Japan urged to use gloomier population forecasts after plunge in births

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Japan must stop being overly optimistic about how quickly its population is going to shrink, economists have warned, as births plunge at a pace far ahead of core estimates.

Japan this month said there were a total of 686,000 Japanese births in 2024, falling below 700,000 for the first time since records began in the 19th century and defying years of policy efforts to halt population decline.

The total represented the ninth straight year of decline and pushed the country’s total fertility rate — the average number of children born per woman over her lifetime — to a record low of 1.15. 

But public and parliamentary dismay over the latest evidence of Japan’s decline was intensified by the extent to which the figures undershot population estimates calculated by government demographers just two years ago. 

The median forecast produced by the National Institute of Population and Social Security Research (IPSS) in 2023 did not foresee the number of annual births — which does not include children born to non-Japanese people — dropping into the 680,000 range until 2039. 

The arrival at that level 15 years ahead of schedule is critical, said academics, analysts and officials, because the government uses that median forecast when formulating economic and fiscal policy.

The government’s pivotal economic policy document — the first blueprint for macroeconomic management produced by the cabinet of Prime Minister Shigeru Ishiba on June 6 — relies on the median population forecasts.

Masatoshi Kikuchi, chief equity strategist at Mizuho Securities, said the government switching to a more realistic, lower births estimate would constitute “admitting to a history of policy error”.

“Adopt the lower estimate, and the government will need to tell people to accept higher tax and lower pension benefits in the future,” Kikuchi said.

Keishi Abe, a member of the opposition Japan Innovation party, also raised alarms last month about the use of the median estimate in a review of pension policy.

“There has never been a case where the actual birth rate was the median estimate,” he said, adding that the use of the median estimate by the government was tantamount to an act of “public deception”.

Along with the median forecast, the IPSS produces an estimate based on very low marriage and fertility rates. The low estimate foresaw annual Japanese births falling below the 690,000 level around 2024.

“The most pessimistic downward change in the fertility trend that Japan could have been expected was the one that occurred . . . and that is the one that should have been used,” said Takashi Inoue, a demographer at Aoyama Gakuin University.

Kikuchi at Mizuho Securities said that “if the government changes the assumptions for future birth rate and population structure, it would also need to change many forecasts related to the future social welfare”.

The median estimate reflected a wish to promote a national sense of “a bright future economy”, Kikuchi added. 

IPSS researchers blame the large discrepancy between reality and the median estimates on the acute failure of Japan’s marriage rate to rebound from the huge dip caused by the Covid-19 pandemic.

“Things have not actually returned to the way they were before Covid-19,” said Motomi Beppu, senior researcher at IPSS. “The early 20s [for Japanese people] are a particularly important time for finding a marriage partner, but Covid-19 has changed young people’s behaviour . . . such as losing opportunities to meet people.”

About 100,000 planned weddings did not take place during the Covid years of 2020 and 2021, according to Ryoma Yamamoto, chief executive of the group that operates Japan’s largest marriage-focused dating app Pairs. This had a powerful knock-on effect.

“Wedding ceremonies are a powerful tool in convincing Japanese people to consider marriage themselves,” Yamamoto said. “So when you didn’t see marriages during that time, the dream wasn’t really generated in people’s minds as before. There was nobody saying ‘You’re next’.”

The sharp drop in dating and marriage among young people was also due to declining incomes, Inoue said, and not necessarily unique to Japan.

“Young people tend to think that marriage and child-rearing are not cost-effective and not worth the effort,” said Inoue of Aoyama Gakuin University. “The same is true for dating . . . the rising cost of everything related to dating, whether it is driving, travelling or dining, is likely to be a factor.”