A Silver Lining for Graying Japan

Posted in Japan | 29-Sep-06 | Author: Hisane Masaki

Prince Akishino and Princess Kiko show their newborn male baby, Prince Hisahito, to the press at a Tokyo hospital.

Japan may see a decline in birth rates reversed this year

Japan will probably see its abysmally low birth rate rise for the first time in six years this year.

The Ministry of Health, Labor and Welfare announced in August that more than 549,000 babies were born between January and June this year, an increase of about 11,600 from the same period last year. Marriages also increased during the same period by about 10,000 from the year-earlier level.

The upward trend in both births and marriages is continuing. The ministry said in a preliminary report on Sept. 21 that births in July rose 3.3 percent from a year earlier, totaling about 96,000. This is the first time in 12 years that births had showed six consecutive monthly increases on a year-on-year basis. Marriages in July also increased 4.7 percent from a year earlier, with a total of about 67,500 couples tying the knots.

The ministry believes the recent economic recovery and improved job stability for younger people, combined with fewer abortions, have contributed to the recent upturn in births and marriages. Kuniko Inoguchi, then state minister in charge of the declining birth rate, said on Sept. 22 that if the current trend continues, the birth rate will certainly go up this year after plunging to a record low last year.

On Sept.6, Princess Kiko, wife of Emperor Akihito's second son, Prince Akishino, gave birth to the first male heir to the imperial throne in four decades, saving the royal family from a succession crisis. The royal birth could also encourage some Japanese women to have babies, at least temporarily.

Japan is at a historic juncture demographically, with the rapid aging of the population and precipitously declining birth rates on an annual basis. Japan's population is shrinking and graying, at a rate probably unprecedented in history. Japan's population began to decline for the first time since World War II last year, two years earlier than expected. The working-age population had already begun to shrink several years earlier.

The government announced in June that Japan's total fertility rate -- the number of babies born to every woman during their reproductive years -- hit a record low of 1.25 last year. If the current low birth levels continue, Japan's population, now 127.7 million, is forecast to shrink to half of its present size in 70 years, and to a third in 100 years. The percentage of people aged 65 or over has reached 20 percent of the total population, while that of children aged 14 or under has declined to 14 percent -- a phenomenon eerily apparent on the streets of Japanese cities, where the laughter of children has become increasingly rare.

Not only is Japan's birth rate already among the lowest in the industrialized world, but its pace of decline is the fastest, raising grave concerns about a possible erosion of the economy's international competitiveness as the population thins out.

A minimum rate of 2.07 is said to be needed if Japan is to avoid a population decline, but the actual rate has been lower than that minimum necessary level since logging 2.14 in 1973. The rate dropped to about 1.5 in the early 1990s and below 1.3 in 2003. Japan's birth rate has actually declined faster than government estimates. A median forecast released by National Institute of Population and Social Security Research in 2002 called for the nation's total fertility rate to stop declining after dipping to 1.306 in 2007 and to stabilize at 1.387 from around 2035. According to the Cabinet Office, in 2003 the total fertility rate was 2.04 for the United States, 1.89 for France, 1.34 for Germany and 1.29 for Italy.

Another record low birth rate, recorded last year, has highlighted once again that a series of measures taken -- and highly publicized -- by the Japanese government in the past decade or so to reverse the declining trend have been a complete failure. Among those measures are the Angel Plan, introduced in 1994, and the New Angel Plan, introduced in 1999. Under those plans, wide-ranging programs were implemented to encourage people to have children.

Critics point out that the government's measures taken to date have been almost useless. They even claim that the government has not been serious enough about the problem, citing the fact that 70 percent of the social-welfare budget goes to programs for the aged, such as pensions and medical services, with only 4 percent set aside for services for children, such as child benefits and child-care services. The government's education-related spending is also the lowest among industrialized countries in terms of its ratio to gross domestic product (GDP).

Japanese have become increasingly concerned about the future as social-security costs, such as pension contributions and insurance premiums for medical care and nursing care for the elderly, as well as tax burdens, are expected to keep rising sharply amid declining birth rates and the rapid graying of society. While having to pay more pension premiums today, current Japanese workers also face the prospect of reduced pension benefits after retirement. In addition, more and more Japanese are living alone. Even as Japan's population began to contract last year, the number of households rose in all 47 of the nation's prefectures and hit a record high of 49.52 million, reflecting an increase in the number of elderly citizens and youths who live alone.

