Over the past couple of decades Japan has experienced a significant decrease in the population. Declining birth and death rates are the major reasons why Japan is seeing this change. These phenomena are leading to economic and social problems. Although the rapid pace of aging in Japan and its pending economic consequences have captured the attention of Japanese policy makers, little is being done as of yet to remedy the situation.

Lifestyle

The shift in Japan's population can be partially attributed to lifestyle choices. The standard maternity age in Japan has been rising over the course of three decades. In 1970 the average mother’s age at first childbirth was 25.6 while in 2011 it peaked at 30.1. It is safer and more likely for younger mothers to produce more children, hence the effect this phenomenon is having on the Japanese population. In 2009 the Japanese government started an initiative program that would pay parents $3,400 per year for every child they have in an effort to boost birthrates. To counter the current decline, Japanese mothers would need to plan for having at least two children.

Aging Population

It has been predicted that by 2025, 27.3 percent of Japan’s population will be over the age of 60. This is largely a result of the declining birth rates and death rates. Parents are choosing to have fewer children later in life while at the same time health care is getting better, quality of life is increasing and people are living longer. Although it is culturally normative for aging parents to live with their children, this trend is changing, causing further stress on government resources for the elderly. The biggest challenge facing Japan will be how to provide for this massive aging population.

Economy

Because such a large portion of the current generation is going into retirement, the number of retirees is out numbering the incoming new workers. This is going to inevitably strain the economy as the government struggles to provide pensions. In addition, a smaller labor force means less tax money available for the government to take care of its citizens. Yet another effect of the aging population will be the shrinking number of Japanese consumers. Since consumer spending comprises two thirds of Japan's gross domestic product or GDP, this is sure to have a stark impact on the Japanese economy.

Effects of Depopulation

As the population of Japan continues to age and decline, Japan will no longer hold its place as the world's second largest economy next to America. Japan will face multiple recessions and China will step into Japan’s number two slot with India steadily approaching behind China. Consequently, this phenomenon is not unique to Japan as Italy and Germany are both aging at a similar rate. Because this demographic shift is inevitable, it will be left to political and policy reform to combat the ill economic effects of this phenomenon.