On April 2, the Cabinet Office of Japan released “In Preparation for Consideration of Medium- to Long-Term Sustainable Economy and Society 2,” a document of the third meeting of the Council on Economic and Fiscal Policy. This document positioned the rapid decline of the working-age population in the 2030s as a “national crisis,” and quantitatively estimated scenarios to address this issue. It concluded that an increase of the real growth rate to at least 1% on average by FY2060 is required to overcome demographic structural changes and ensure the long-term stability of finances and social security.

The estimate is based on three scenarios with conditions of “improvement in productivity,” “expansion of labor participation,” and “increase in birthrate.” The average real growth rate from FY2025 to FY2060 is roughly projected as follows: I. 0.2% in the scenario for the status quo; II. 1.2% in the scenario for long-term stability with minimum growth; and III. 1.7% in the scenario for substantial growth. If scenario I works from FY2025 to FY2060, the real GDP per capita in FY2060 will be the lowest level among developed countries. If scenario II is realized, it will be a similar level to that in Germany. If the scenario III is successfully achieved, it will be comparable to the US and Nordic countries.

Out of the three conditions above, “improvement in productivity” depends on the advancement and social implementation of technology. It is not impossible to achieve if we seriously work on it. The “expansion of labor participation,” aiming for “five years younger” by 2045 can also be possibly realized if the working environment where people in their 50s now can continue to work healthily and positively until 74 years old is provided. The challenging goal is “increase in birthrate.” The estimated figures are 1.36 in the scenario for the status quo, 1.64 in the scenario for long-term stability with minimum growth, and 1.8 in the scenario for substantial growth. On the contrary, the number of births in 2023 was 758,631, representing a significant decrease of -5.1% over the previous year. The birthrate in 2023 will certainly be lower than 1.26 in 2022, which was the lowest figure ever. (The data in 2023 will be announced in early June 2024). It seems to be difficult to achieve the scenarios.

With regard to the birthrate, a bill to revise the “Child and Child Care Support Act” is currently under deliberation in the Diet. The focus of the discussion is the view of the government that “no substantial burden will be incurred.” However, what should be questioned is the importance of the policy and the appropriateness of the measures, and the government should discuss the price, namely the burden. This problem cannot be solved only with “allowances” or “benefits.” The decline in the marriage rate is the key factor. Elimination of the gender gap and getting rid of the anxiety of the younger generation about their future are mandatory. It cannot be said that “social security will be reduced to ease the burden, and therefore the future is secure.” Concentrated and comprehensive efforts are essential to raising the birthrate. What should be discussed is not whether or not the burden exists, but the substance of the policy, how the burden should be covered, and the cost-effectiveness.

This Week’s Focus, April 5

Takashi Mizukoshi, the President