It pains me to say this nation that I love so much is falling off the world stage as a major player; but it needs to be said. A few weeks ago, India overtook Japan as the world’s third-biggest economy in terms of purchasing power parity (PPP) - a calculation of the amount of money needed to purchase the same goods and services. And now, it looks like it won’t be long before Brazil overtakes Japan next. But this is not the only reason I think that Japan will lose its significance in decades to come. The fact of the matter is that the awful Japanese economy, along with the population falling off a cliff, means that we’re looking at a bleak future of Japan. In just a few decades, Japan will be dramatically downgraded unless there are some substantial changes.
Obviously, PPP isn’t the only way to measure a country’s economy – Japan’s GDP is still way ahead of India’s. But the important point isn’t a snapshot of the current situation, it’s the downward spiral that characterizes the economy. As the Japan Times (JT) reports: (bold added for emphasis)
A report just released by a think tank of the Nippon Keidanren, the country’s most powerful business organization, says that by 2050, Japan will no longer be a developed country, predicting years of negative growth from 2030 onward.
“Unless something is done, we are afraid that Japan will fall out of the league of advanced nations and again become a tiny country in the Far East,” says the report in Japanese by the 21st Century Public Policy Institute (21st CPPI), the research institute of Keidanren.
Again, that was “Japan will no longer be a developed country” by 2050. This report is nothing if not a wake-up call for Japan. But how did it get this way? It has a lot to do with the population. Japan is getting old.
As I once mentioned earlier, Japan’s population will be 2/3 of what it is today by 2060. That is, it will drop from 127 million people to 87 million. And by 2050, almost 40% of Japanese people will be aged 65 or over, compared to 23% today. The working age population will fall by about 10% (from around 63% to 52%).
With so many old people with low savings, there will be a huge burden put on younger Japanese people. Japan used to have great industrial productivity, but this has been falling from some time, and natural disasters like last year’s tsunami – which will be the most expensive disaster of all time – is not helping. The JT continues:
The 21st CPPI predicts that in the best-case scenario, Japan’s gross domestic product in 2050 will be only one-sixth of China’s and one third of India’s, as the country struggles to stay ahead of Brazil as the world’s fourth biggest economy. If Japan does not take remedial measures, it will drop to ninth place in the world, behind France and barely ahead of Indonesia.
The JT article puts the Nippon Keidanren report into perspective, arguing that things are even worse than the report made it out to be.
It almost looks as if the real damage will only occur after 2030 and 2040. The report forecasts that from 2030 onward Japan’s GDP will fall by 0.17 percent a year, accelerating to 0.46 percent by 2041 and to 1.32 percent a year by 2050. In reality the damage has already started, and the risk is that if quick action is not taken between now and 2020, it may be too late to stop Japan’s economy going into a tailspin.
Japan has wondered for years about how they could, for example, increase the number of tourists who come to Japan. In fact, for the first time in five years, the government has just developed a serious plan to boost tourism - the new Tourism Nation Promotion Basic Plan, which has set various goals for the next five years. But with foreigners thinking that Japan is not safe to visit because of radiation fears, I doubt that a few charming incentives are going to make a significant difference. I think the problem is bigger than that.
For one thing, many people outside of the big cities are still not used to seeing foreigners, and there’s also the fact that Japanese people are generally monolingual. If Japan seriously wants people to want to come, the very first step would have to be doing something about communication. Tokyo and other big cities have plenty of signs in English, but I hope you’ll agree that there’s more to exploring a new place than reading signs. In fact, the big cities – like Tokyo – are practically the only place you’re going to hear English-speaking Japanese people.
And foreigners coming to Japan isn’t just a problem regarding tourism. It’s also quite difficult for foreigners to get jobs in Japan. As the New York Times (NYT) says:
Maria Fransiska, a young, hard-working nurse from Indonesia, is just the kind of worker Japan would seem to need to replenish its aging work force.
But Ms. Fransiska, 26, is having to fight to stay. To extend her three-year stint at a hospital outside Tokyo, she must pass a standardized nursing exam administered in Japanese, a test so difficult that only 3 of the 600 nurses brought here from Indonesia and the Philippines since 2007 have passed.
