
Since Prime Minister Shinzo Abe returned to power and “Abenomics” began demonstrating some success in lifting Japan out of its two-decade-long economic slump, expectations of a resurgent Japan have been met with both fear and praise (depending on who you ask). However positive the macroeconomic outlook for the Japanese economy and however successful Abe might be at normalizing Japan’s military stance, Japan isn’t back — its falling birthrate and shrinking population will significantly damage its international competitiveness. Japan’s population fell by a record 244,000 last year, further evidencing that this trend is accelerating. Is it all doom and gloom for Japan from here on out or is there a possible way out?

The arithmetic of population growth is simple — more citizens need to be added to the population pool than are being lost every year. Natural births and natural deaths account for only part of this equation; the other half is captured by immigration and emigration. In Japan’s case, population dynamics so far have been affected primarily by a decline in births. Given high life expectancies and a generational population boom in the decades following the Second World War, Japan’s population pyramid is top-heavy, with over 20 percent of the population 65 or older. Furthermore, Japan’s current fertility rate, according to the World Bank, sits at 1.39 births per woman — one of the lowest in the world.

One Japanese government estimate finds that should current trends continue, Japan’s population will have shrunk to a paltry 87 million from its current size of 127 million by 2060. Of those 87 million Japanese, as high as 40 percent of the population could be 65 or older. Not only is that a recipe for a social security disaster, but it would also rob Japan of any capacity to remain competitive on the world stage.

Reports emerging from Japan in the first few months of 2014 allege that the Abe government is eyeing adjusting Japan’s restrictive immigration policies to help alleviate the looming demographic crisis. According to a government simulation, one possible solution for Japan at the moment is to begin accepting 200,000 immigrants per year starting in 2015 and raising the fertility rate to 2.07 births per woman. If both of these criteria are met, Japan’s 2060 scenario looks less grim, with a projected population of slightly over 100 million.

Reaching the immigration target will almost surely be easier than lifting the nation’s low birthrate. With the 2020 Tokyo Olympics and the Trans-Pacific Partnership looming, Japan has plenty of reasons to liberalize its immigration policies. Allowing highly skilled foreign workers to settle in Japan will also bring new talent into the country, raising its competitiveness across a variety of industries. The 2.07 birth rate target is a far more challenging benchmark for the Japanese government. As The Economist notes, “a change on that scale would require major surgery to the country’s entire social architecture.” In an alternative approach, Japan could leave its birth rate as is but would then need to admit 650,000 immigrants per year starting in 2015 as opposed to 200,000.

Enjoying this article? Click here to subscribe for full access. Just $5 a month.

One policy approach could be to address Japan’s workplace gender inequality, which discourages women from pursuing both a career and a family. The World Economic Forum’s Global Gender Gap Report ranked Japan 105 out of 136 countries based on a series of gender equality indicators. Other problems for Japan include recent trends among its youth that have come to regard sex as superfluous and unnecessary. One report from last year found that 45 percent of Japanese women aged 16-24 are “not interested in … sexual contact,” as are 25 percent of Japanese men. The Japanese government, beginning in the 2000s, has attempted to address the fertility issue more seriously. Public funding is available for in vitro fertilization and other fertility treatment. Still, raising the fertility rate is one of the most challenging policy endeavors possible — for any country.

The immigration solution to demographic problems presents a novel scenario for Japan, which has traditionally been ethnically homogenous despite its high level of integration with the global economy. According to the Japanese government, the number of foreign residents in Japan is slowly but surely rising. Should the government’s plan to add an additional 200,000 immigrants per year succeed, Japanese society will begin to look very different within a decade, raising possible national identity issues. Currently, less than 2 percent of Japan’s population is non-ethnically Japanese. Should immigrants comprise a greater percentage of the whole, the idea of Japan will have to change, incorporating its new residents into the fold. That change won’t be easy, but it might be necessary to avert the alternative scenario: a country that shrinks its way into ruin.