Japan has 512,000 fewer people this year than last, according to an estimate released on by the country's welfare ministry, providing the latest sign of Japan's increasing demographic challenges.

Births in the country — which are expected to drop below 900,000 this year — are at their lowest figure since 1874, when the population was about 70 per cent smaller than its current 124 million.

The total number of deaths, on the other hand, is increasing. This year, the figure is expected to reach almost 1.4 million, the highest level since the end of World War II, a rise driven by the country's increasingly elderly population.

Japan's birthrate has fallen to 1874 levels. Credit:E+

That gap between births and deaths has put Japan in a demographic squeeze. As the number of births go down, there are fewer young people entering its workforce. That means fewer people to replace retiring workers and support them as they age, a situation that poses a serious threat to Japan's economic vitality and the security of its social safety net.