May 25, 2025 (Financial Times) - Japan has been struggling to cope with a combination of anaemic economic growth and a shrinking population for over 30 years. 2025 marks the tipping point when the rising costs outstrip the country's capacity to pay for them.
Japan's fertility rate has hovered around 1.2 for decades, well below the replacement level of 2.1. Although South Korea’s birthrate has recently fallen even lower, Japan’s demographic decline has been in motion for much longer, offering the world a window into what aging societies may soon confront. While the Japanese government has tried various policies—from encouraging births within marriage to introducing dating apps and flexible work schemes—the societal and economic headwinds remain formidable. Marriage rates continue to fall, and fewer couples means fewer babies, a situation further strained by wage stagnation that makes many young men economically unattractive partners. Though desire for marriage and family may remain strong, socioeconomic barriers have made these dreams increasingly out of reach.
Despite its looming crisis, Japan continues to function with remarkable social cohesion and economic resilience. Communities like the Fuwaku Rugby Club for men in their 70s and 80s illustrate how older Japanese remain physically and socially active, even as their generation begins to dominate the country’s demographic structure. Yet this aging society demands more infrastructure—more care homes, medical services, and welfare spending, which has now risen to around 10 percent of GDP. The burden on the national budget is compounded by a decline in innovation, with fewer patents filed as the working-age population shrinks. To adapt, businesses like Unicharm and Ito En have shifted their product lines from babies to elderly care, recognizing aging as both a social challenge and a commercial opportunity. Funeral services, too, are adapting to the reality of more solitary deaths, offering proxy scattering of ashes at sea. Meanwhile, local efforts to integrate immigrant communities, like the Kiricafe project in Kirigaoka, reflect Japan’s quiet but significant pivot toward increased immigration. Although the official stance remains cautious, foreign nationals may make up 10 percent of the population within two decades, signaling a major cultural transformation for a country long known for its homogeneity.
Globally, Japan’s demographic trajectory is becoming less of an outlier. China, once worried about overpopulation, now faces similar headwinds after decades of the one-child policy. Its fertility rate is plunging and its population is starting to decline, bringing economic growth to a slowdown. Other developed nations, including France, Germany, the UK, and the US, are also grappling with plateauing or shrinking working-age populations. But while many countries are only just beginning to feel these effects, Japan has been wrestling with them for over 30 years. In that time, it has managed to preserve social order, public health, and a vibrant business landscape. Even though none of Japan’s interventions have reversed the demographic slide, the country has avoided collapse and continued to thrive in many respects. That paradox—that failure to solve the problem still led to a kind of quiet success—may be Japan’s most important lesson for the world: that it is possible for a nation to age and shrink gracefully without surrendering its stability or sense of purpose.
Source: Financial Times
