TCS Daily

Greying Temples

By Trenton Truitt - July 21, 2006 12:00 AM

Much has been written about how best to prepare the US for the retirement of the baby-boomers. But the challenges of an aging population for a country's economy are perhaps even more pronounced in Japan, a nation whose 'greying population' and low birth rate are now at the top of the country's agenda.

Recent figures indicate that Japan's population contracted for the first time last year and the number of senior citizens now stands at over 20 percent of the population. This makes the percentage of seniors in Japan the highest of any country in the world. Also, unlike projections for the US, Japan's total population is expected to continue falling until the year 2020 (and likely beyond). At that point one in four Japanese citizens will be aged 65 or over.

These statistics are worrying for Japanese policymakers. After the burst of its 'Bubble Economy' and subsequent recession, Japan has only recently begun pulling itself up. Yet the forthcoming retirement (Japan's mandatory retirement age of 60 is one point being reconsidered) of so many workers along with the accompanying health care and pensions costs could cripple an already fragile economy if serious steps are not taken.

Yet the challenges don't end with greying. Japan also faces declining birth rates. It seems that women are now only having an average of 1.25 children each (far below the 2.25 children needed to keep the population growing), and Japan is currently the least fertile country in the world. In fact, its birth rate is only two thirds that of the United States'. As a result, by 2020, Japan's workforce is heading for the most severely depleted numbers of any industrialised nation, leading to a contracting tax base, labor shortages, and stress on public services.

The Japanese Government has therefore already begun to take the first steps towards addressing these challenges. Along with reconsidering the retirement age (Japanese do tend to live longer), other options include incentives for keeping older employees on the payroll, tax rises, as well as health care and pension reform. Japanese women have an average life expectancy of 85, and men 78 -- this could be turned to advantage by drawing on their life experience. Some Japanese companies have already been trying the policy of extending the working ages, arguing that by allowing employees to work past retirement they are retaining an invaluable resources and a wealth of knowledge and experience.

Hisakazu Kato, an assistant professor of demographic economics at Meiji University, suggests that Japan "think about the importance of training personnel again, for instance by retraining the elderly and improving education programs for the young."

Japanese companies must come to terms with the logic of encouraging workers to stay in their jobs longer if they are to avoid the tremendous losses being forecast. Kobe Steel has recently done just this. It is apparently offering one year contracts to select employees over 60 to maintain skill levels in the company. This example is a step in the right direction for Japanese employers which other companies can learn from.

But perhaps Japan could go one step further and look to the US's saving grace in this matter -- immigration. Historically opposed to opening its doors to foreigners, this is one thing Japan must at least consider if it is to cope with its loss of young workers. By easing its tough immigration and naturalization laws, Japan could drastically beef up its labor market, diminish its loss in tax revenues, and add much needed dynamism to the economy.

It is clear that while the country's aging population presents challenges, it also provides opportunities to overcome these, if only Japanese companies have the foresight to seize them, and recognise the potential in an experienced workforce. If Japan can rise to the challenge, and if its government is brave enough to consider radical changes such as immigration reform, it might find that the future could be brighter than many expect.

Trenton Truitt is a freelance writer living in Yokohama.


1 Comment

What fertile subgroups exist? That's the future
If you dig deeper into the data, the US has certain groups that are above 2.1 in fertility. That is the future of the US. The same is true for Europe. Overwhelmingly they seem to be religious believers who are serious about their faith. As secularists seem to not mind disappearing, their ideas will disappear as surely as the Shakers.

The fertile will inherit the earth. So who are the fertile japanese?

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