From Tokyo to Beijing, growing old is hard to do

Sometime later this month, Japan will release the first estimate of births and deaths in 2020 — an annual gift from the health ministry that arrives around December 25 with all the seasonal joy of a broken boiler.

For the past 13 years, this release has delivered evidence of Japan’s shrinking indigenous population and its darkening demographic shadow via a series of bleak milestones. These seem all the starker for their stubborn resistance to remedy and for the cautionary road map they provide the outside world. 

By 2008 — one year after the great inflection from growth to decline — deaths in Japan outnumbered births by just over 50,000. By 2019, that imbalance had increased tenfold to more than half a million. In 2016, the population decreased at an average rate of 1,000 people per day. Based on monthly numbers, 2020 is on trajectory for a possible shrinkage rate equivalent to 1,500 per day, or one person per minute. 

As per tradition, Japanese media will greet this by assembling experts to shake their heads and wring their hands. But for Japanese viewers, both young and old, it is all gloomy non-news. They may not relish it, but the populace, whose popular books include Enjoying Nursing Care, has already struck a bitter peace with reality. The audience that really matters — in a country where birth rates fell to a 70-year low in 2019 and senior officials often highlight “warning lines” on fertility rates — is China.

The question for Beijing is not how worried to be, but rather when the weight of demographic concern makes itself felt. Along the road of ageing and population decline, there are some unexpected moments of benefit: Japan’s jobs-to-applicant rate, for example, has stayed above 1.0 this year, despite Covid-19. Yet an aged population is nothing to look forward to. There are also important differences in what brought the two countries to their demographic present: China’s 1979 one-child policy is prime among them. Even so, Japan’s experience is instructive. 

Japan’s latest health ministry numbers will confirm a phenomenon whose effects are now plain but that have been the subject of warning for over a quarter of a century. From giant typefaces on menus, to empty schools being razed to build care homes, daily life teems with mundane examples where Japan’s physical fabric is changing. Businesses, families and the public sector must adapt to having almost 29 per cent of the population aged over 65 and a relentlessly shrinking workforce to support them. Changes to the macro fabric — such as a historic risk rebalancing by pension funds, or a surge in outbound acquisitions — can also reverberate globally.

For China, where the over-65s ratio stood at 11.9 per cent in 2019, a Japanese-style demographic fate may seem distant. But China’s ratio is rising more rapidly than it did in Japan and some projections suggest it will hit 25 per cent in about 15 years. The critical death-birth crossover that Japan experienced in 2007 will, on current projections, happen in China a decade from now. 

Japan’s lesson is that real peril lies in the expectation of pain. In the more than 30 years since the bursting of Japan’s stock market and property bubble, there has evolved a spectrum of theories about the economic landscape that formed in its aftermath: for some, a permanently half-baked flirtation with recovery; for others, a reasonably managed decline with dignity. 

Less in doubt is that there has never since been any real sense that Japan will ever sustainably recapture the optimism and euphoria that once acted upon the country as such a powerful propellant. Recent days have been a reminder of that. Any celebration of the Nikkei 225 stock market index hitting a 29-year high last week was tempered by the fact that it is still a third below the 1989 peak. There are many reasons for this, but demographics are surely central: once the idea beds-in that population decline is inexorable, it is difficult to look out at the economic horizon and see, as Japan once did, infinite possibility. 

Japan’s fertility rate fell to 1.5 the year after the bubble burst in 1990; five years later the working-age population began to fall. By 1997, demographers were predicting that the crossover into overall population decline would come a decade on — as it duly did. China faces a similar series of milestones over the next 30 years. The double challenge is not only to prepare the economy for the practical effects of population decline and ageing, but to find ways to be optimistic in their shadow.

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