Japan Population Decline and the Challenges of Decreasing Productivity

EAST 2325
Japan population decline and the challenges of decreasing productivity xxxxxxxx Student no. xxxxxx
Department of East Asian Studies
University of Leeds

EAST 2325 Assessment
In a special report on Japan, published on 20 November 2011, The Economist noted that Japan would be ‘a test case of how big countries across the world should handle ageing and population decline.’ What makes Japan so special in this regard, and what specific challenges face the Japanese government in formulating and implementing suitable policies to increase productivity in the face of population decline?

Abstract
Currently Japan is considered as the leading high technology and as having the highest population density in the world. However, Japan is now facing the biggest challenges of ageing population in the world. This issue might lead the country into economy crisis, and labour shortage in the future. Therefore, it is very important for the every country to examine and to find the best solution to address the ageing population. In fact, many other countries, such as Europe soon enough will be facing the same situation as in Japan.
Many countries are slowly observing how Japan is going to handle and overcome the current situation of ageing and population decline.
The purpose of this paper is to first examine why Japan is so special regarding ageing population. And secondly, to observe facing policy challenges in terms of increasing productivity. Finally, conclude all the important facts about Japan’s ageing population.
Why is Japan special?
Japan used to be one of the well known countries of "created a growth miracle" in terms of growing significantly numbers of the labour force and rising productivity after the Second World War. However, Japan is now facing the issues of low fertility and growing life expectancy, which has left the country with an ageing population.
According to The Economist, 18 Nov 2010, Japan currently has the fastest ageing population in the world compared to other countries and this has increased dramatically in recent history.
For instance, the median age is now 44.7 which is probably the oldest country in the world. Furthermore, scholars predict that in 2050, four out of ten of the Japanese population will be over the age of 65. On the other hand, Japan is also facing a deep debt to GDP ratio of 197.5%, in 2011.

Immigration
Due to Japan’s ageing population and low birth rate, a labour shortage is predictable in the near future. One solution to overcome this will be inviting more immigrant workers into the country.
The idea of immigration has made a great impact in successfully increasing the productivity and the improvement of the employment rates in the United States. For instance, Giovanni Peri. The Professor of Economics at the University of California, Davis claims the "immigration creates new sources of employment and does not affect natives." [Immigration improves employment, productivity and incomes in the U.S] [Online] [Accessed June 9, 2010] Therefore, it is a good reason that the Japanese should try to increase their immigration in order to prevent and overcome the labour shortage that the nation might face in the future. According to the Chief of Japan’s Economic Planning Agency. Taichi Sakaiya. “In the face of ageing society, Japan must accept foreign human resources. Not only skilled workers, but a wide range of workers.” [Population decline and ageing in Japan: The social consequences, Pg.115] However, wide range of worker may not be able to help to improve productivity, because poorly educated or low skilled immigrants seem to be unlikely to help to improve Japan’s productivity. On the other hand, Japan is one of the most homogenous countries in the world. For that reason, it is believed that Japan will have the difficulty in accepting foreigners to their country. According to the UN special Report 2005, racism and xenophobia are widespread in Japan. Japan needs to have higher skilled and professional immigrants to be able to help their countries, at the same time, the Japanese need to treat foreigners equally without any discrimination.

