business

Abe's Options for Halting Japan's Looming Demographic Crisis

  • Working-age population may shrink 40 percent in next 45 years
  • Premier has asked new minister to come up with bold proposals

Japan's Prime Minister Shinzo Abe.

Photographer: Kiyoshi Ota/Bloomberg

Prime Minister Shinzo Abe has ordered his new minister for demographic issues to come up with “bold proposals” for raising Japan’s birthrate. His aim: Stem a slide in the labor force to drive production and fund the retirement of the country’s elderly.

The working-age population in Asia’s second-biggest economy could shrink as much as 40 percent in the next 45 years, while the number of elderly balloons in a country with one of the world’s longest life expectancies. Abe last month made arresting the decline a priority, announcing a new economic plan that calls for stabilizing the population at 100 million in half a century from 127 million now.

Here are some measures Abe’s new minister Katsunobu Kato, a father-of-four, could introduce to slow the downward spiral.

Immigration

Less than 2 percent of the population are non-Japanese, compared with about 13 percent in the U.S. and Germany. Economists have called for increased immigration, and about half the respondents to an April poll in the Asahi newspaper agreed.

Abe last month rejected the idea of accepting more foreigners, saying he would first seek bolster the fertility rate, and entice women and the elderly into the workforce. Last year, he said foreigners were needed as housekeepers to allow more Japanese women to work outside the home, but details of a pilot program are yet to be decided.

Kindergartens

Abe has repeatedly pledged to reduce to zero the number of children waiting for daycare places from the current 23,167. But despite a rapid expansion of facilities, waiting lists swelled this year for the first time in half a decade after the government loosened restrictions on families qualified to use the service.

Elderly Care

Abe has promised to also cut to zero the number of people forced to give up work to care for aging relatives. About 260,000 people were being cared for at home while awaiting a space in a senior facility as of March last year; and with baby boomers -- those born between 1947 and 1949 -- set to hit 75 in under a decade, many of their children could be forced to drop paid work to care for them.

japan elderly
Elderly women sit by the side of a road on Gogo Island in Matsuyama, Ehime Prefecture. The working-age population in Asia’s second-biggest economy could shrink as much as 40 percent in the next 45 years, while the number of elderly balloons in a country with one of the world’s longest life expectancies.
Photographer: Yuriko Nakao/Bloomberg

While subsidies for the nation’s understaffed nursing homes were cut this year, Chief Cabinet Secretary Yoshihide Suga hinted this week that more money could be made available in an extra spending package.

Removing Tax Breaks

Spouses of employees don’t have to pay pension premiums and get tax breaks if they earn less than 1.3 million yen (about $10,800) a year.

The system has been blamed for compelling women to accept poorly paid, part-time positions or stay out of the work force completely. While Abe has called for the establishment of a more neutral tax system, opposition including from within his coalition partner Komeito means this is unlikely to be included in tax plans for the next financial year.

Equal Treatment

Japan’s lifetime employment system is still in place, but only for a shrinking share of the workforce as about 40 percent of the workforce are employed on an hourly or contract basis. Pay is low for these (mostly female) workers and they often don’t receive benefits such as paid maternity leave, making it harder to start a family.

Kathy Matsui, chief Japan equity strategist at Goldman Sachs Group Inc., last year said Japan’s economy could grow nearly 13 percent if the percentage of women in work equaled that of men. She called for more flexible working practices and equal treatment of full-time and part-time workers.

Decentralization

Women in Tokyo give birth to fewer children per head than those in any other part of Japan -- the capital’s average of 1.15 compares with about 1.6 in the southwest. Abe wants to bolster this figure to 1.8.

Former cabinet minister Keiji Furuya advocates policies to reverse the drift from rural areas to Tokyo, including tax breaks for corporations who move their headquarters out of the capital. Proponents of the plan say it would help counter some of the difficulties of raising children in Tokyo, such as cramped housing, long commutes and a lack of support from a extended family nearby.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE