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Like no other industrialised nation Japan is confronted with the challenges of a rapidly ageing and shrinking population. Today, more than a quarter of the Japanese population is already over age 65. Along with a stagnating economy that is even failing to gain momentum through the acclaimed Abenomics, Japan’s demographic change is the biggest problem for the island nation. What measures is the government adopting to halt the demographic crisis? Is it perhaps already too late for counter measures?

In Japanese mythology the crane is considered a talisman and said to live for a thousand years. In Japanese folklore those who do not shun the task of folding a thousand paper cranes are granted good health and a long life.

Rather like the legendary crane, Japan’s population is increasingly enjoying longer life expectancy. In 2015, life expectancy at birth was 80.79 years for men and 87.05 years for women. By global comparison Japan’s women have the highest life expectancy, while men live the third longest. Japan is frontrunner in the percentage share of seniors of the total population. 27.3 per cent of the population is 65 years-plus (corresponding overall to 34,610,000 people). These developments present the government with considerable financial and political problems. The sakazuki, the ceremonial drinking cup, symbolises these challenges. To celebrate their centenary birthday year, pensioners receive this silver drinking cup worth about 70 euros. Together with a congratulatory certificate signed by the prime minister, these celebratory gifts are dispatched throughout Japan to its centenarians on the “Respect for the Aged Day” (Keirō no Hi). When this tradition was introduced in Japan in 1963, only 153 centenarians lived in the entire country. Today, five decades later, the number of those aged over 100 is actually about 60,000. In 2015, the Ministry of Health, Labour and Welfare spent almost two million euros on the manufacture and presentation of the sakazuki. Due to the rapidly rising number of centenarians the Ministry has been unable to justify the production costs of the sterling silver sakazuki for some time, and this year production switched to cheaper metal for the first time. In the past, the cup was already slightly reduced in size. As trivial as this example may seem, Japan finds itself in a demographic crisis. Due to long life expectancy, its society is ageing at a rapid pace and the low birth rate is responsible for a declining population number. The Japanese government is engaged in frenetic efforts to counteract the looming demographic disaster. If the government does not get demographic change under control, Japan will face dark days ahead.

Reason to Panic

Sociologists and demographers refer to societies with more than 21 per cent of the population age 65 years or older as “ageing”. Latest estimates by the Ministry of Internal Affairs and Communications estimate the share of over-65 year-olds in Japan at 27.3 per cent. This share is projected to rise to 39.9 per cent by 2060. In other words, this means that for every Japanese teenager under 15 there will be three seniors age 65 years-plus in 2040. Today, Japan’s population is not only already overaged, but it is also growing older at a worryingly fast pace. However, the rapid ageing process is rather a symptom of the demographic crisis that Japan is facing. In fact, longer life expectancy of the population is one of the virtuous outcomes of successful industrial nations. Long life expectancy directly reflects the achievements of the state in the areas of medical technology and healthcare, and is an indicator of a generally high standard of living. The fact that the Japanese are becoming older on average is a sign of the success of the Japanese welfare state. Japan’s problem is not its ageing, but rather its shrinking population; the fertility rate is 1.46 children per woman of child-bearing age. To achieve a balance with the young generation, or in other words to prevent the population from shrinking, it would need a rate of 2.07 children for each woman of child-bearing age. However, experts expect a negative development in the fertility rate: based on the current trend and granted that the government doesn't intervene, it is projected that only an average of 1.35 children will be born per woman in 2060. The population number would accordingly shrink from the current 127.3 million to 94.6 million. This represents an anticipated population loss of almost 33 million people. By comparison, the metropolitan region of Tokyo has about 34 million residents. There are also other causes for concern. The aforementioned trends of an ageing and shrinking society will have a devastating impact on the relation of working people to older persons. If, as projected, by 2060 the working population declines to 50.9 per cent of the overall population, every Japanese pensioner would only be supported by 1.25 people in paid employment on average. This would lead to increasingly higher taxation expenditure and reduce the population’s private wealth. Forecasts for this suggest that by 2024 private households’ average wealth will have fallen to the same level as 1997. The demographic crisis that Japan is suffering threatens to become a disaster.

