Comm J Market Notes
#50, March 2007
Japan’s Shrinking Population
Japan’s population shrank to 127.76 million last year, and is projected to sink below 90 million by 2050 . The reason is simple – the birthrate of 1.29 per woman’s lifetime is far below replacement level.
With the longest life expectancy in the world, one would expect Japan’s population to increase. But the low birthrate more than offsets it, and Japan doesn’t have much stomach for immigration. It’s mathematics. If you check how many people there are in each age group, the conclusion is that even if the birthrate jumps to 1.8, and even if immigration jumps from the current 1-2% of population to Germany’s level of 7%, the population will still fall under 100 million in 2050.
Tokyo University Economics professor Akihiko Masutani published an interesting book called “Shrinking Population Economics: Lessons from Japan”. His thesis goes like this: “Japan’s government is stuck in post-war boom thinking, that the economy must grow via increases in mass-production capacity. This policy will be disastrous in a shrinking population phase, leading to over-investment and ballooning public debt. However, if we re-align policy to emphasize consumption (e.g. by the aged), demand-driven economics, niche markets, and corporate profits rather than sales, the citizens can live well in a time of shrinking population and flat GNP.
Footnote – after a record low 1.26 birthrate in 2005, the 2006 rate increased to 1.295. Maybe it’s turning the corner – but for now, I’m not buying real estate here.