Issue Briefs

Japan’s Demographic Challenge

Underlying Japan’s long-term economic struggles is profound demographic change. With a combination of low birthrates and the world’s longest life expectancy, Japan’s population is rapidly greying and shrinking. This demographic revolution has already had significant effects on macroeconomic conditions and consumption patterns as well as the health of the social safety net. It has dramatically affected communities outside of Japan’s major cities, because rural areas have aged faster than the country as a whole, threatening their future viability. It may also be forcing Japan to update its immigration and family policies to limit the impact of demographic change.

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Shortly after taking power in December 2012, Japanese Prime Minister Shinzo Abe outlined a three-pronged economic policy that became known as “Abenomics.” By coordinating monetary, fiscal, regulatory, industrial, social and trade policies, the Abe government is working to end deflation and stimulate demand in the near term and pursue politically difficult fiscal and structural reforms for long-run growth.

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As part of his economic initiatives known as Abenomics, Prime Minister Shinzo Abe is promoting a program of so-called “Womenomics,” which is based on the premise that improving opportunities for women can both mitigate the effects of Japan’s shrinking workforce and actually increase the fertility rate.

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