Japan’s Slow Suicide The sharp, protracted fertility decline means a smaller population, and a country composed mostly of old people

WASHINGTON – Japan is slowly sinking. This is due to the impact of many self-inflicted wounds, starting with the collapse of fertility rates. “Civilizations die from suicide, not by murder.”, wrote revered British historian Arnold Toynbee. Considering that not enough babies eventually means the death of a society, his words truly apply to Japan. Indeed, as baffling as this may sound, it is true that civilizations implode for non material causes. Their demise is not due to wars or natural catastrophes. It is about lack of confidence in the future that brings about loss of vigor and optimism.

From greatness to decline

And this is today’s Japan. And what is most remarkable is how fast Japan changed from its role of unchallenged Asian Superstar to yet another “has-been” case. Think about it. Throughout the 1980s Japan was the shining example that demonstrated to the entire world the triumph of “Asian Values”. At that time it was thought that Japan had the skills, the drive and the determination that would have allowed it to surpass America as the leading global economic power.

Not enough babies

But now Japan is one of the best examples of a civilization’s “slow motion suicide”. High debt, massive public spending and slow growth point to a bleak future. While there are many factors contributing to this picture, the most visible is the incredible collapse of fertility rates, (average of 1.39 children per woman) . Very few children and extended life expectancy for older Japanese mean a net population decline (minus 244,000 in 2013), and a society that will soon resemble a giant geriatric ward. And this is not a temporary phenomenon. This decline has ben going on since the 1970s.

Population decline

Indeed, a study by the Japanese Ministry of Health and Welfare indicates that, if the country keeps its present  demographic trends, by 2060 Japan’s total population will go from 127 million down to 87 million, of which 40% will be 65 or older. This is a real catastrophe.

Very few workers, many pensioners

Imagine the implications of this shrinkage. Japan will have a substantially reduced work force, and this is bad news for future economic expansion. At the same time, there will be a need to increase public spending for more and longer lasting old age pensions. Likewise, many more senior citizens mean higher health care and nursing home costs due to the needs of millions of old people who cannot rely on a social safety net provided by large extended families. The sad truth is that millions of elderly Japanese live alone.

Larger welfare programs, more debt

In all this, please remember that Japan already has –today– a monstrous public debt, now 240% of GDP.  A reduced working population will translate in reduced tax revenue, while the state will have to keep or even enlarge all its welfare programs in order to provide for tens of millions of older Japanese. This means even more spending and therefore more debt. And it also means that most of Japan’s financial resources will be devoted to support the elderly. Where will the money for R&D and therefore new economic growth come from?

The government led by Prime Minister Shinzo Abe is aware of all this and it is trying to think about ways to reverse this rapid population decline. But I suspect that there is no public policy “silver bullet”. Of course, a simple solution would be to encourage immigration, on a massive scale. But this is almost unthinkable in a society that does not welcome foreigners. And Japan would need millions of newcomers to stabilize its population.

The role of women

Many think that the key issue is about changing the role of women in Japan. Some believe that if more Japanese women worked, then they would have more babies. However, others argue exactly the opposite. If more young and productive Japanese women could work, then they would postpone marriage and motherhood.

Reinvent Japan?

Ideally Japan would need to reinvent itself. Right now it is a society suffocated by strict social norms, economic rigidities and high taxes. The country would need a real breath of fresh air. Lower taxes and substantial deregulation, plus incentives for genuine economic competition would create a new pro-growth environment for would-be entrepreneurs. If this were possible, who knows, may be more people would marry and have more children.

Shinzo Abe is trying to revive Japan’s dormant economy with  turbo-charged Keynesian policies. Higher spending, cheap money and an artificially depressed currency should boost consumption and exports. Sure enough exports are growing, and the stock market is booming. But the overall economy is doing at best so-so, while the national debt is growing, and the population continues to decline.

This is Japan’s slow suicide.



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