Downsizing Japan (Opinion piece)

February 14th, 2011By Category: Uncategorized

Though many developed countries are struggling to keep their birth rates afloat, Japan’s demographic crisis seems to be worse than most. By 2050, forty percent of all Japanese are forecast to be over the age of 65, and analysts are predicting a twenty five percent decline in the country’s total population. Pundits and politicians alike are becoming increasingly concerned about the growing number of elderly in Japan, who are expected to put the national social security system under an extraordinary level of financial stress as the first of the baby boomer generation retire and become qualified for pension payments next year.

Domestic demand, productivity and the nominal GDP have all stagnated amid troubling economic conditions, which remain difficult to change because of the shrinking and aging work force. It has become appallingly obvious the demographic crisis in Japan is the root of many societal and economic problems in the Land of the Rising Sun, and is something that cannot continue to go on unaddressed.

Unfortunately, however, solutions to the demographic crisis itself have remained an elephant in the room for far too long. Though formally acknowledged as serious issues by many that had gone before him, it was only recently that Prime Minister Naoto Kan proposed reform in the social welfare and tax systems – both of which are necessary in the continued support of Japan’s aging society. Despite the benefits can be had through an increased workforce, the thorny issue of mass immigration continues to be an unpopular notion among both politicians and the general public alike. Robots, though beneficial in being able to fulfill labour shortages, come with the unfortunate consequence of being unable to pay taxes, and those who have worked well into their retirement age can only continue to do so for so long. To many, it seems that the aging of Japan is directly responsible for its economic woes.

Or is it?

Take a moment to think about an inverse relationship – in other words, Japan with a growing population. Such may, in fact, present a bigger problem to the nation than the ones that accompany a population in decline. Take food as an example. In the words of renowned British scholar Thomas Robert Malthus, “The power of population is indefinitely greater than the power in the earth to produce subsistence for man.” Japan currently imports sixty percent of the food it consumes. With its limited amount of arable land, one can only imagine the level of dependency a larger population in Japan would have. With dependency comes vulnerability, and Japan would be first hit in the event of a global food shortage.

Then there’s the problem of overcrowding. As is, Japan is home to several of the largest cities in the world. In fact, the number of people living in the Greater Tokyo Area is already greater than the total population of Canada or Australia. What would happen if this population were to swell? The level of pollution would rise to intolerable levels. Public transit and roads would be pushed into overcapacity. Though they’ve declined since the burst of the asset price bubble, property prices in urban areas would surge, pushing those well off into suburban communities and thereby encouraging urban sprawl. Japan would effectively become the largest city – state (city country?) in the world, and though it may sound enticing to some, running and supplying the population of such a country limited by natural resources, would be next to – if not – impossible.

Some, however, may argue that the economic benefits of a large, growing population offset and can overcome any of the difficulties outlined above. Would it really, however, be any better than it is now?

The long and the short of it is this: probably not. One has to realize that Japan’s economic stagnation was not the direct result of population decline; it simply exacerbated the problem. The collapse of the Japanese bubble and its continued economic malaise is the direct result of several factors, including but not limited to the rapid appreciation of the yen following the signing of the Plaza Accord, interdependencies between the public & private sectors and the complex system of money politics and vested interests in Japan’s political system. The bubble, in short, would have popped anyway, and Japan would be facing problems similar to the ones it is currently grappling with.

So, if population growth is not the answer, then what is?

The answer may lie in utilizing the resources already at its disposal – most importantly, women. A report by Goldman Sachs last year revealed that Japan’s GDP would be increased by a full 15 percent if 80 percent (currently at 60 percent) of all women in Japan held some sort of a job. Such a boost in both workforce size and GDP would be welcomed in a country currently grappling with an aging, shrinking workforce.

And let’s not forget about the overqualified. Because of Japan’s twenty year economic slump, many white collar professionals have also been forced into entry level jobs simply to make ends meet. Such an obvious waste of talent and skill is a loss to the country’s overall economic health, and is one that the government must actively find a solution to.

Make no mistake: I am not dismissing the benefits of population growth, nor am I against the idea of gradually opening Japan’s immigration system. It is important to realize, however, that population growth isn’t and has never been the be-all and end-all solution to Japan’s problems – a misconception by many that I would simply like to correct.

Author of this article

GaijinPot

GaijinPot is an online community for foreigners living in Japan, providing information on everything you need to know about enjoying life here, from finding a job and accommodation to having fun.

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Comments

  • Masshah1 says:

    The Japanese government should give incentives to people to have more children. Give them money (perhaps) every time they have a child.
    Encourage large families. I have not met a Japanese family with more than 3 children. I myself come from a a family of four and my married brother have 4 children too.

  • Twat says:

    Jason – I like your arguments and they might even work but this is Japan where it takes 3000 years to change anything. Better go and do some internet banking….. hang on…. I forgot, I’m living in Japan.

  • Brit in Nags says:

    Thats why I don’t pay into the pension system!There’ll be nothing to claim when I’m old and wrinkly in Japan(If I can stand it here until I’m that old or haven’t died).

    To say that more women should work to help the econmomy is all well and good and well but those with young children are struggling to find child care facilities and are on long waiting lists.
    If the support structure isn’t there then things will not change!

    I agree with Jason that the rice farmers and automotive industry should stop being subsidized by government.

    Too much rice is produced and alternative crops should and must be planted,its very inbalanced.

    Mass immigration may not be the key but better treatment of the foreigners already here would be a start!!

  • Kaaru422 says:

    About time somebody mentioned that Japan’s population could get smaller and things be ok.

  • Kenelwood says:

    The J-economy can not be fixed or saved, because the fixers and savers are on a doomed quest to nail the problem down, by drawing our attention to a narrow sub-world of repeatable numbers and reasons where we all see things the same — with researchers focused either on propping up the official story or knocking it down, few people have stepped back far enough to see the deep unsolvability at the heart of the event. It’s the stuff that makes you believe what you already believe even more strongly: that en-masse { in Japan } we are getting it wrong because we aren’t considering the obscurities that render our current economy…

    So it’s a good idea to be the change you want to see in your immediate world because YOU are the future of the economy, right now. Yes, that’s my BIG idea for a stable Japan.

    ken

  • Jason the Economist says:

    Hi Peter, imagine what would happen if the Japanese authorities did the following:
    1) stop supporting the export-orientented industries (autos, electronics, etc.) with a super-loose monetary policy that hinders the Yen’s value and has resulted in a debt-to-gdp ratio of over 200%.
    2) dramatically lower the corporate tax rate and get rid of the entrepreneurship tax.
    3) stop subsidizing the rice farming industry so that land that is dominated by rice fields can be used to grow other needed crops.

    Due to (1), the Yen will naturally strengthen (making imports to Japan cheaper) and big corps will be forced to get rid of their archaic, inefficient lifetime employment practices, BUT, due to (2) other companies (domestic and international) will be encouraged to open and will accept those workers and supply enough jobs for more! China will import loads of Japanese goods in the near future — Japanese companies will be fine without gov support.

    The third point will lower food costs.

    With those three points in place, now Japanese people can actually *afford* to live AND have children!

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