Japan's Population to Begin Decreasing Sooner

The National Institute of Population and Social Security Research of the Ministry of Health, Labor and Welfare announced that Japan's population will begin decreasing much sooner and more sharply than calculated in previous estimates. Past estimates assumed that the number of children an average woman would have in her lifetime would stabilize at around 1.6, but the new estimate shows this figure to be around 1.4. Because fewer children are being born, Japan's total population will peak 127,741,000 persons in 2006, a year earlier than predicted in past estimates.

A smaller population automatically means a smaller working population. Decreases in the number of young people, in particular, lead directly to increased burdens on the pension and medical care systems. The new estimate suggests that contribution rates for the national pension system, planned to be raised from 17.35% of monthly wages (borne 50-50 by employers and employees) to 19.85% in FY2004, must be raised even further. Calculations also suggest that the 27.8% contribution rate figure now estimated for FY2025, when the next revision will take place, must be raised to over 30%.

Despite all previous estimates suggesting that the Japanese population was aging much faster than any other country in the world, there has been no grand design proposed for building a social and economic system capable of coping with this change. The steps that have been taken so far have been uncoordinated and retrogressive. Japan needs to implement flexible, far-reaching, and targeted reform while the economy is still capable of withstanding radical change.