The ageing of Japan's population, caused by the declining birth rate, can be classified into three phases. During the first phase, in the post-war period from 1947 to 1957, the fertility rate halved from 4.54 to 2.04. In the second phase, from 1957 to 1973, the rate stabilised and settled at 2.0 children per woman of child-bearing age. This period was characterised by Japan’s economic upswing and an annual income rise of ten per cent per capita. The third phase, from 1973 to today, is characterised by a continual decline in the fertility rate caused by economic stagnation and recurring recessions. Today, the Japan's fertility rate is about 1.46 children per woman. In fact, since 1974 there has not been a single year in which the rate was above the reproduction level. The reasons for the decline in the fertility rate and the related regressive birth figures are closely linked to the economic conditions in Japan. The country is continuously faced with the threat of sliding back into recession. Government debt measured in terms of gross domestic product (GDP) is over 240 per cent and Abenomics, the economic and monetary policy named after the prime minister, still has not resulted in an economic recovery. For Japan’s citizens this means lower incomes, cuts to social benefits and ultimately pessimistic future prospects. This economic pessimism is primarily to blame for the trend of the Japanese postponing marriage much longer than in the past, or not even getting married at all. Experts state that marriage at a later stage as well as opting for a single lifestyle could be held accountable for about half of the declining birthrate. Japanese couples marry later now than in the 1970s. At about 31 years, men now marry on average 4.2 years later than in the 1970s; at 29 years old, women are even 5.2 years older when they marry for the first time. In the Japanese context fewer or later marriages mean fewer births because only two per cent of all Japanese children are extra-marital; by comparison, the percentage is 40 per cent in the UK and the U.S. The bad state of the economy, the aforementioned drop in salaries, and more than ever the unique character of Japanese corporate culture are held to blame for these developments. Japanese companies are governed by a strict seniority principle: age and an employee’s period of employment for an organisation determine the salary level and position within the company. During the early years, young employees often only earn a relatively modest income. The seniority principle also means that Japanese employees work extremely long hours as employees also stay for as long as the boss is still in the office. There is an obvious link between low salaries, consistently high living costs, a poor work-life balance which leaves the individual worker scarcely any leisure time, and a plummeting birth rate. Those who want a successful career in Japan marry late and have few or no children and practically no free time. To boost the economy, Shinzo Abes’ government recently supplemented Abenomics with Womenomics. Now, women should be increasingly integrated into the working age population. However, conversely this also means that more women than ever before suffer under Japanese corporate culture. The career women of Womenomics have, just like their male colleagues, not much money and little free time (it sounds trivial, but leisure time is the basic condition for getting to know potential partners and having children). These are undoubtedly not the best conditions to boost the birth rate.

The poor economic situation, low wages and long working hours complicate familyformation in Japan.

The aforementioned projections and developments are worrying. However, the demographic crisis is now already having considerable effects on politics, the economy and social factors. Japanese old-age pensioners are proven to vote for protectionist policies; they tend to vote for initiatives promoting their government’s pensions policy rather than voting for education or expanding children’s nurseries. Pension policies and the votes of the older electorate are essential and do not necessarily mean anything negative. Also, it is only to be expected that interest groups like Japanese old-age pensioners vote for policies that affect themselves. However, this behaviour becomes problematic when the balance of power between “young” and “old” in the population is so heavily skewed as it is in Japan. Another factor is that Japan’s seniors are heavily over-represented in elections. This dates back to the district boundary allocations after the Second World War when two-thirds of the population lived in rural regions. These districts and prefectures put forward a correspondingly high number of members of parliament. However, today only one fifth of the population still lives in the rural areas; the vast majority of the Japanese has long since lived in cities. However, the relationship between the representatives who are sent from a prefecture into parliament and the actual residents in the prefecture has not yet adjusted to the new realities of life in many parts of the country. Japan’s particularly “grey” and depopulated prefectures still send above-average numbers of representatives to the National Diet (Kokkai). The conservative and protectionist electoral behaviour of over-proportionately represented seniors at election time has an indirect influence on the decline of the birth rate, as raising children remains expensive in a state that always has to keep one eye on pensions policy and social benefits for elderly persons. Expenditure on social benefits including pensions, care of the elderly and healthcare is responsible for about 55 per cent of non-interest bearing overall government expenditure.

