ISLAMABAD: Japan will face mounting demographic and macroeconomic challenges, including a shrinking labor force— the oldest of any developed country—, low demand and economic growth, deflation, declining savings rates, and increased government debt by 2040.
‘Global Trends 2040’ released in the first week of April by National Intelligence Council (NIC) identifies four structural forces that will shape the future – demographics, the environment, economics, and technology – and assesses how they affect decisions and outcomes.
It also mentions five potential scenarios for the world in 2040, based on different combinations of the structural forces, emerging dynamics, and key uncertainties.
The 2021 Annual Threat Assessment of the U.S. Intelligence Community says that birth rate remains low and the median age rises, in most developed and a handful of emerging economies, Japan will see their population peak and then start to shrink by 2040.
During the next 20 years, the world’s population will continue to increase every year, adding approximately 1.4 billion people to reach an estimated 9.2 billion by 2040, but the rate of population growth will slow in all regions.
Population growth in most of Asia will decline quickly, and after 2040, the population will begin to contract. Although India’s population growth is slowing, it will still overtake China as the world’s most populous country around 2027.
Countries with highly aged populations like China, Japan, and South Korea, as well as Europe, will face constraints on economic growth in the absence of adaptive strategies, such as automation and increased immigration.
An opportunity and a burden, the combination of fewer children per woman and people living longer will see the global population age rise from a median of about 31 years in 2020 to 35 in 2040. Japan is likely to reach median ages of more than 53 in 2040, up from 46.
Rapid increase in median and older ages in population, Japan is likely to see further productivity slowdown in the coming decades because older workers usually show fewer productivity gains and a greater share of national income will be diverted to pensions and health care for seniors.
The report ‘global Trends 2040’ further revealed that as birth rates remain low and the median age rises, most developed and a handful of emerging economies will see their populations peak and then start to shrink by 2040, including Japan, China, Russia, and many European countries.
In contrast, Sub-Saharan Africa will account for around two-thirds of global population growth and is poised to nearly double its current population by 2050, portending extensive strains on infrastructure, education, and healthcare.
Japan’s population has decreased, raising concern about the future of Japan. There are many causes, such as the declining birth rates, as well as the ratio of men to women since the last measurements from the years of 2006 and 2010. According to the Japanese Health Ministry, the population is estimated to drop from its current state of 125.71 million to 86.74 million by the year 2060.
Japan is likely to remain highly economically dependent on its largest trading partner and main regional rival China and a close ally of the United States while working to further diversify security and economic relationships, particularly with Australia, India, Taiwan, and Vietnam.