We're entering the Year of the Rabbit according to the lunar cycle, so it may not be coincidence that governments across East Asia are trying to figure out how to encourage their populations to do a little breeding.
Japanese Prime Minister Fumio Kishida opened parliament here on Monday with a policy address focusing on the devastating demographics facing the world's third-largest economy. The median age in Japan already is 48.4 years, the highest in the world according to United Nations data, and it only is set to rise. Most people you meet are well into middle age.
"It is now or never when it comes to policies regarding births and child-rearing," Kishida told the Japanese Diet today, indicating that policies supportive of child rearing are his top agenda item this year. "It is an issue that simply cannot wait any longer."
The Japanese leader is pledging to introduce "an unprecedented level of measures" to encourage a higher birth rate as well as to encourage companies to pay higher wages. Both issues have been long-term laments for the government, which has found them stubbornly refusing to budge.
To encourage families to have more children, Kishida promises support from three pillars: higher child allowances; greater child-raising support in terms of after-school facilities and medical help; and labor reform to make it easier for parents to take childcare leave.
That's ahead of the formation of the Children and Families Agency, due to launch in April. Kishida also says he will lay out a plan by June to double the budget for children by the time the government introduces its annual honebuto economic plan.
Kishida has called together a working group that includes directors general from the Cabinet Office, Cabinet Secretariat and the ministries of health, education, transport and internal affairs. They are charged with delivering a package of measures related to accomplishing those three pillars by the end of March.
However, Kishida hasn't discussed how he intends to pay for any of those initiatives. Kishida's "style on this matter - as with his thinking on defense spending - appears to be to pick a large number and worry about the details later," Takahide Kiuchi, executive economist at the Nomura Research Institute think tank, chides.
If people are really avoiding having children because they are worried about the cost of raising them, spurring overall growth and attaining a steady economy should be a key focus, Kiuchi says, not simply throwing money at the problem through government cash giveaways that are a temporary fix.
Still, there's no doubt about the pressing nature of the population problem. Births in Japan likely fell below 800,000 for the first time on record last year, according to the government's estimate, coming a full eight years before it had predicted that decline would happen. "While undeniably long overdue, the Kishida administration's concerted effort to finally address Japan's declining birth rate should be welcomed," Kiuchi says.
Kishida has promised to introduce "new capitalism," a vague term that he has yet to define. He says he intends to encourage cooperation between the government and the private sector as one way of sparking growth.
One of his key desires is to prompt companies to distribute profits to employees in the form of higher compensation, which then would feed through to greater economic growth. He would like to see companies diverge from a system of paying workers based on seniority to merit-based pay and promises to provide greater detail by June as to how that will be achieved. He also pledges support for job training and aid for workers to switch into growth industries.
Japan's inflation rate stands at 4.0% as of December, new figures show, the highest rate since 1981. Kishida emphasizes that wages must increase faster than the rate of inflation, although it is likely price increases based on higher fuel imports have now peaked.
Separately, Kishida is pledging to increase Japan's defense budget. The government will spend ¥43 trillion (US$330 billion) over the next five years starting with fiscal 2023, an increase of more than 50% from current defense spending. Both China and North Korea are on the radar as threats, while Kishida has looked to reaffirm Japan's alliance with the United States as well as the "Quad" Indo-Pacific democracies grouping that also includes Australia and India.
China contracts, India grows
A similar theme of a declining, ageing citizenry rose to the fore last week when China published its latest population figures. Those numbers show that China's population shrank by 850,000 people in 2022, with deaths outnumbering births for the first time since the 1960s amid the famines of the economically disastrous Great Leap Forward. India later this year likely will surpass China to become the nation with the most people in the world.
That transition already may have occurred. India's population currently stands at 1.417 billion, as of the end of 2022, according to World Population Review. That's just over 5 million more than the 1.412 billion people it estimates that China now contains.
What's more, half the population in India is under the age of 30, meaning the median age is 28.4. That contrasts with the median age in China, now at 38.4.
Each country faces its own issues, and personally I'm encouraged that the world will soon have a shrinking rather than growing population. We will need to think about new ways to define economic relevance beyond simple measures of GDP, which rewards countries for concreting over everything and growing in an unsustainable way.
India's government must find jobs for millions of young people entering the work force every year. It has introduced as of last year a new system to bring young people aged 17.5 to 21 into the military for a short contract with a maximum four-year tenure.
But the demographics of ageing nations are particularly problematic. If you look at bar charts, youngest people at the bottom, nations such as India have a "building" structure, something like a pyramid that narrows as the building rises. But places such as Japan and China are top-heavy, with a narrow base, a massive middle-age bulge, and comparatively thick wedges at the top, too. There literally aren't enough young people to support the growing ranks of the elderly. If their demographic charts were buildings, they'd topple over.
"Our nation is on the cusp of whether it can maintain its societal functions," Kishida told Japanese lawmakers today. He is not wrong. Japan already does its best to group hollowed-out small towns in the hinterlands that can "share services" and provide transportation support for the elderly to reach them.
It is a common issue across East Asia that citizens are resisting having children. In China, years of the one-child policy have resulted in generations of single children who are now of child-rearing age and having babies at below the replacement rate for the population. Demographers typically say each woman must have 2.1 children for a population to avoid decline.
Births have fallen for six consecutive years in China. What's more, many families are now conditioned to the concept of having one child, if they have one at all. And they compete with families who are also investing all their resources in a single child.
Ageing around the globe
I'm sitting here in Hong Kong, median age 44.8, with South Korea not far behind at 43.7 years of age. Singapore (42.2 years) and Thailand (40.1 years) are also right up there. The United States is half a decade younger (median age 38.3), although a fair chunk of Western Europe (led by Italy, second-oldest population in the world at 47.3 years of age) faces similar issues.
Those numbers will rise. South Korea has the lowest fertility rate in the world, at 0.8 children per mother, according to World Population Review. Hong Kong is tied with Puerto Rico at the second-lowest, at 0.9, but Macau (1.1), Singapore (1.1), China (1.3) and Japan (1.3) are not far away.
Covid may have a temporary and provocative effect. In China, there were 10.41 million deaths last year, up from the typical 10 million reported in recent years. It may be in the next report that we see an even greater impact because China only threw off the shackles of Covid restrictions in early December. But the Chinese government has a history of doctoring numbers that don't suit its narrative, so it remains to be seen if 2023's deaths show what certainly has been a large temporary uptick due to the disease.
It should be in the latter half of this century that the global population will start to decline. Ecologically, that moment can't come too soon. But it will produce unexpected challenges that Japan in Asia and Italy in Europe will face first. Fewer workers, it seems to me, guarantees that wages will need to rise and productivity will need to increase. How those leading-edge nations perform will be instructive to watch.
