Case Study of the Day: Demographic Dividend – Japan’s Grey Economy

Japan’s Grey Economy

• Japan is rapidly going grey, due to a declining birth rate and high life expectancies.
• In Japan, the demographic change is the most in the emptying countryside, where fertility rates are lower and young people move away to the cities for jobs.
• Thus, as the population in the countryside rapidly shrinks and ages, Japan’s biggest cities — Tokyo, Yokohama, Osaka and Nagoya are growing because of the concentration of jobs, universities and political institutions in these seats of power.
• As a result, Japanese policymakers are taking to policies to reverse population growth in cities, in the following manner:
  • Japan is offering cash incentives to families to shift from Tokyo to mountainous areas that lie within the city’s boundaries.
  • Earlier, Japan’s hollowed-out towns and villages had highlighted the charms of rural life, easy access to undersubscribed childcare, and the availability of eligible men.
  • The government will extend to families up to 1 million yen per child. The figure is more than triple the ¥300,000 on offer under an existing scheme in place since 2019. Those that take the money must embrace the provincial life for a minimum of five years or refund the state. The plan also has some other conditions that would need to be fulfilled strictly in order to avail and keep full benefits.
• Impacts/Consequences
  • The country’s labour pool is already contracting, putting companies in a bind.
  • Younger Japanese have balked at marrying or having families, discouraged by bleak job prospects, onerous commutes, and corporate cultures incompatible with having both parents work.
• Thus, the greying population in Japan is resulting in a ‘Demographic dividend’ turning into a ‘Demographic Tax’ in Economic growth as described by the IMF.

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