Poverty in old age has already become a major problem in Japan today. With a shrinking working age population, social welfare benefits also decline inevitably. Social welfare benefits for old people and pensions have already been cut in recent years. More Japanese pensioners than ever are drawing exceedingly small pensions; doctors’ fees and hospital treatments have to be paid for with up to 30 per cent own contributions. Japan’s old people are becoming poorer despite their political over-representation. Japanese old-age poverty meanwhile manifests itself regrettably in an increasing crime rate amongst the elderly. Although the general crime rate is falling in Japan, the number of criminal offences committed by seniors has increased sixfold since 2001: Japan’s old-age pensioners are responsible for 16 per cent of all police investigations. Cases of shop-lifting or pickpocketing are particularly common. The share of prison inmates over age 60 is relatively high at 12 per cent in comparison to on average only five per cent in other advanced industrial nations.

Rising numbers of criminal pensioners in Japan follow from high levels of povertyin old age.

The approach of government and business enterprise to tackling demographic change should be viewed from two sides. On the one hand, with the implementation of suitable measures the state hopes to increase the birth rate actively and to find new ways of a more holistical integration of specific population groups into the labour market. On the other hand, the ongoing advance of an ageing society has already become a reality that must be directly tackled both politically and economically. So, how are government and businesses reacting to this demographic challenge?

Silver Lining on the Horizon?

Japan’s government is acutely aware of the negative trends projected and has already adopted measures to counteract its demographic profile that has spun out of control.

In a fairly creative way, the Japanese government is experimenting with the role of Cupid in order to reverse the low birth rate trend on a regional level. For several years some municipal councils have been offering the services of a matchmaking agency to young residents who are eligible for marriage. For example, Ehime Prefecture on Shikoku Island is gathering large data sets – so-called big data – from residents who are looking for a suitable marriage partner. On the basis of these data entries the system searches for suitable partners in the region and meaning to improve the chances for a quick and successful introduction. Within one year, Yamanashi Prefecture was able to inspire 700 singles to take part in a similar programme – 100 more members than the government originally hoped for. 200 couples arranged a date, and of these, five couples even said ‘I do’.

In addition, the government endeavours not merely to rely on Japan’s mothers to raise their children in a campaign to reintegrate women into the job market as early as possible after having given birth. Currently, approximately 60 per cent of all Japanese women leave their job after childbirth and dedicate themselves exclusively to childcare and managing the household. Only a few return to their professional career. Pregnant women also increasingly give up their career as a result of workplace discrimination. In Japan, this phenomenon is known as matahara, an abbreviated form of the English phrase ‘maternity harassment’. A survey of pregnant women in part-time employment conducted by the Ministry of Health, Labour and Welfare revealed that almost half of the interviewees were exposed to discrimination from managers and work colleagues. The share was almost 22 per cent among those in full-time employment. Matahara manifests itself in the workplace particularly in verbal abuse, degradation and unfair treatment. Despite several ground-breaking court rulings, which deemed the discrimination of pregnant women unfair, it is questionable whether the mind-set of the Japanese patriarchal work collective can change without the appropriate professional development measures within an organisation.

Source: Statistics Bureau, Ministry of Internal Affairs and Communications, Population Census of Japan.
Source: Statistics Bureau, Ministry of Internal Affairs and Communications, Population Census of Japan.

By contrast, the percentage of men who take paternity leave is only 2.3 per cent countrywide. Ironically, according to the Organisation for Economic Cooperation and Development (OECD), Japan offers the most generous terms for fathers of all OECD countries. Theoretically, Japanese fathers could obtain paternity leave for up to 52 weeks whilst retaining almost 60 per cent of their salary, yet they fail to do so in practice. This discrepancy is due to a large extent to the social stigma associated with the traditional allocation of gender roles in what is socially a rather conservative country. Such prospects are a thorn in the side for Shinzo Abe whose Womenomics aim to increase the amount of women in the working age population in order to boost the stagnating economy. For this reason, the state provides subsidies for companies making it easier for fathers to take their entitled paternity leave.One the pioneers of the movement in politics, Kensuke Miyazaki, a young representative of the Liberal Democratic Party (LDP), was the first politician in Japanese history to claim his entitled paternity leave. However, only two months later, one week before the birth of his child, Miyazaki resigned from his position because of the revelation of an extra-marital affair. This scandal could further fuel Japanese society’s already widespread prejudices against employees who wish to take paternity leave.

