How the Aging Population in Japan Is Hurting Their Recovery

Written by Daniel Lara-Agudelo, GEI Associate

Japan is one of the world’s most aged nations, and its population continues to grow older at a rate that is faster than any other developed country. The latest statistics that have been circulating are shocking – more than half of the population is older than 45, and current estimates predict that by 2050 the median age will be 53 (Hayashi).

The main issue is that the Japanese are not having enough children to offset the large number of elderly citizens that live within the country’s borders. In 2014, there were only 1,003,532 babies born nationwide, this is 2.5% less than in the previous year and half the number that were born in the early 1970’s (Hongo) when the population was 12-13% smaller. Deaths, on the other hand, numbered 1,273,020 that same year; constituting a .3% increase from the previous year and the highest death rate that Japan has seen since World War II (Hongo).

Some recent demographical changes have contributed significantly to the aging population in Japan. The number of marriages that occur each year has plummeted, and those who do manage to “tie the knot” are usually doing it much later than in other countries. As a result, the average age of conception has increased and is now in the early thirties for both men and women (Hongo). This limits the amount of children that a couple will have in their life time; as of now the fertility rate is at 1.42, a .01% decrease since last year (Hongo). Fortunately for the Japanese though, this statistic has been on the rise since it hit an all-time low of 1.26 in 2005 (Hongo). It is these changes, and a few others, that have made the country home to such a large number of elderly citizens. If these trends continue there is no telling how much worse the situation will become.

To some, an aging population may not seem like a problem but, in reality, it can be devastating for a nation’s economy. Researchers theorize that Japan’s inverted age pyramid explains why its economy has failed to respond to recent stimulus measures aimed at helping the country during its recovery period. Jonathan Buss, an economist at Oxford said the following concerning the topic: “monetary stimulus is considerably less effective in economies with aging societies and populations” (Menton).

There are various reasons why this is so, one of the main ones has to do with consumption patterns. An increase or decrease in interest rates has a negligible effect on how much older people spend. They are not incentivized to increase their savings when rates are high, and they are not likely to spend very much more of their money when they are low. This essentially invalidates monetary policy. Another one of the main reasons why economic stimuli are ineffective in countries where the average citizen tends to be older has to do with the fact that the elderly, more often than not, are creditors rather than debtors. Because of this, the credit channel of monetary policy becomes a nearly useless tool for the government. Essentially, all of this means that Japan has to look for other ways to reenergize the economy besides using fiscal or monetary action.

They must either find some new policy formula or they have to change the demographics of the country in order to create a situation that is more conducive to economic growth. According to Dr. Osotimehin, the executive director of the U.N. Population Fund, demographics have the potential to change in about 20 to 30 years (Hayashi). He recently stated that

If you want to change that demographic, what you need to do is what the prime minister (Shinzo Abe) is talking about. Engage women and give them better visibility. Make sure that men participate in child rearing so they can take paternity leave. Make sure that women have the better career prospects so they don’t get married and then disappear from the statistics. Create an environment where women can get married, have a child or children, and are still guaranteed careers… If you do those things, you’d change the demographic. (Hayashi)

This means that while Japan’s population is aging rapidly at the moment, if the right steps are taken, the trend can be stopped. Hopefully, the government and the citizenry can start implementing some of the above suggestions soon so that the country will be able to recover more quickly from the recession from which they recently escaped.

Works Cited

Hayashi, Yuka. “Q&A: Japan’s Aging Should Be Viewed as Achievement, Not Negatively.” The Wall Street Journal. N.p., 18 Mar. 2015. Web. 08 July 2015.

Hongo, ByJun. “Japan’s Births Hit Record Low and Other Population Stats.” The Wall Street Journal. N.p., 9 June 2015. Web. 08 July 2015.

Menton, Jessica. “Japan Recession 2014: How A Graying Population Impacts Asian Economies.” International Business Times. N.p., 18 Nov. 2014. Web. 08 July 2015.