Sunday, July 19, 2009

Why Japan Isn't Rising

Due to the importance of the issues raised, and the similarities of the viewpoints expressed with those of this blog, we are happy to take the exceptional step of publishing this article from Daniel Gross. The article originally appeared in Slate on 18 July 2009, and a modified version also appeared in last week's issue of Newsweek.

Why Japan Isn't Rising - It's mellowing as its population ages.

by Daniel Gross

To this gaijin, Japan looks prosperous, clean, highly functioning. At Takashimaya, the high-end department store atop the central train station in Nagoya, shoppers line up in orderly queues before the 10 a.m. opening. But Japan seems to be in the midst of an existential crisis—in the first quarter it shrank at an abysmal 15.2 percent annual rate. In 10 days traveling through the country, I couldn't find anyone who thought the malaise would end soon.

Japan's rise literally from rubble into an industrial powerhouse is one of the great economic stories of the 20th century. But a slow response to the bursting real-estate and stock bubbles of the 1980s consigned the country to a decade of economic slumber from which it has yet to fully awake. The first great wave of globalization was kind to Japan. But the second wave, dominated by China, which is set to surpass Japan this year as the world's second-largest economy, poses a serious challenge. The unemployment rate has spiked to an unthinkable 5.2 percent, and Japan seems to have reconciled itself to decline. Twenty years after the publication of The Japan That Can Say No, a manifesto of self-assertion co-written by Sony Chairman Akio Morita, we seem to have "The Japan That Can Grow Slow." And part of it is because Japan, like the baby boomers in America, is mellowing as it gets older.

Japan still retains its lead in engineering. A showroom at Panasonic's headquarters displayed a heated, multifunction toilet seat that conserves energy. (Wouldn't leaving the seat cold conserve even more?) The sleek Shinkansen bullet trains roll up to their appointed spots on time. TKX, an 87-year-old Osaka-based company that makes abrasives, has adapted its expertise to cutting silicon ingots into wafers for solar panels.

But social engineering is proving more challenging. Japan's population peaked in 2004 at about 127.8 million and is projected to fall to 89.9 million by 2055. The ratio of working-age to elderly Japanese fell from 8-to-1 in 1975 to 3.3-to-1 in 2005 and may shrivel to 1.3-to-1 in 2055. "In 2055, people will come to work when they have time off from long-term care," said Kiyoaki Fujiwara, director of economic policy at the Japan Business Federation.

Such a decline is cataclysmic for an indebted country that values infrastructure and personal service. (Who is going to maintain the trains, pay for social benefits, slice sushi at the Tsukiji fish market?) The obvious answers—encourage immigration and a higher birthrate—have proved difficult, even impossible, for this conservative society. In the United States, foreign-born workers make up 15 percent of the work force; in Japan, it's 1 percent. And, official protestations to the contrary, they're not particularly welcome. One columnist I met compared the standard Japanese attitude toward immigrants to that of French right-winger Jean-Marie Le Pen. In the 1990s, descendants of Japanese who had emigrated to South America early in the 20th century returned to replace retiring factory workers. Now that unemployment is on the rise, Japan is offering to pay the airfare for those who wish to return home.

Japan doesn't particularly want to import new citizens, but it doesn't seem to want to manufacture them, either. It's become harder to support a family on a single income, and young people are living at home for longer. And Japan isn't particularly friendly to working mothers—pre-K day care is not widely available, and the phrase work-life balance doesn't seem to have a Japanese translation. (The directory of the Japanese Business Federation, a showcase of old guys in suits, makes the Republican Senate caucus look like a Benetton ad.) The upshot: a chronically low birthrate. Too often, demographic change was described to me as a zero-sum game—rather than being seen as potential job creators, women and immigrants are often seen as taking jobs from men.

Chalk it up to age or to culture, but Japan strikes me as strangely passive about the huge changes it is facing. I heard plenty of bromides about the need for new policies toward both immigration and work-life issues but no real policies. "The ongoing issues of the lower birthrate and the aging society have been going with such speed that the national design of how to respond to that has not caught up yet," said Yuriko Koike, a TV reporter turned politician (Japan's first female defense minister) and one of the most prominent women in public life.

As befits a nation riven by geological faults, the focus seems to be on planning to use technology to manage the impact of unstoppable events rather than averting them. In Toyota City, where robots do 90 percent of the welding work on Priuses at the Tsutsumi plant, I asked a city official how demographic changes would affect the delivery of health care. He responded, only partially in jest, "Maybe the robots will take care of us."


Wolfgang said...

"Japan's population peaked in 2004 at about 127.8 million and is projected to fall to 89.9 million by 2055. "

The newest numbers from

2000 126.93
2001 127.32
2002 127.49
2003 127.69
2004 127.79
2005 127.77
2006 127.77
2007 127.77
2008 127.69
2009 127.60 (June)

So the fall from the peak in 2004 (127.79 million) until now (127.6) is only 0.15%. I don't think that such a negligible decrease could somehow suggest a further fall by 30%.

Anonymous said...

page 17 of this shows what is happening in Japan. They lost 10% of the population of those under 65 between 1985 and 2005

Edward Hugh said...

The thing is Wolfgang, the economic consequences of even "such a small fall" are now abundantly evident in the current crisis. (Actually it is the shift in age structures that matters). So what, if anything, do you think we should be doing about this part, granted that you feel that Japan's population may be stationary, but much, much older by the time we reach 2050.

How does Japan realistically support all those old people, given that the fall in the birth rate, this part at least, is evident and not disputed by anyone to my knowledge?

Cicerone said...

Wolfgang: the decline of Japans population isn't so severe now because of population momentum. Most of Japan's population is still in the 50-60 range. In the next 20 years the death rate will increase along with the ageing of the population, simply because there are more older people. The birth rate will sink, because the share of women in the 15-45 range will decrease.

You can calculate the growth rate with the following formula: (TFR/replacement rate)^(1/generation length). For Japan the calculation would be: (1.3/2.1)^/(1/30), if you assume a generation length of 30 years. The growth rate would be in the -1.5% range, if the population momentum is used up. That will be the case in 60 years if the TFR will stay at 1.3. Until that, the decline will accelerate.

That is the problem with the population decline: The decline we whitness now is still far away from the decline rates at which the countries will stabilize. As it seems that most of the countries' TFR fall to the 1.3-1.5 range, the average annual decline of these countries will amount to 1%-1.6%, which isn't slow anymore.