It has been three years since the launch of Prime Minister Shinzo Abe's "Abenomics" economic policy package and its three policy "arrows" -- the prime minister's prescription for a healthy economy. After such a long course of treatment, what is the diagnosis? The fact is, Japan's prolonged deflationary period has meant continued sluggishness.
In this light, how are we to interpret the following data, comparing the growth rates of Japan and the United States from 2000 through 2013? Not the growth in each nation's gross domestic product (GDP), but in the GDP growth per person of working age from 15 to 64 years old. This data, from a Bank of International Settlements report, shows Japan with a growth rate of more than 20 percent, and 11 percent for the U.S.
In other words, the productivity of Japan's working age population far outstrips that of the U.S. Nevertheless, Japan's economy as a whole remains stuck in neutral. This is explained by one simple fact: Japan's working age population is shrinking fast. During the same 2000-2013 period, the number of working age adults in the U.S. grew by 12.9 percent, while Japan's declined by 8.5 percent.
This generation is also the core of the consumer economy. And while the impact of its unprecedented contraction here in Japan has been pointed out by experts for many years, the government has failed to tackle the issue head-on. All it has done is, after identifying relentlessly falling prices as the source of the disease, administered repeated courses of quantitative easing and pork barrel spending.
It seemed, for a brief moment, that the Abe administration would at last face up to the declining working population part of Japan's economic ails. To keep Japan's population above the 100 million mark, the Abenomics program declared, the country would look to raise the birthrate from the present 1.4 children per woman to 1.8.
However, is the 1.8-children-per-woman goal realistic, and would that birthrate actually hold Japan's population at 100 million? The answer to both questions is a resounding "No."
First of all, 1.8 children per woman can be called a "birthrate wish," one premised on the assumption that everyone thinking, "I'd love to get married if I could," and "I'd love to have lots of kids," will see their hopes come true. However, even in the event of this unlikely outcome, a birthrate of 1.8 children would not be enough to maintain Japan's population in the nine-digit range. According to figures released in February 2014 by the Cabinet Office, even if in 2030 Japan returned to and then sustained the baby boom rate of 2.07 kids per woman, by 2060 the country's population would stand at about 98 million people.
There are probably some people out there asking, why all the fuss? There are a lot of very prosperous countries with less than 100 million people. What is so magical about this particular number?
It must not be forgotten that Japan faces unique problems, however. The country's population is not just falling. Its very composition is changing as well. At the same time as the number of working age Japanese drops, the elderly make up an ever increasing proportion of the overall population. If the current population shift holds, in 2060 -- when today's 20-year-olds join the ranks of the elderly -- it is estimated that there will be just 1.3 people of working age for every person aged 65 and over.
We are speaking of a country where the national debt is already more than two times its GDP. The current government is adding new debt at a quickening pace, and cannot staunch the flow of red ink. Increased participation by women in the workforce; the elderly returning to the ranks of the employed; measures to boost the birthrate; robotics and other technological innovations -- all these are worthy of pursuing to blunt the blows of a quickly declining population in a badly indebted nation, but they likely cannot prevent them altogether.
Deep cuts in Japan's social security benefits plus steep increases in individual contributions to the system are one option to ease the financial burdens on the state, but that would risk impoverishing both working people and the elderly, and causing real damage to Japan's quality of life and economic vitality. It would also probably reduce the birthrate even further.
And this leads us to another option, one considered taboo for many, many years but which has now found its time: Make accepting foreign immigration Japan's national policy.
There is still very deep opposition in Japan to accepting foreign workers and immigrants. The standard anti-immigration arguments are easily enumerated: Japan's "Japanese-ness" will be lost, crime will increase and, especially recently, terrorists will creep into the country.
However, Japan's labor shortage has meant that foreign workers have in fact been coming steadily into the country for some time already. The conditions they endure aren't always optimal, either. Many people who come under Japan's technical trainee program are in fact used as low-wage labor. There are frequent cases of these people fleeing their jobs to find other work illegally. But the main point here is that leaving this system itself in place could present greater risk of social problems in regional communities or deteriorating public order.
There is in fact one municipality in Japan where more than 16 percent of the population is non-Japanese: the town of Oizumi in Gunma Prefecture.
Last month, representatives from Oizumi and other places with large foreign populations met in Hamamatsu, Shizuoka Prefecture, for the "conference of municipalities with concentrated foreign populations."
Instead of thinking of foreigners as simply people working away from home, "we've entered the stage where we're considering how to leverage the diversity of our foreign citizens," commented Hamamatsu Mayor Yasutomo Suzuki. The conference wound up with a "Hamamatsu statement" calling on the central government to create a "foreigner agency" to coordinate policy for the strategic promotion of immigration.
The problem with a declining working age population -- especially the number of younger workers -- is not just about the impossibility of maintaining the social security system on the backs of ever-fewer employed people. The working generations are also the ones who innovate, who lead new consumer trends, who bolster Japan's economic dynamism. They are tremendously important. And what's more, the more diverse the working population is, greater are the heights they can achieve.
During his first news conference of the year, Prime Minister Abe said he would make 2016 "a year of resolutely taking on challenges." There is no greater challenge before him than Japan's dire population problem.