An Unknown Future: How Japan Is Facing the Consequences of Its Demographic Crisis

Japan has recommended a new policy aimed at addressing the crisis of declining birth rates and population ageing, which threaten to have serious economic and social consequences for the country's future.

The former Prime Minister Fumio Kishida's government used measures to promote childbirth, including expanding childcare facilities, offering housing subsidies, and even launchinJapan has recommended a new policy aimed at addressing the crisis of declining birth rates and popg a government-run dating app to encourage marriage and childbearing.

“Japan is standing on the verge of whether we can continue functioning as a society. Focusing attention on policies regarding children and childbearing is an issue that cannot wait and cannot be postponed,” Kishida said last year.

Societal Transformation

On May 14, the Japanese government recommended adopting a new policy that would make childbirth completely free, as part of its response to a demographic change crisis that has plagued the country for years.

According to the Japanese Ministry of Health, this policy is expected to take effect in April 2026, if officially approved in the budget for the same fiscal year.

This move reflects growing concern within government circles about the negative consequences of population decline, especially as the number of births continues to decline for the ninth consecutive year.

In 2024, approximately 721,000 babies were born, the lowest number since statistics began 125 years ago, while approximately 1.6 million people died, meaning the number of deaths was nearly double the number of births.

The number of marriages also fell by 5.9% to 489,281, the lowest number in 90 years, which is one of the main reasons for the declining birth rate.

Given these circumstances, the Japanese government has introduced policies to try to reverse this demographic trend, but their efforts have so far yielded little success.

Currently, Japanese families bear the costs of childbirth, with the government providing a subsidy of 500,000 yen ($3,400) per birth.

However, this subsidy does not fully cover the costs in approximately 45% of cases, forcing families to pay additional amounts out of their own pockets.

According to data from the Japanese Ministry of Health, the average cost of a natural birth in the first half of fiscal year 2024 was approximately 518,000 yen, a significant increase from 417,000 yen in 2012.

The new plan requires the government to cover the full costs, including non-medical expenses associated with childbirth, through public health insurance, which currently only covers cesarean sections.

The government panel also recommended setting a uniform price for births nationwide to reduce cost disparities across regions.

Many younger Japanese say they are reluctant to marry or start families due to poor job opportunities, cost of living that is rising faster than salaries, and a corporate culture that makes it difficult for both parents to work.

Professor Christina Davis, a professor of Japanese politics at Harvard University, noted that “health and education costs are a barrier to Japanese families, but they are not the only reason for the low birth rate.”

She added that “broader conditions related to the labor market and motherhood require comprehensive reforms that go beyond financial support alone.”

Challenges and Pressures

Japan is one of the world's largest economies, but its ongoing financial challenges are closely linked to its declining population and aging society.

A major problem that Japan has failed to address is that 30% of the country's population is over 65 years old, a figure expected to rise to 40% by 2070.

Japan's population, which has exceeded 125 million, is expected to decline to 87 million by 2070.

This severe demographic crisis is exacerbating pressures on the economic and social systems and increasing healthcare burdens amid a shrinking workforce.

Due to this demographic shift, the country is also experiencing a labor shortage, particularly in high-skill industries such as manufacturing and construction.

As Japan's population continues to age and the workforce shrinks, these burdens on the state will increase, particularly with increased reliance on healthcare and pension systems at a time when the number of taxpayers is shrinking.

For the fiscal year 2025, the social security contributions in Japan were projected to account for 18 percent of the national income.

However, past fiscal policies, such as the post-2008 economic stimulus package, and global factors, such as US tariffs, are contributing to Japan's high public debt-to-GDP ratio, which has reached 1,279.3%.

A recent poll conducted by Nikkei Research for Reuters showed that two-thirds of Japanese companies are experiencing a serious negative impact on their operations from labour shortages, as the country's population continues to shrink and age rapidly.

A credit research firm Teikoku Databank reported that the number of bankruptcies caused by labour shortages in 2024 surged 32% from a year earlier to a record 342 cases.

Serious Consequences

While this demographic change will transform Japanese society in the coming years, it will have a particular impact on one of the government's most pressing current concerns: national defense.

During the term of former Japanese Prime Minister Fumio Kishida (2021-2024), Tokyo allocated the largest defense budget in its history, as part of its commitment to increase defense spending to 2% of GDP by 2027.

It also eased restrictions on weapons development and sought to build strong alliances and partnerships with countries that shared a similar worldview.

Later, Japan's new Prime Minister, Shigeru Ishiba, sought to strengthen his country's independent security capabilities and become a more equal partner in its military alliance with the United States, which has been pressuring Tokyo for decades to assume greater defense responsibility.

Currently, the Japanese military is significantly smaller than its main rivals, with the size of the Japanese army being less than one-tenth that of China and one-fifth that of North Korea.

A declining population will also undermine the state's ability to collect taxes, meaning less funding for increased defense spending.

Three decades of economic stagnation have also hampered the state's attempts to increase revenue. Even when former PM Kishida attempted to raise taxes to fund defense, he failed.

With a rapidly declining population and an aging society, Japan may find itself unable to provide enough soldiers or fund a sufficient defense force to meet the demands of military alliances, especially in a world of turmoil.

Increasing concerns about escalating global threats have made many young Japanese reluctant to enlist in the military and put themselves on the front lines.

Therefore, the Japanese Ministry of Defense has resorted to advertising using celebrities, peaceful messages, and anime to attract younger generations, and has also raised the maximum age for conscripts from 26 to 32.

However, all these efforts have been in vain and have not led to any improvement. The Ministry of Defense failed to reach its 2023 conscription target by more than 50%, and the situation has worsened with the shrinking number of young people eligible for conscription.

Over the past 30 years, the number of Japanese citizens aged 18 to 26 (the target age group for conscription) has declined by approximately 40%.

The period between 1994 and 2024 saw the percentage of military enlistment drop from 17.43 million to just 10.2 million.

To achieve conscription targets over the next decade, the Japanese military will need to recruit more than 1% of the country's total population, a tall order that will not be easy to achieve.

Ineffective Plans

In recent years, Japanese leaders have sought to implement policies that encourage families to have more children.

For example, in 2023, Kishida presented a plan to double government spending on childcare subsidies by 2030.

However, the new childcare law passed in 2024 under Ishiba's leadership represents less than half the amount Kishida proposed.

Kishida's other plan, which aims to cover college tuition for families with three or more children, was widely criticized on Japanese social media as out of touch with reality, contributing to Kishida's decline in popularity.

Although Kishida's plan to cover university tuition fees for large families has received official approval, its effectiveness and true impact on the demographic situation cannot be confirmed in the near future. It may take at least 20 years for results to become apparent.

One solution proposed by researchers and analysts is to encourage immigration to Japan, especially since the country has historically not been welcoming of immigrants.

Some analysts believe that radically changing this approach could revive the economy and inject much-needed vitality and dynamism into Japanese society.

However, immigration is not a permanent solution, as even new immigrants may end up adopting the same patterns of declining birthrates found among the Japanese population.

Immigration also carries additional costs, most notably those related to social integration. Furthermore, the government will later have to bear the burdens of health care and retirement for immigrants as they age.

As for conscription into the Japanese armed forces, this is not possible, as Japanese law only allows citizens to join the military.