Demographic Changes and Economic Growth in Japan

Fluctuations in distribution, size and composition of population over time, are known as demographic changes. Several factors affect these changes , such as;

  1. Birth rates: The size and age configuration a population can  be influenced by fluctuations in the birth rate. Increase in birth rate can results in growth of population, whereas decrease in birth rate can lead  to aging and decline in population.
  • Death rates: The  age structure of the population  and size can also be affected by fluctuations in death rate. Population growth is the outcome of decreasing number of deaths and vice versa.
  • Age structure: Birth and death rates are a cause of change in the ratio of people in various age categories.
  •  Economic factors: Economic elements such as education level, income and employment level are also the transition agents of demographics.
  • Migration: Demographic changes can be the outcomes of migration of people. Emigration causes brain drain, and decrease in population while immigration results in  cultural diversity and increase in population.
  • Social factors: Social factors  are  also responsible for demographic changes. Cultural norms towards family size and  towards marriage can lead to a change in birth rate. Moreover, gender roles and structure of family also result in demographic shifts.

For the anticipation of population trends, policymakers and researchers are concerned with these factors causing demographic shifts.

Economic Growth:

An increase in productive capacity of a country during a year is given the  name of economic growth. GDP is used as a measure of it.

Economic growth is the main driving force for  innovation, Investment, employment and improving living standard of the people. It means it is deeply linked with lives of people.  For the long term benefit of whole  society, sustainable economic growth is required.

Economic growth is contributed by various aspects, containing:

1: Human capital: Elevated economic growth lead by the increase in productivity is gained by skilled and well- educated workforce.

2: Demographic factors: An optimistic age configuration and a growing population can equip an immense consumer base and an enormous labor force lead to improved economic growth.

3: Investment: Boost in productivity and outputs can be lead by the investment in physical means like infrastructure, machinery and equipment.

4: Innovation and technological progress: The reduction in prices, improvement in quality of goods And services, and increase in productivity  directs the expansion of economic growth is gained by the advancement in technology.

5: Natural resources:Access to natural resources by furnishing the inputs crucial for production can stimulate economic growth

6: Political stability and good governance:A conducive environment for asset and development can be created by useful management and stable political circumstances.

7: Trade: Specialization, efficiency and increased competition that can contributes to economic development can be lead by International trade.

8: Macroeconomic stability: A stable economic environment  that facilitates asset and development can be equipped by a sound fiscal policy, stable inflation and low interest rate

9: Entrepreneurship and small business development:.Rising competition and developing jobs by  the development of small businesses and Entrepreneurial workout  can contribute to economic growth.

10: Infrastructure: .Efficient movement of goods and people and the trade lead to a boost in economic growth, can be promoted by the sufficient infrastructure such as transport webs and communication systems .

Demographic change and Economic growth:

Demographic changes are strongly related to economic growth. Demand level in economy, innovation, labour productivity are affected by demographic  changes which in turn lead to economic growth .

Labour force is the critical factor through which demographics affect economic growth . Age and size of population can change the ratio of working force. A large number of working people can enhance productive capacity i.e. economic growth.

High death rate or low birth rate can create a shortage of working force and hence a decline in economic growth is observed. It can also lead to demand changes and through which a change in growth of  economy.

Similarly, education as demographic characteristics affect economic growth as it can build up human capital or  can decrease it through a lack of it . the productive capacity goes to its peak  with the well educated population.

It is clear from above arguments, demographic changes are strongly linked with growth of economy and these are the considerable factors for government and policy makers in order to gain desirable economic growth.

Demographic Changes and Economic Growth in Japan :

Huge demographic shifts have been observed in Japan since  last decades, including overage population, low birth rates and shortage of working  population . These changes have affected the economy to the greater extent


Shortage of workers is the  biggest challenge for Japan, as it is an obstacle to economic  growth by lowering productivity.

Numerous rich countries are standing up to  demographic challenges but Japan is dealing with an extreme version of it. At “unprecedented speed”  the population was aging and declining, said by the  prime minister, in an interview with The Economist, Shinzo Abe.The average woman giving birth to a number of children over a lifetime is the fertility rate and that is 1.4 in Japan. The births are 400,000 times less than the deaths in Japan every year. The highest life expectancy in the world is in Japan “the land of rising sun” which is about 84 years, at the same period.The population in Japan that is older than 65 is more than 28% in comparison with other countries like in India it’s just 6%, in Germany it’s 21% while in America it’s 15%. However, the highest aged population of the world exist in Japan.It is expected in Japan that more than half of babies that born today will live for 100 years.

It’s a good news, of course, of having an increase in life expectancy .Living is a desire of vast majority of people.Yet, new issues are initiated due to a declining and aged population. For every job applicant there are currently 1.6 vacancies , as there is an intense labor deficit in Japan.The percentage of active,  young people to the old and aged retired is rapidly decreasing.Rather than paying into the public funds people are consuming the ever more of their lives through pensions and medical care, that are a part of public funds. There is unsustainable social-security system. Government reckons that from the Japanese current ¥121trn ($1.06trn) to ¥190tr, the social welfare cost will risen by 2040 and 250% of the GDP is public debt.

Huge pension obligations and healthcare costs are the outcome of aging workforce.It has build up a pressure on investment resources and government budgets.

Consumer base is affecting by the Japanese aged population, in addition to the shrinking of work force. The decline in consumer spending is lead by the less spendings, tend by the aged people. Economic growth can be further reduced by the decline in consumer spending, as economic workout is driven by the consumer spending.

To cope  up with the situation, various  policies have been implemented by Japanese government to resolve these demographic issues. These policies focus on  encouraging families to have more  children, participation of women in workforce and a liberalise immigration policy.

Despite these efforts, economy of japan is stagnant. For this slow and stagnant growth of economy, demographic changes are responsible. There is a need of more aggressive policies to bring japan’s economy to the road of economic growth.

Overall, the relationship between demographic changes and economic growth in Japan is complex, and ongoing efforts are needed to ensure that the country can continue to thrive in the face of these challenges.

Mehreen Shahzadi
Mehreen Shahzadi
Undergraduate student in the field of Economics, in National Defence University, Islamabad.