Addressing demographic headwinds in Japan: A long-term perspective
Japan faces serious demographic headwinds. Under current fertility, employment and
immigration rates, the population would fall by 45% by 2100 and employment by 52%.
Given the challenges of a shrinking and ageing population, the government has pledged
to “create a children-first economic society and reverse the birth rate decline”.
One priority is to strengthen the weak financial position of youth, which leads many
to delay or forgo marriage and children. Making it easier to combine paid work and
family is also critical so that women are not forced to choose between a career and
children. Policies should also cut the cost of raising children, the key obstacle
to couples achieving their desired number of children. Given the challenge of reversing
fertility trends, Japan needs to prepare for a low-fertility future by raising productivity
and employment, particularly among women and older people. Breaking down labour market
dualism, which disproportionately affects youth, women and older people, is a priority.
Abolishing the right of firms to set a mandatory retirement age (usually at 60) and
raising the pension eligibility age would also promote employment. Foreign workers
are helping ease labour shortages, but more needs to be done to attract foreign talent.
A comprehensive approach is needed to raise fertility, the employment rates of women
and older persons and inflows of foreign workers.
Published on April 24, 2024
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