To guarantee that both parents continue to work, the Abe government has attempted to increase the number and capacities of child daycare centres since 2013. Initially, hundreds of thousands of children were on the waiting lists of the overcrowded institutions. By 2018, 500,000 additional supervised places are now set to be offered. While the government is well on the way of achieving its allocated quota by building new children’s daycare centres, substantial challenges are already emerging. These are partly caused by outdated formalities and partly by imprudent deregulation. Almost 760,000 qualified nursery carers resigned in recent years because of low income was and due to unreasonable amounts of bureaucracy. This has been caused by the government’s subsidy system that only grants up to 80 per cent co-funding for licensed daycare centres whether they are public or private. Thus, there are only minimal prospects of success in this market for independent service providers that could offer personnel more flexibly and competitive employment conditions. Yet, if a provider does obtain a licence, all aspects of the centre’s operation from opening hours to salary levels will be strictly regulated. Many qualified nursery workers cannot concentrate on the job of supervision due to numerous administrative tasks. In addition, salary increases are usually promised on the basis of seniority and not, for example, performance. According to the Ministry of Health, Labour and Welfare for every job application from a qualified nursery worker there are five vacant positions for qualified nursery supervisors. Meanwhile, the growing pressure to increase the positions for nursery workers frequently leads to instances of fatalities caused by overwork of the childcarers and oversubscribed daycare centres. In 2015, throughout the country, 14 children lost their lives, mostly in unofficial institutions.

A breakthrough for the long-term integration of women into the labour market could certainly be the suspension of a tax break for married couples, which has applied since 1961, and is currently being championed by the LDP. The regulation determines that a married couple will receive tax relief worth 360,000 yen (about 3,000 euros), if a partner’s annual earnings are less than 1.03 million yen (about 9,000 euros). 15 million tax payers apply for this tax benefit every year. In most cases they are female spouses who only have a part-time job due to this tax incentive. A study carried out by the Ministry of Health in 2011, Labour and Welfare shows that more than a third of married women intentionally reduced their working hours to qualify for inclusion in this tax class. A revision of this tax break could make it possible for women to gain promotion or to return to work and therefore introduce additional workers to the market.

Silver Economy

A chronic shortage of workers is one of the numerous symptoms of an ageing society. While many companies grimly search for suitable young talent or hire workers from overseas, more and more Japanese companies rely on those who are 65 plus coming out of retirement. Pola, one of the biggest cosmetics companies in the world having its headquarters in Tokyo, sells its products in Japan with the support of 50,000 sales agents who work on commission. These agents known as beauty directors operate as independent small businesswomen who often spend years establishing a close network of clients and maintain this by arranging regular home visits. Almost 95 per cent of Pola’s total revenue in Japan, estimated at an equivalent of over 870 million euros, owes to such sales agents. Amazingly, an impressive 5,500 of these “beauty directors” are in their seventies, 2,500 in their eighties and 250 of them are even more than 90 years old. The cosmetics business, which has been employing women as sales representatives since 1937, does not recognise any retirement age. It is important for the company to build up a loyal and long-term client network that can only be established through long-standing relationships. The company’s most successful representative, who manages more than 90 shops, is 76 years old and has five grandchildren.

The manufacturing industry, once the driver of the Japanese economy, has also been increasingly employing older workers again. Almost a decade ago the bearing manufacturer, Isoda Metal, founded in 1905, decided to allow skilled workers to stay on past the age of 65. The workers are given one-year contracts and also usually take on training junior workers besides their main job. The director of the company, which supplies components, among others, for the Japanese Self Defence Force submarines, regards the retirement of qualified and experienced employees as a business risk and supports the role of the veterans as a model for workers at the start of their careers. Meanwhile, 25 per cent of all workers employed by the manufacturer are between 60 and 80 years. Furthermore, since 2001, another company in the metal industry only has been employing applicants over 60 because they are also willing to work on weekends and public holidays, thus ensuring the seamless maintenance of the manufacturing process.

