“If foreign nationals come to Japan as estimated … the ratio of foreign nationals in the total population will rise from 1 in 45 in 2020 to 1 in 16 in 2045 and 1 in 9 in 2070.” Komine Takao, Visiting Professor at Taisho University, examines the latest “Population Projections for Japan.”
The National Institute of Population and Social Security Research (IPSS) released their new “Population Projections for Japan” in late April. This population projection is produced once every five years and acts as the standard outlook of the future of Japan’s population. As the previous projections were released in 2017, the new projections should’ve been released in 2022, but the period for study was extended due to the major effects of the COVID-19 pandemic on marriage and birth in Japan.
Everyone wants to know how the future will turn out in terms of the economy, industry, and stock prices. The future is ordinarily an unknown; however, we can see a pretty accurate picture of the future of populations. This is because we know exactly how many people of what age reside in Japan currently, and we also know the average life expectancy of each age group. What we don’t know is at what pace children will be born in the future (fertility assumptions) and what the inflow and outflow of foreign nationals will be. Because of this, we can make pretty accurate estimations for population projections by establishing some assumptions for these two unknowns.
Of these two assumptions, we will look at the inflow and outflow of foreign nationals later. For the birthrate, new estimates have adjusted the previous estimate of 1.44 for total fertility rate (the average number of children women give birth to over their lifetime, hereinafter simply “birthrate”) down to 1.36. If we consider that the birthrate in Japan dropped to 1.26 in 2022, it is no surprise then that the estimates for birthrate have dropped.
Japan is a highly advanced nation in terms of population change. After the Second World War, the birthrate rapidly declined. When birthrate falls, the ratio of senior citizens overall rises correspondingly, leading to an aging population. Next, the productive population (group working to support society, aged 15–64) falls, and the labor force population shrinks. Finally, the overall population decreases. This is the process that follows. Many countries in Asia have begun to show a decline in birthrate behind Japan. Once birthrate falls, by necessity, these countries will follow the same process as Japan, with the ratio of senior citizens rising, the labor force population shrinking, and an overall decrease in the population. For many countries in Asia, the future of Japan is also the future of their countries.
These new estimates cover the period through 2070. Let’s take a comprehensive look at how the population structure in Japan will change in the future by comparing 2020 and 2070 as benchmark years (see chart).
First, the population will decrease further. The total population including resident foreign nationals will decrease by more than 30%, from 126,150,000 in 2020 to 87,000,000. The Japanese government has set a goal of stopping population decrease at one hundred million, but with these estimates, the population will drop below that mark in 2056.
Second, the number of children will decrease further. The population of children under 14 will decrease from 15,030,000 to 11,030,000. This is to be expected as estimates for birthrate were lowered.
Third, the productive population of people 15 to 64 will decrease further. This population will decrease by about 40%, from 75,090,000 to 45,350,000. This group will make up a smaller percentage of the total population, dropping from 59.5% to 52.1%. When the ratio of the productive population in a population decreases, this is known as a “population onus.” With a decreasing birthrate, there is a temporary increase in the productive population ratio, which is experienced as a period of “population bonus,” but once that has passed, society enters into a population onus. Japan had a period of population bonus from 1955 to 1975, but since the 1990s, Japan has been in a period of population onus. Under a population onus, economic growth is constrained due to labor shortages leading to fewer workers bearing the costs of social security, which in turn more easily allows for adverse impacts on the economy and society, such as instability in the foundation of the social security system.
Fourth, the aging population will increase. The ratio of senior citizens (65 and older) will increase from 28.6% to 38.7%. However, while the senior citizen population will increase to 36,190,000 by 2043, it will then fall to 33,670,000 by 2070.
Up until now, these have all been extremely common sense results as existing population trends will continue further. But compared to the previous estimates from 2017, something a bit strange has occurred in the new estimates. Let’s use the previously mentioned graph to compare the old and new estimates for the population in 2045. First, the young population in 2045 is lower in the new estimates (11,030,000) than in the old (11,380,000). This is to be expected as estimates for birthrate were lowered. However, the ratio of the productive population is greater (58,320,000 or 53.6%) in the new estimates as compared to the old (55,840,000 or 52.5%). This seems odd at first glance.
This is because the new estimates feature an estimated wide-scale increase in the influx of foreign nationals compared to the previous estimates (see graph). The previous estimates assumed a surplus in the influx of foreign nationals of 70,000 per year on average, but in the new estimates, this is 160,000 per year. Most of these foreign nationals coming to Japan would be in their 20s or 30s. This is why the productive population increases in the new estimates, despite a decline in the birthrate. This would also greatly reduce labor shortages.
The Japanese social security system recalculates finances once every five years as a general rule, and they re-examine benefits and insurance premiums if needed. The next year for these financial inspections is 2024, and as the productive population has seen an increase in these population projections compared to the previous estimates, it is likely that there will not be any major impacts on social security finances.
In other words, the continuation of a surplus in the influx of foreign nationals and an increase in workers will delay the progression of a population onus and will help to prevent adverse effects on the Japanese economy and society through changes in the population structure.
However, there are some questions regarding the influx of foreign nationals as saviors. First, will this many foreign workers continue to come to Japan? It has been explained that the annual influx surplus of 160,000 people in the new estimates is based on the average from 2016 to 2019. However, as can be seen from the graph, the period between 2016 and 2018 was a period of extremely high influx of foreign nationals before the effects of the COVID-19 pandemic appeared. Will this level of surplus continue for the next 50 years? There has been a particular trend towards relying on foreign workers as cheap labor in Japan in the past. As the income standard in other Asian countries increases, it is possible that there will be competition for labor between Asian countries. When I consider the long term, I think that there may instead be an increase in the number of Japanese people going abroad to work.
If foreign nationals come to Japan as estimated, then the number of foreign residents in Japan as stock will greatly increase. As a result, the ratio of foreign nationals in the total population will rise from 1 in 45 in 2020 to 1 in 16 in 2045 and 1 in 9 in 2070. The ratio of foreign nationals in the productive population will rise from 1 in 32 in 2020 to 1 in 11 in 2045 and 1 in 7 in 2070. Have Japanese workplaces, the economy, and society itself made preparations to incorporate this many foreign nationals? There are also many unknowns regarding the extent to which these foreign workers in Japan will support the Japanese social security system.
When considering the new population projection in this way, one could say that it is not limited simply to an outlook on population but also raises major questions about how the Japanese economy and society will respond to the influx of foreign nationals.
Komine Takao, Visiting Professor, Taisho University
