Japan’s Demographic Jeopardy


 

The low fertility rate of Japan is well known, and it has led to a shrinking working-age population in the country. Simultaneously, as the elderly live increasingly longer, there are a decreasing number of taxpayers able to support Japan’s ever-growing cohort of retirees. This is not helped by the fact that Japan has one of the highest life expectancy across Asia.

In 1950, there were a dozen workers supporting each retiree, alongside paying ordinary Government taxes. By 2050 it is projected there will be only 1.4 workers to each retiree. This is an increasingly unsustainable tax burden on the diminishing working population of Japan.

Number of Workers to each Dependent (65+) in Japan
The working-age population represents those aged 15 to 64. Period: 1950-2050.
Japan’s Demographic Jeopardy




The reality of this demographic shift is emerging now due to the gradual nature of population change. With the lowest current worker-to-retiree ratio in the whole of Asia, Japan is leading in this disastrous demographic trend.

The Government has intervened by raising the retirement age from 64 to 65 this year. It is unclear whether this will be enough to ease the cost burden on the Japanese taxpayer. This is because retirees cost Governments the most out of any age demographic due to expensive medical and care provisions. One estimate shows health expenditure for the average Japanese 80-year-old retiree to be 11 times higher than that of the average 20-year-old worker.

Unless Japan’s unpopular intervention to raise the retirement age reverses this trend, the decline in taxpayers – and continued rise in expensive dependents – could become an overwhelming burden on the working population. 

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