Fri, Sep 14, 2018 - Page 9 News List

Japan’s baby bust is an opening for experimentation

Other developed nations should be watching to see if it manages to raise its fertility rate no matter how bold the methods might be

By Noah Smith  /  Bloomberg

Japan’s population is shrinking. There are about 127 million people in the country today, but by the year 2050 the figure is projected to drop to about 102 million and keep falling thereafter.

This is likely to cause all sorts of problems.

A shrinking population is also an aging one — a smaller base of workers supporting a larger number of retirees means lower living standards for everyone. An older population also tends to be less productive.

Additionally, a shrinking population means a shrinking domestic market, decreasing the incentive for companies to invest in the country.

It could also reduce the natural rate of interest, forcing the Bank of Japan to keep quantitative easing running forever in order to keep the country out of a liquidity trap, and is certain to reduce Japan’s power and importance in the world.

So there are many reasons to want to stabilize the Japanese population. There are two ways to do this: immigration and higher fertility.

Under Japanese Prime Minister Shinzo Abe, Japan has been admitting a lot more immigrants, but while this should help cushion the blow of population decline, it is unlikely to solve it, for several reasons.

First, the sheer numbers required to prevent a decrease in population would be enormous — Japan is not accustomed to being a nation of immigrants, as the US or Canada is, and tens of millions of newcomers would likely provoke a dangerous political backlash.

Second, relatively low salaries and the language barrier mean that Japan has lots of trouble attracting highly skilled permanent residents, meaning that too much of its immigration is of the low-skilled, guest worker variety.

So a rise in fertility would be a very good thing for Japan. The rate has risen from a low of 1.26 children per woman in 2005 to 1.46 in 2015, but that is still well below the 2.1 required for long-term population stability.

The bad news is that birthrates are very hard to raise with government policy.

Almost all rich countries have sub-replacement fertility. The most successful country has probably been France, which has promoted work-life balance and provided generous subsidies for childcare.

Japan is now seeking to emulate that model, providing more cheap childcare and trying to push companies to give employees more time at home.

Those are good ideas, but it is unlikely that they will be enough to stabilize the population. Fortunately, Japan is in a highly innovative mood in terms of policy.

Although many rich countries turn inward and retreat into either nostalgic populism or reflexive conservatism, Japan has experimented with unconventional monetary policy, increased immigration, new corporate governance strategies and other bold moves.

That means it might be the perfect place to try out new ideas for increasing the fertility rate — ideas that, if successful, could be exported to all the other developed nations that are in a similar boat.

One idea would be to promote suburban living. More than 94 percent of Japan’s population lives in cities, and that number has actually risen in recent years. Although home sizes have been increasing, urban apartments and houses still tend to be small places, unsuitable for larger families. That might be one reason the fertility rate tends to be higher in suburbia.

Japan, with its excellent rail networks and flexible zoning laws, is great at density, but it might be time to reconsider the all-urban focus. Cheaper roads and gasoline would help make car-centric suburban life more feasible.

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