So Ms. Fransiska spends eight hours in Japanese language drills, on top of her day job at the hospital. Her dictionary is dog-eared from countless queries, but she is determined: her starting salary of $2,400 a month was 10 times what she could earn back home. If she fails, she will never be allowed to return to Japan on the same program again.
The exams for medical students abroad are too difficult. They are, to be precise, unreasonably difficult. Another story from the NYT follows:
Tan Soon Keong, a student [from Malaysia] speaks five languages — English, Japanese, Mandarin, Cantonese and Hokkien — has an engineering degree, and three years of work experience in his native Malaysia, a track record that would seem to be invaluable to Japanese companies seeking to globalize their businesses.
Still, he says he is not confident about landing a job in Japan when he completes his two-year technical program at a college in Tokyo’s suburbs next spring. For one thing, many companies here set an upper age limit for fresh graduate hires; at 26, many consider him too old to apply.
Indeed, the age at which people are hired in Japan is so important to employers hesitate to employ someone “too old.” The only problem is that they consider that to be mid-twenties. Japan has to realize that beggars and be choosers, and the way they are hiring people – foreign and domestic – is ridiculous. Many foreigners are deterred from even trying, and locals feel the pressure immediately after graduating from university.
Western countries all around the world do not discriminate by age to such an extent. Any hospital in America would be happy to have a perfectly competent doctor work there, regardless of their age. But Japanese companies are arbitrarily strict, and it’s making them limit their potential at the expense of young people wanting to get into the work force.
According to the CIA, 2012 estimates of the total fertility rate (TFR) of 222 countries finds Japan at 202, with a TFR of 1.39. This basically means the average number of children Japanese women have over their lifetime is 1.39. Let’s compare Japan with a country that has a similar problem. If you compare it with Canada, you get a likewise low rank of 177, yielding a TFR of 1.59. But if you were to look at the countries for population trends, they tell very different stories. Japan makes it extremely hard for skilled foreigners to come and work and live here. From the NYT:
The barriers to immigration to Japan are many. Restrictive immigration laws bar the country’s struggling farms or workshops from access to foreign labor, driving some to abuse trainee programs for workers from developing countries, or hire illegal immigrants. Stringent qualification requirements shut out skilled foreign professionals, while a web of complex rules and procedures discourages entrepreneurs from setting up in Japan.
Canada, on the other hand, welcomes skilled foreign professionals. This is of course the reason why Canada, with its tiny birth rate, actually has a rising population. In stark contrast to Japan, the number of Canadians increased by two million over the last ten years.
Both countries aren’t having enough babies, but Canada is welcoming those from abroad to live and work. Whereas Japan does not allow for dual citizenship – in fact, you even have to give up your own name and adopt a Japanese one – Canada does not require the renunciation of citizenship. Obviously immigration in Japan would be a lot easier if the hoops they require foreigners to jump through were a bit closer to the ground.
Or, perhaps, Japan should give incentives to people for having more children, like the opposite of the one-child policy in China. This has, after all, been done many times before. One recent example is the Russian campaign to increase the birthrate by giving mothers around $10,000 to have a second child.
But where would the money come from? Lots of money will be going to medically treat elders – the oldest generations, who so happen to have the longest life expectancy in the world. So perhaps Japan will have to raise the age of retirement? The government has been discussing this since at least half a year ago. The current age of retirement is 60, but they’re thinking of making it 65. Being the oldest-living nationals in the world, I would say it makes sense to do so.
Japan would also go a long way to have more women participate in the economy. In terms of work, promotions, and home life, Japan today is like America in the 1950′s – quite sexist. The JT mentioned this story:
Japan comes a lowly 94th out of 134 countries in the World Economic Forum’s ranking for women in the economy. Women have difficulty moving up in a male-dominated economic world. Just to take a tiny example, only this month did Japan’s leading dental school at Osaka University appoint its first woman professor in 60 years, Mikako Hayashi, even though women comprise half the dental students.
Japan is doing a lot of things right – there is great education, cheap healthcare, a crime rate so low that it’s the envy of most developed nations, etc. And they’re doing things even better, such as getting rid of the alien registration system for foreign residents next month, and making English education more strict starting next year. But Japan is also doing a lot of things wrong. And unfortunately, I don’t think enough Japanese people are aware of it. The improvements are coming too slowly, while the population increases too rapidly.