Japan Hits Demographic Tipping Point With First Official Population Decline In History

As troubling as Japan's deflationary, and now negative interest rate, economic quagmire is, the biggest threat facing Japan has little to do with its balance sheet and everything to do with its demographics, for the simple reason that not only is Japan's population the oldest it has ever been, as well as the oldest on average in the entire world, but is now also officially shrinking.

According to data released yesterday by the Ministry of Internal Affairs and Communications, in the latest 5 year census, Japan’s population declined last year for the first time in nearly a century.

The Internal Affairs and Communications Ministry said the latest census shows that Japan’s population as of Oct. 1, 2015, was 127,110,047 - a decline of 947,305, or 0.7 percent, since the last census conducted in 2010.  

The number of Japanese dropped to 127.1 million in a national census for 2015, down 0.7 percent compared with five years earlier, and was the first recorded decline since the 5-year census started in 1920. As the Shimbun adds, in the 2015 census, men accounted for 61,829,237 of the population, and women 65,280,810.

The population of Fukushima Prefecture, where many residents are still being forced to live away from home due to damage caused to their hometowns by the 2011 Fukushima nuclear power plant disaster, saw the biggest decrease, or 115,458, a 5.7 percent decline from the last census. The two other prefectures hit hardest by the disaster — Iwate and Miyagi — also saw population declines.

To be sure, this is not exactly a surprise: Japan's ministry had estimated that the nation’s population had been declining for four straight years since 2011, but the latest results are the first official confirmation via a census that the national population has gone down since the government began conducting them.


What is interesting is that whle the census found a record high number of households in the country at 53,403,226, the average number of people per household was a record low of 2.38.

A large-scale census is conducted every 10 years, and a simplified census is carried out every five years after a large census. The 2015 census was a simplified one.

This being Japan, someone had to state the patently obvious: "A ministry official said Japan’s population decline seems to be largely due to the natural factor of deaths outnumbering births."

Some more details:

Out of 47 prefectures nationwide, populations declined in 39, including Hokkaido and Aomori. Of the three prefectures hit hardest by the disaster, Miyagi’s population dropped by 13,950, or 0.6 percent; and Iwate’s by 50,333, or 3.8 percent. The decline in Miyagi Prefecture was small, probably due to the inflow of people working on reconstruction projects. The population increased in eight prefectures, including Okinawa, Tokyo and Aichi.

Japan's demographic troubles are well known: as we reported last September, the number of Japanese aged 65 or older has risen to a new record of about 33.8 million people, or 26.7 percent of the population. Last year, the Internal Affairs Ministry said about 33.84 million people aged 65 or over were living in Japan as of last Tuesday. That is an increase of 890,000 from the same period last year. Men account for about 14.62 million of the total, and women, 19.21 million.

The number of Japanese aged 80 or older has risen by 380,000 from last year to 10.02 million, topping 10 million for the first time.

As we have documented before, Japan's demographic crisis has broad implications for the nation. Fewer workers and less labor will reduce the potential output of the Japanese economy, which will increase the country’s reliance on imports as retirees continue to spend, inhibiting GDP growth. The rising number of retirees will strain the government’s welfare programs and the country’s pension funds, which have been major buyers of government bonds. Japan already maintains the world’s second-largest debt load in nominal terms and it's growing.

The government sees this problem and has passed a bill giving private-sector workers the right to remain at their jobs until the age of 65, rather than the current 60.


Japan’s demographics will also likely have an impact on consumer behavior. Japanese consumers older than 65 are less likely to shop for alcohol, clothing, books and electronics compared with younger consumers, according to a McKinsey survey from 2011. The average senior shops for books and clothing 38 and 35 times per year, respectively, compared with 73 and 58 times for people between the ages of 18 and 34. The only item seniors shop for more frequently than younger consumers is food, McKinsey found.


How Japan faces its demographic challenges over the next several decades may provide important lessons for countries such as China, which also are fast approaching a demographic cliff. People over 65 account for nearly 10 percent of the population in China — similar to Japan in 1985 — up from 6 percent 20 years ago.

China now faces a similar trajectory, as seen in the chart above. Its working-age population—defined as those between ages 15 and 64—is peaking and is set to decline in the years ahead.


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