Japan's Aging Population: A Reflection on Europe's Future Challenges

Japan's population has experienced a significant decline, shrinking by half a million people in the past year. This demographic shift presents growing challenges in addressing labor shortages and sustaining the social security system, which relies on a dwindling tax base. According to data released by the Ministry of Internal Affairs and Communications, the total population fell by 550,000 to 123.8 million in 2024, marking the 14th consecutive year of decline.

The number of Japanese nationals decreased by 898,000, representing the largest drop since comparable records began in 1950. This demographic trend raises serious concerns about the sustainability of Japan's social system as the number of contributors decreases. The working-age population, defined as those aged 15 to 64, has also declined by 224,000 to 73.7 million, exacerbating the fiscal challenges for a nation already burdened with the highest debt-to-GDP ratio among developed economies.

Furthermore, the data indicates a sharp decline in the number of children, which fell by 343,000 to a record low of 13.8 million--now just 11.2 percent of the total population. This decline follows alarming statistics from the Ministry of Health, Labour and Welfare, which reported a historic low in birth rates earlier this year, intensifying concerns about Japan's long-term demographic prospects.

As labor shortages worsen, Japan's unemployment rate remains at a record low of 2.4 percent, the lowest among OECD countries, consistently remaining below three percent for four consecutive years. Projections from the Recruit Works Institute suggest that Japan could face a labor shortfall of 11 million workers by 2040. To mitigate the overall population decline, the number of foreign residents has increased for the third consecutive year, rising by 342,000 compared to the previous year.

Japan's demographic issues are indicative of a broader global trend. In South Korea, the birth rate saw a slight increase last year for the first time in nine years, yet it remains significantly below the replacement rate at 0.75. Meanwhile, France experienced a rapid decline in birth rates in 2023, marking the fastest decrease in half a century. Additionally, China's population has been in decline for three consecutive years.