Female participation At the same time, Japan should focus on the female employment. This is because the Japan’s female employment rate has been an issue in their Labour market. Without doubt, Japan is one of the highly developed nations in the world, but it is still lacks flexibility when it comes to the women’s equality and rights in the work place.
According to the Worlds Economic Forum’s annual ranking of gender equality, Japan is ranked 91st out of 128 Countries, which is far behind compared to other OECD countries. Japan scores high at education and health but it scores low at the gender income gap, the lack of women in legislation, management, parliament and ministerial positions.
In 1986 an equal opportunity law was put in place to enforce equal treatment, promotion and employment of women. However for Japanese who are not so willing to conform to the international pressure, this encourages indirect discrimination. And therefore, while there has been some increase in the number of women in the workplace. Nothing much has changed in other respects.
All in all Japan ranked last out of all nations in a study performed by Grant Thornton International which investigated the gender gap between men and women in executive positions
As a result, female participation in the labour force requires fresh consideration and innovation. Therefore, the Japanese government needs to implement a better policy to support and to encourage more highly educated female workers to returns to work after childbirth and furthermore, to provide equal opportunity for women to be employed in management positions. Scholar believes this will help to increase employment, while also improving productivity in the country. However, this improved career opportunity doesn’t seem attractive to women. This is because the Japanese traditionally value women for their qualities as wives, in terms of taking care of housework and childcare. Meanwhile the men are responsible for obtaining income for the family.
Fiscal challenges Since ageing population and economy recession has occurred in Japan. The government started to receive less revenue of taxes due to the shrinking working population, at the same time, spending more money for the nation, relating to social security and pensions.
The Japanese GDP to debt ratio is the largest out of the G7 nations and has been rising far faster than any other G7 country since 1991. Yet, the current debt level of Japan is unsustainable. For this reason, Japan’s deficit will limit its fund to develop more advance technology and investing in the R&D. It is believed by the author of Tackling Japan’s fiscal challenges, 2006, pg.186 states “elixir to cure a country’s demographic woes is higher productivity growth driven by improved technology.” Unfortunately, the deeply debt situation in Japan is unlikely to have enough money to invest. For the purpose of reduce country’s debt and to have sufficient money for investing in productivity. The Japanese government needs to reform its policy, by cutting health care benefit, pension, at the same time, increasing taxes on the young age worker in the future.
To sum up, how Japan is going to cope with its fiscal challenges? It is still remain unclear. Economist expert argues that Japan might be taking the fiscal challenges seriously, yet, it is still needs more effort to solve this current situation. While it may be true about raising consumption tax and reducing benefits can help country’s debt, but actually is not simple as it can be imagine.
Conclusion
Japan is now currently confronted by the biggest challenges of ageing population. However it is believed that many other countries in Europe and North America are also facing this problem. Yet, Japan is still a special case compared to others, because Japan has the highest life expectancy rates than any other country in the world.
On top of this, Japan has its very own unique culture, which creates unique barriers that Japan have to overcome, in order to defeat the ageing population challenges. There is some suggestion for Japan to solve its ageing population problem, such as inviting more immigrants, encourage female participation into labour force and to increase taxes. Still, remain the difficult situation of the Japanese government to implement all these policy. Therefore, Japan’s ageing population is easy to identify the challenges, but is difficult to tackle them.
A news article on 19th November 2011, states that "unless Japan 's productivity rises faster than its workforce decline, which seems unlikely, its economy will shrink." [The Economist, Japan 's population, The old and the older, by The Economist ][Online] [Accessed Nov 19th 2010] This immediately shows, most of the people who concern about the ageing population in Japan is slightly pessimistic. On one hand, people are still hoping to see Japan overcome the challenges of ageing population, because Japan has been always show miracle of what they have been overcome different challenges over the last few centuries. Therefore, it is a very important topic for other nation which might facing the same situation to pay more attention and to examine Japan’s proceeding of ageing population, and hopefully Japan can be the first country to overcome the ageing population so that other country can learn the lesson of Japan’s ageing population.

Bibliography Population decline and ageing in Japan: The social consequences, Florian Coulmas, Routedge

BBC News, Japan racism ‘deep and profound’, by Chris Hogg, 11th July 2005 http://news.bbc.co.uk/1/hi/world/asia-pacific/4671687.stm The Economist, Japan 's population, The old and the older, by The Economist online
Nov 19th 2010, 11:46 http://www.economist.com/blogs/dailychart/2010/11/japans_population Immigration improves employment, productivity and incomes in the U.S, by ESTELLET, Published June 9, 2010 http://www.unaoc.org/ibis/2010/06/09/immigration-improves-employment-productivity-and-incomes-in-the-u-s/ Tackling Japan’s fiscal challenges: Strategies to cope with high public debt and population aging, Editor Keimei Kaizuka, Anne O. Krueger, Published Palgrave Macmillan 4 July 2006

Bibliography: Population decline and ageing in Japan: The social consequences, Florian Coulmas, Routedge BBC News, Japan racism ‘deep and profound’, by Chris Hogg, 11th July 2005 http://news.bbc.co.uk/1/hi/world/asia-pacific/4671687.stm The Economist, Japan 's population, The old and the older, by The Economist online Nov 19th 2010, 11:46 http://www.economist.com/blogs/dailychart/2010/11/japans_population Immigration improves employment, productivity and incomes in the U.S, by ESTELLET, Published June 9, 2010 http://www.unaoc.org/ibis/2010/06/09/immigration-improves-employment-productivity-and-incomes-in-the-u-s/ Tackling Japan’s fiscal challenges: Strategies to cope with high public debt and population aging, Editor Keimei Kaizuka, Anne O. Krueger, Published Palgrave Macmillan 4 July 2006