A major reason for the falling birth rate is the growing trend to marry late or not at all. The average age at first marriage in 2004 was 29.6 years for husbands and 27.8 for wives. The average age when a woman gives birth to her first child was 28.9 years in 2004, versus 27.5 in 1995. Marriages decreased for the third straight year to 720,429, or 19,762 fewer than in the previous year. And marriages per 1,000 people were 5.7, the lowest on record. Economic factors are most often cited as the primary reason more and more Japanese get married in later life or choose -- or are even forced to choose -- to remain single. Working women in particular need or want to work, but it is not easy to combine employment and child-rearing because of the poor quality of child-care services available, unfavorable employment practices, and rigid working conditions.

According to a recent Cabinet Office survey, only about 40 percent of Japanese parents said they wanted to have more children, the lowest percentage among the five countries surveyed (the others were Sweden, the US, France and South Korea). Of the Japanese pollees who didn't want to have more children, 56 percent cited financial reasons for their reluctance. Meanwhile, 81.1 percent of Swedish pollees said they wanted to have more children, with the comparable number reaching 81 percent in the US and 69.3 percent in France. "In those three countries, there are good child-support services and tax benefits," a Cabinet Office official said. "I think that's the reason for the [high] birth rates." In South Korea, 43.7 percent said they wanted to have more children.

The rapid demographic changes have alarmed Japanese policymakers. In addition to a further shrinkage in the working population, the continuous decline and rapid graying of the population are matters of deep concern because they will ultimately mean lower consumer spending as well as a drop in the savings rate. All of this poses a serious potential threat to the future competitiveness of what is currently the world's second-largest economy. Meanwhile, pressure is also growing, especially from domestic industries, to accept more foreign workers to alleviate an anticipated serious labor shortage.

A number of Japanese firms have started to improve their child- and elderly-parent-care programs, driven not only by concerns about a possible labor shortage after the baby-boomer generation starts retiring next year but also by growing awareness of the need to secure qualified workers, especially women, over the long term amid the dwindling working population. Some electrical appliance manufacturers have even introduced programs granting their employees leave to receive fertility treatment. This is an encouraging move in the right direction and needs to be further accelerated.

But Japanese firms still have a lot of things to do. The government white paper on the labor market, released in August, said that the steady increase in low-wage, part-time workers and those in temporary jobs is contributing to the low birth rate as people become reluctant to marry because of financial insecurity. The annual report acknowledged for the first time that the changing employment system is behind the widening income gap. The report cites a poll showing 59 percent of men in their early 30s who are on regular payrolls are married, compared with only 30 percent of their counterparts with part-time or temporary jobs. It is possible that people not on regular payrolls are hesitant to wed because their income is relatively low, the paper says.

The report says Japanese firms have changed their employment systems to hire more nonregular workers, to give themselves more freedom to adjust their operations and cut personnel costs and thereby help them recover their competitive edge in the global business environment. But the change in the employment system has created an income gap between regular and nonregular workers, and this gap will become bigger unless companies give nonregular employees more opportunities to become regular workers. The more young people are able to build stable lives and have families, the bigger the consumer base will grow. This will be in the interests of firms selling consumer goods. As the white paper points out, the public and private sectors should together create new systems, including introducing a regular employment system with shorter work hours and providing more training programs for nonregular workers.

If the recent upward trend in both births and marriages continues, it is possible that the nation's total fertility rate will bounce back to around 1.3 percent this year from last year's record low of 1.25. It would be the first rise in birth rates on an annual basis since 2000, which saw a slight birth rate increase thanks to many "millennium babies."

It is still premature, however, to conclude that the low birth rate trend has finally bottomed out. There is a strong possibility that the "second baby-boomers" born in the early 1970s have made primary contributions to a recent increase in births. These people of child-bearing age will decline in number in the coming years. No change can be seen in the trends of late marriages and births.

Shinzo Abe, who was elected as president of the ruling Liberal Democratic Party (LDP) on Sept.20, was elected in parliament on Sept. 26 as Japan’s new prime minister to succeed Junichiro Koizumi. Former Finance Minister Sadakazu Tanigaki, who ran unsuccessfully for LDP president, proposed a "fertility tax system" to reduce the tax burden on low-income couples with children. Unfortunately, however, Abe has not put the challenge of addressing the declining birth rates high on his policy agenda. If he misses the moment, a glimmer of hope that has emerged recently would easily disappear.