their place in the corporate ladder.
One-third of Japan’s population are over 60 years old and 12.5 per cent are above 75
years of age. The working age population (ages 15-64) peaked in 1997 and by one measure is
already 9.7 million people fewer than it was then.(Armstrong, 2016)
Productivity Stagnation
Much of Japan’s productivity stagnation is credited to Japan’s ageing and declining
population. A lower population means there are fewer people contributing to the Gross
Domestic Product. Furthermore, the growing ageing population has become a financial burden
with which to be dealt.
“Top Japanese labour economist Atsushi Seike details the enormous pressure
that ageing is putting upon the Japanese economy and society. ‘Total spending
on social security was almost 110 trillion yen (approximately US$924 billion) in
