Japan’s Population Shrinks by Half a Million, Raising Economic Alarms

Japan’s population experienced a significant decline of 550,000 in 2024, highlighting the country’s growing challenges in addressing labor shortages and funding its social security system with a shrinking tax base, Bloomberg reports.

This underscores the urgency for effective policy interventions to mitigate the economic consequences of demographic shifts.

The total population dropped to 123.8 million, marking the 14th consecutive year of decline, according to data released Monday by the Ministry of Internal Affairs and Communications. The number of Japanese nationals alone plummeted by 898,000, the steepest fall since comparable records began in 1950.

This data serves as a stark reminder of Japan’s concerning demographic outlook, raising alarms about the long-term sustainability of its social welfare system as the number of contributors dwindles. The core labor force, aged 15 to 64, shrank by 224,000 to 73.7 million, further intensifying the fiscal strain on a nation already burdened with the highest debt-to-GDP ratio among developed economies.

The data also revealed a concerning decline in Japan’s child population, which fell by 343,000 to 13.8 million, representing a record-low 11.2% of the total population. This drop follows labor ministry figures released in February that showed births fell to a new historic low, amplifying concerns about the long-term future of domestic industries due to a shrinking supply of new workers.

Despite a low unemployment rate of 2.4%, the lowest among OECD countries, Japan is projected to face a labor shortfall of 11 million by 2040, according to an estimate by Recruit Works Institute. This looming shortage underscores the urgent need for strategies to attract and retain workers, including increased automation, immigration reform, and policies that encourage higher workforce participation among women and older adults.

Partially offsetting the overall population shortfall, the number of foreign residents rose for the third consecutive year, increasing by 342,000 from a year earlier. While this influx of foreign workers helps to alleviate immediate labor pressures, it also raises questions about integration and the long-term social implications of demographic change.

Japan’s population woes reflect broader global trends. South Korea’s fertility rate, while experiencing a slight uptick last year, remains well below the replacement rate at just 0.75. France witnessed an accelerated drop in births in 2023, reaching the fastest pace in half a century, while China’s population has declined for three consecutive years.