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Global Economy

Without migration, Japan's prosperity will decline

A single number is enough to describe the challenge: Japan's population is shrinking by an average of more than 2,000 people every day. This is shown by the official population statistics for the first half of 2021. Figuratively speaking: an entire village disappears from the map of the island state every day. Schools are actually being closed in the countryside, houses are empty and dilapidated. The reason is the low birth rate.

Labor migration needs to quadruple

The Japanese Agency for International Cooperation (JICA) has examined the consequences for the labor market in more detail. According to the forecast, the number of people able to work will fall by ten percent by 2040. Japan must significantly increase the number of foreign workers in the same period – to around 6.7 million. Currently there are only around 1.7 million. In other words: the number of immigrant workers must quadruple. Only then will Japan's economy have a chance to close the upcoming gaps in the labor market and maintain the economic growth that the government is aiming for.

"We urgently need to talk about how we can bring more foreign workers into the country," the Japan Times newspaper quoted JICA boss Shinichi Kitaoka as saying. The immigrants won't come by themselves either: "International competition for workers will increase, also in relation to China."

On the direct path to an aging society

But recruiting immigrants is not a popular idea in Japan. As early as 2019, the Japanese government launched a program to attract more workers to the country. About 60,000 guest workers per year were targeted. But the bureaucratic hurdles were high and the numbers fell short of expectations. Immigration then ground to a halt with the pandemic as Japan closed its borders. The situation of the few immigrant workers from other Asian countries is often precarious. As "technical interns" with no prospect of staying, many lead a life on the fringes of Japanese society.

The economist Martin Schulz, chief economist at the technology group Fujitsu in Tokyo, sees the "point of no return" for Japan's population development. Under realistic assumptions, a reversal is no longer to be expected. Even with financial incentives, the country cannot increase the birth rate. Japan is on the way to becoming a "super-aging society", a rapidly aging society. At the same time, it still does not see itself as an immigration country. "Japan will also try to keep down immigration in the long term," says Schulz.

Significant consequences for society

The consequences of the shrinking population will be drastic. It is to be expected that more and more Japanese will remain employed as long as possible. In old age, the lack of young people in care makes things even more difficult. Older people will have to look after the very old. The comparatively few boys will rarely be available for this – they are needed in all sectors.

At the same time, Japan will look for other means of alleviating the shortage of workers, expects economist Schulz; for example through technical innovations and even more automation. But no matter how imaginative Japan's engineers are: Under these conditions, the country will have to adjust its standard of living downwards in the long term. "Prosperity will be defined differently in Japan in the future," Schulz expects: as a state in which people are satisfied with less.

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