Aging in Japan: The magnitude of the challenge

Demographic changes are tsunami: it flows through all aspects of personal life, social structures, labour market and economy. For the last fifty years and as projected for the next decades for as long as one can make projections, Japan experiences an extended, severe wave of aging. This post looks at the magnitude of the challenge.

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Thirty years ago, I lived in Japan for three years. With the support of the Japan Foundation and the Japan Society for the Promotion of Science, I researched on population aging and its impact on company personnel management practices [1, 2]. Besides the Endaka (the rapid appreciation of the yen), population aging appeared as a key and growing challenge for Japan in the late 1980s. In 1980, with 9% of its population aged 65 years and over, Japan was the second youngest country (by this measure) of the then 24 OECD countries, behind Turkey. Then the projection was to see Japan become the third oldest by 2020 – quite a challenging proposition for a country in which many aspects of societal life rest on a pyramid-shaped demographic structure, including companies’ personnel management practices.

Visiting Japan again in Spring 2017, I wanted to review the situation. Well, aging actually accelerated dramatically: by 1990, with 12.1% of its population aged 65 years and over, Japan moved up to the 18th rank of the same 24 OECD countries; ten years later, in 2000, Japan, with 18%, was in 2nd rank and by 2004 – far ahead of 2020! – became the oldest country of the OECD, then counting 30 countries [3]. Since then, the gap with the immediate followers, Germany and Italy, did not cease to increase. Each successive projection has been showing an ever faster aging process.

A “medium scenario” projection suggests that the sharp aging process will continue to grow until the middle of the twenty-first century and remain very high thereafter. The chart below [4] provides a good view of the evolution of the composition of the Japanese population by broad age groups. In the two decades following 1990 and my return to Canada, the proportion of 65 year-olds and over increased by 5.3 percentage points between 1990 and 2000, and then added 5.7 percentage points by 2010, to reach 22.9%, highest proportion among OECD countries. In 2010, the Japanese population reached its highest figure: 128.6 millions. It has been declining since then.

Following the post-second world war baby boom, the effects of a policy-driven fast and drastic reduction in fertility after the beginning of the 1950s caused a rapid diminution in the population of less than 15-year-olds after 1980. By 1960, the fertility rate (the number of children born to each woman in her child-bearing years) was already at 2.0, by far the lowest among OECD countries [5]. After 1980, while the total population continued to grow, the below 15 population started to shrink substantially, dramatically eroding the base of the age pyramid. The decline in the youth population, both in numbers and share of the total population, is projected to continue in the coming decades.

While the youth population was shrinking, life expectancy has been fast growing, resulting in a considerable growth of the older age groups. Life expectancy at birth grew from 67.8 years in 1960, 2.1 years less than in the United States, to 83.9 years in 2015, highest among OECD countries and 5.1 years above life expectancy at birth in the United States [6]. This was achieved through huge gains in additional years of life beyond the age of 65: from 11.9 years in 1960 to 19.5 years in 2015 for men and from 14.1 years to 24.3 for women [7]. These indicators were all the fastest growing among OECD countries.

These are the two broad demographic patterns that together brought such a rapid and acute aging of the Japanese population. After 2010, the population of Japan started to decline. The working age population (aged 15 to 64 years) reached its peak around 1995. The labour force reached its highest number in 1998, then has been on a declining trend, despite an increasing participation rate – up from 72.6% in 1998 to 76.9 in 2016 [8].

As it stands with most recent figures of 2015, the Japanese population is 128 millions, 26% is aged 65 years or more – of which close to half is aged 75 years or more. According to current projections, just 20 years ahead, these figures will be 118.5 millions with almost a third aged 65 years or more – 60% of which will be 75 years old or more.

Japan is “the world leader in this demographic change” [9]. As such the phenomenon and its implications receive a lot of attention by analysts and policy circles. Few see this in positive terms: less money to be spent on the education of shrinking cohorts of young people going through school; as Japanese people are healthy, while there will be more elderly people to support, each one of them requires less care; fewer people means that Japan’s population has a smaller impact on their natural resources – less strain on food, water, energy, and land means a higher quality of life for all [10].

However, most commentators and policy analysts consider aging as a cause of wide-ranging challenges: aging threatens social security schemes, including pensions; aging questions labour market institutions and personnel management practices, many of which are based on age structure and seniority; aging affects the knowledge base for innovation and production, as fewer young people get into the workforce fresh out of universities; aging puts a strain on social cohesion, as family structure and composition change, affecting roles and responsibilities of various family members; and likely many other spheres of life and national economy are concerned.

Japan documents these challenges (just search on the web “aging in Japan”!) and faces them with an array of policy developments. But is anyone able to imagine policy development and societal adaptation needed to meet the challenge of a continuously moving target over such a long period of time – even if it moves in a single predictable direction?

References

[1] Patrice de Broucker (1988), Vieillissement et gestion du personnel au Japon, Revue Futuribles Nº 126, November.

[2] Patrice de Broucker (1992), Le vieillissement de la population : un défi à relever pour l’Etat et les entreprises, Revue française de gestion Nº 91, November-December.

[3] OECD (2017), Elderly population (indicator). doi: 10.1787/8d805ea1-en (Accessed on 07 December 2017).

[4] United Nations, Population Division, Department of Economic and Social Affairs, World Population Prospects: The 2017 Revision.

[5] OECD (2017), Fertility rates (indicator). doi: 10.1787/8272fb01-en (Accessed on 09 December 2017).

[6] OECD (2017), Life expectancy at birth (indicator). doi: 10.1787/27e0fc9d-en (Accessed on 08 December 2017).

[7] OECD (2017), Life expectancy at 65 (indicator). doi: 10.1787/0e9a3f00-en (Accessed on 08 December 2017).

[8] OECD (2017), Labour force participation rate (indicator). doi: 10.1787/8a801325-en (Accessed on 10 December 2017).

[9] Reiko Aoki (2013), A Demographic Perspective on Japan’s “Lost Decades”, Population and Development Review, Volume 38, Issue Supplement s1.

[10] Fred Pearce (2014), Japan’s ageing population could actually be good news, Insight, New Scientist.

 

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Non solum data – Data sine monito oculo nihil sunt.

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