Pacific Money

Japan Won’t Depopulate Quietly Into The Night

Recent Features

Pacific Money

Japan Won’t Depopulate Quietly Into The Night

The Japanese government is trying to increase the nation’s labor force.

Japan Won’t Depopulate Quietly Into The Night
Credit: Shibuya, Tokyo via Korkusung /

Shrinking Japan? After watching the number of children decline for 35 straight years while the elderly population keeps rising, Tokyo is belatedly starting to tackle some cultural taboos in hope of defusing the nation’s demographic time bomb.

On Wednesday, the same day official data showed the world’s third-biggest economy avoided another recession, Japanese Prime Minister Shinzo Abe took a step toward securing the nation’s longer-term economic future by unveiling a plan aimed at increasing the labor force by more than 1.1 million by fiscal 2020.

Under the plan, minimum wages would rise by 3 percent a year to a national average of 1,000 yen ($9.12) per hour, while the government would seek to boost pay for part-time workers and make legal changes to ensure equal pay for equal work. Childcare and aged care places would also be boosted under the plan to “promote dynamic engagement of all citizens,” with a goal of retaining more elderly and female workers.

The official retirement age is being raised to 65 by 2025 compared to 62 this year, helping sustain the working lives of the nation’s nearly 7 million baby boomers. Closing the gender gap could add another 7 million workers and increase gross domestic product by nearly 13 percent, according to Goldman Sachs.

The government’s latest moves are part of a plan aimed at maintaining the nation’s population above 100 million, ensuring the nation retains its heavyweight economic status amid the rapid emergence of regional rivals such as China.

As noted previously by The Diplomat, Japan’s population is forecast to shrink from a peak of 128 million in 2010 to 100 million by 2050, with demographic change having already knocked more than half a percentage point a year off the annual economic growth rate from 1999 to 2011.

Government data has revealed another 150,000 decline in the population over the past year, with those aged 65 or older now accounting for 27 percent compared to barely 13 percent for those aged 14 years or younger. The number of such children fell to a record low of around 16 million as of April 1, nearly half its a peak of nearly 30 million in 1954.

The large proportion of elderly compares to immigration-friendly nations such as Canada and the United States, where the percentage of those aged 65 or older was around 15 percent in 2013, although in Germany and Italy the figure was approximately 21 percent.

“The government’s figure is challenging but it’s not impossible,” JPMorgan Chase & Co. economist Masamichi Adachi told Bloomberg News. “Baby-boomers are extremely healthy compared with people their age 10 or 20 years ago, and they can physically stay in the workforce longer. It’s also becoming more natural for women to stay in work.”

‘Womenomics’ has helped the female participation rate rise to around 50 percent compared to 47 percent in 2013, although changing cultural and corporate attitudes has proved more challenging.

Tokyo’s goal of filling 30 percent of senior positions in the public and private sectors with women by 2020 has already been cut to just 7 percent for government jobs and 15 percent at companies. Despite the opening of more than 400 new nurseries in fiscal 2014, a reported 72,000 children remain on waiting lists for childcare.

Japan’s male labor force participation rate stands at 84 percent compared to 63 percent for women, yet female workers dominate the lower-paid, part-time jobs that now account for a record 30 percent of the labor force, up from 13 percent in 1990.

However, part-time wages rose faster than those for full-time workers in 2015, indicating that Japan’s tight labor market is finally boosting workers’ bargaining power. In March, Japan’s unemployment rate fell to just 3.2 percent, with the jobs to applicants ratio of 1.3 at its highest level since 1991.

Immigration By Stealth?

While the nation’s elderly and female labor force slowly expands, Tokyo is quietly opening the doors slightly wider to foreign labor.

Although cautious of labeling it an “immigration policy,” lawmakers in Abe’s Liberal Democratic Party (LDP) have flagged doubling the number of foreign workers from the current level of around 1 million, which represents just 1.4 percent of the workforce compared to the 5 percent plus average of other advanced economies.

Helped by rebuilding following the devastating 2011 disasters and a construction boom ahead of the 2020 Tokyo Olympics, the number of foreign workers has increased by around 40 percent since 2013. Chinese account for more than a third, followed by Vietnamese, Filipinos and Brazilians.

While previous measures have proposed easing entry for skilled professionals and expanding a heavily criticized trainee system, an LDP panel has proposed easing entry into sectors facing shortages, such as nursing and farming, initially for five-year periods.

The unofficial policy has reportedly been dubbed “imin-omics,” despite reluctance to tackle the nation’s “allergy” to mass immigration. In 2014, Japan received a record 5,000 refugee applications but accepted just 11, with the government instead pointing to its generous foreign aid spending, including being the second-largest donor to the U.N. refugee agency.

“I would say that before accepting immigrants or refugees, we need to have more activities by women, elderly people and we must raise our birth rate. There are many things that we should do before accepting immigrants,” Abe said in September 2015.

Yet while one lawmaker said allowing more foreign workers would “leave Japan in tatters,” others have called for change.

“Unless we become serious about letting in foreign workers, Japan’s growth will only lose steam — and it will happen fast. Now is the last chance,” LDP upper house lawmaker Yoshio Kimura told the Japan Times.

Chief Cabinet Secretary Yoshihide Suga suggested the future debate would consider the longer-term issue of permanent residence for less skilled foreign workers, but caution was needed.

While the politicians argue, Japan’s corporate sector is rapidly increasing its intake of foreign hires. From convenience store operator Lawson to manufacturers such as Fujitsu and Hitachi, foreign nationals comprise around 10 percent or more of new graduates.

A Reuters survey conducted last year showed 76 percent of Japanese firms were in favor of bringing in more low-skilled foreign labor, partly to help address acute shortages in sectors such as construction.

“If we don’t legally approve foreign workers to some degree, then the number of illegal workers will only increase and there’ll be a deterioration in public order,” a chemicals company manager warned.

Japan’s previous moves to accept foreign workers, such as nurses from the Philippines, have had limited success. While some 973 Filipinos have taken Japan’s national exams for nurses over the past seven years, only 77 passed, reflecting high regulatory barriers.

In contrast, nations such as Thailand have seen the number of foreign residents surge sevenfold from 1990 to 2015, reaching nearly 4 million last year, while Hong Kong and Singapore have continued to actively recruit foreign labor.

Calling for changes to a culture of long working hours, increased access to childcare and greater skills training for aged workers among other measures, the OECD has urged Tokyo to make revitalizing its labor force its “number one priority.

“Japan’s demographic challenge is daunting but not insurmountable,” OECD Secretary General Angel Gurría said. “Aging societies do bring costs, but having workers and consumers living longer is of course a good thing in itself, and can also be an economic asset. Japan’s experience will be closely watched by other countries facing similar transitions in the future.”

The message for Abe’s government: Change might be tough, but it is better late than never. For a nation that rebuilt itself from the ashes of war, the modern challenge of repopulation should surely not prove impossible.