Business with old age isbooming in Japan.

These examples demonstrate that people of retirement age can certainly be integrated into the Japanese labour market with great success. However, this is not the only area that is increasingly undergoing change; even products and services for sales markets must be relevant and reoriented to the ageing society. The silver economy promises numerous new business opportunities. For example, many of the ubiquitous mini-markets in Japan already display entire product ranges such as food and hygiene items aimed at seniors. The Japanese government sets great store by companies specialising in medical technologies in order to control the rapidly rising costs of healthcare in future. As one of the leading nations for robot technology, Japan’s researchers are now also developing and testing technologies such as exoskeletons and robots for rehabilitation and support with caring for old persons. Several research programmes are even financed by the Ministry of Economy, Trade and Industry (METI). A baby robotic seal called Paro developed by the researcher Takanori Shibata is said to have a therapeutic effect on old people suffering from depression, dementia and other illnesses. 3,500 of the robotic seals have already been sold in 30 countries. In Denmark, the robotic seal is even supposed to be in use in over 80 per cent of care homes run by local governments. However, the biggest challenge continues to be the costs of mass production and the future commercialisation of the robots. Hand sensors for a carer robot developed by the scientist Shigeki Sugano already cost an equivalent of almost 150,000 euros – the robot assists seniors to get out of bed and can serve them food and drinks.

The substantial costs prompt the question as to whether both financially and also on a human level it would not perhaps be more plausible to hire young workers from abroad. Care for the elderly is the sector with the most urgent need for personnel. The government certainly recognises the problem, however, foreign and mostly South East Asian carers generally find it unreasonably tough to meet the licencing conditions set by the government. In 2009, the first year foreign applicants were permitted to take the licencing test, not a single carer passed the entry exam. One year later only three of the 254 applicants successfully passed the annual test. The biggest hurdle here was the inexplicably difficult language test. After the test was simplified in 2011, 47 of 415 candidates obtained their carer’s licence. In comparison, in the United States recently over 5,700 foreign carers successfully obtained their accreditation. The example of the approval conditions for foreign carers is symbolic of Japanese politics: on the one hand, problems such as the shortage of workers are correctly identified, and on the other hand only half-hearted measures are adopted to tackle them.

Fundamental Paradigm Shift – a Must

Japan needs an economic upturn. It requires a prosperous economy to create positive economic prospects for young couples in future, and for their private lives, so they can start to have children again. However, this will be an ongoing project for the coming decades. Above all, Japan needs workers. These new working-age people must help to replenish tax takings to facilitate the necessary social benefits and pensions for the older population. In future, the country will be unable to avoid opening its borders to immigrants. Culturally and historically, Japan has always been extremely sceptical and resistant to a more open immigration policy. Even today, at the peak of globalisation, only about two million foreigners live and work in Japan. By comparison, a similar number of foreigners live in Switzerland, a country with extremely restrictive immigration laws and only about six per cent the size of Japan’s population. Japan’s government and society must rethink their reservations towards immigration. Fears about dissonant Western influences and the destabilisation of “homogeneous” Japanese society are outdated and have for some time been incompatible with modern attitudes and global labour market developments. The United Nation’s Population Division has calculated that between 2000 and 2050 Japan would need about 17 million immigrants to stop the depopulation trend. To reverse this trend, even, and therefore to counteract the increasing ageing population, Japan would have to become far more open still.

Only by completely reorientating itself, Japan can find a way out of crisis.

The legendary crane, the good omen for health and long life, has long since developed into a herald of the crisis. It no longer signals good fortune, but epitomises the demographic calamity – the wings of the crane flap incessantly. For the Japanese government it already seems too late to put a stop to the demographic change. It now has to practise crisis management and to attempt a damage limitation exercise. A root and branch rethink of society – not only with regard to immigration policy and gender equality – but also in terms of regenerating the economy are the only approaches that could save Japan from a completely overaged population and depopulation.


Akim Enomoto is Associate Researcher and Project Coordinator at the Konrad-Adenauer-Stiftung’s office in Tokyo, Japan.

Hannes Bublitz is Associate Researcher and Project Coordinator at the Konrad-Adenauer-Stiftung’s office in Tokyo, Japan.

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