We are facing a large wave of population decline. What is expected of policymaking going forward? This article looks at policymaking in a time of population decline from the perspective of public economics.
Japan plunged into a full-scale population decline in 2008. More specifically, it was the year that inaugurated the era of population decline, which also has been referred to as a "silent emergency." According to the national census conducted by the Ministry of Internal Affairs and Communications, Japan's population decreased by approximately 80,000 in 2008. The National Institute of Population and Social Security Research estimates that Japan's population will decrease by almost 350,000 in 2015.
What about the future? Japan's population is shrinking at an increasing rate. In 2015, the rate was 0.28%, will rise to 0.61% in 2025, and jump to 1.05% in 2050. The decrease is even starker if we examine the decline in the number of people. According to future population estimates, Japan's population will contract by 740,000 in 2025 and this figure will accelerate to 1,020,000 in 2050.
The impact of population decline and that of the working population becomes more pronounced over the course of time. The view of many experts is that unless there is a significant increase in productivity, we will not be able to avoid a fall in the rate of potential economic growth. Also, by 2025, the entire baby boomer generation will be 75 years old or above. This increase in the elderly population will exert pressure on public finances due to higher medical and nursing care and other social security expenditures.
In the era of the Japanese post-war economic miracle when the population was increasing, politics demonstrated tremendous effectiveness by allocating the increased wealth. However, since Japan plunged into an era of low growth and a shrinking population, the role of politics has quickly changed from one of "positive allocation" to "negative allocation." In reality, this situation is not being addressed and the political arena has become dysfunctional. In such circumstances, how should policy be made in order for politics to function? In this series of articles, we will search for hints to answer this question.
* Translated by RIETI.
October 27, 2015 Nihon Keizai Shimbun
