Japan Aging Population: Threat or Opportunity?

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Is Japan aging population a threat or an opportunity? In this article, we consider that even though the dramatic increase in the number of elderly can be socially and economically devastating for Japan, it somehow represents an opportunity for companies to innovate and for Japan to lead the way to the global aging phenomenon.

According to the last census conducted in 2015, Japan’s total population was 127.09 million. A decrease of nearly one million people from the previous one conducted in 2010. This decrease was the first decline in population since the initiation of the Census in 1920 and brought Japan into the scary stage 5 of the Demographic Population Model (DTM).

The DTLM model considers the total population evolution based on the birth rate and death rate. Each of the stages analyses the impact between birth rate and death rate. Social factors and economic growth are critical to the transition of a country for one stage to the next.

Stages of the Demographic Transition Model

Stage 1 is the prototype of pre-industrial societies. Even is the birth rate is high, the death rate is high as well. These societies rely heavily on unskilled manual labor and agriculture, thus the need for a large workforce despite the lack of proper sanitation and healthcare.  Contrarily to the 18th century, when all countries were in Stage 1, today, no countries are in this stage.

During Stage 2, the improvement of social and economic conditions and a decline in death rate associated with a still high birth rate leads to an increase in the overall population. India is a perfect example of what a country in Stage 2 is.

In Stage 3, a lower birth rate associated with a still declining death rate leads to a decrease in the total population growth rate. Morocco and Kenya are currently in Stage 3.

A decline in both birth and death rates is usually associated with mature economies, highly educated citizens, and functional healthcare systems. Stage 4 is considered as the ideal stage to be. Today, most developed countries are enjoying the social and economic benefits of stage 4.

Japan is, unfortunately, the perfect example of what a Stage 5 country with a declining population is. The economy is becoming the driving force behind a decline in family size. Young people are part of the labor force, and the working-age population concentrates in urban areas.

Why is Japan the prototype of a stage 5 country? Numerous economic, societal, and political reasons can explain why Japan is a super-aging society.

Economic

Japan has long been a model of economic growth and success. With a GDP of 5.9 trillion dollars, the archipelago is still ranked third in the world. But the road has been bumpy. The fuelling of the estate bubble by the massive loans bubble lead to what is now known as the lost decade.

The economic insecurity during this post-1990 period had severe consequences on Japan’s population. According to Statista,  in 2015, the number of nuclear families amounted to 56 percent. The size of the households has been on a gradual decrease over the last decades, from 3.41 people per household in 1970 to 2.33 in 2015.

According to the Japan Statistics Bureau, the number of elderly households (private households with household members aged 65 years old and over) in 2015 was 21.71 million. It accounted for 40.7 percent of the total private households. There were 5.93 million one-person elderly households.

The retirement age in Japan is at 60 years old, but citizens have the choice to work up to 70 years old to increase the level of their pension. With the declining workforce, older adults are encouraged to continue being active for as long as they wish and are physically able to.

With economic difficulty, come precarity, lower-wage, falling birth-rate due to the inability to support larger families and rigorous immigration policy for foreign workers.

Social and Cultural

Shinzo Abe, Japan’s Prime minister, described Japan’s aging population and low birthrate as the main national challenges. In his views, there is a need to reform the uniform Health Care system that treats everyone in the same way and enter the age of personalized health care.

The Government also took action to increase the number of childcare places and introduced other measures to encourage couples to have more children. In 2019, the number of babies born in Japan, approx: 889,000, did not compensate for the number of death, approx: 1,245,000.

Plans are currently being analyzed by the Japanese Government to consider raising elderly people’s out-of-pocket medical expenses to 20 percent from the current 10 percent under the Long-Term Care health insurance system.

In 2013, after the Abenomics, Shinzo Abe introduced a new word, “Womenonics,” to encourage women to enter the workforce. This policy aimed at increasing the total number of the workforce but at consequences on the natality as Women being more involved by their career had less time to devote to a family. According to the Japan Times, More than 70 percent of single people in their 40s and above reject the idea of building a family and prefer to age alone.

Raising a child is expensive in Japan. From birth to College, the cost ranges from $300,000 to $600,000. By offering new moms, $30,000, and subsidies for children’s care, housing, health, and education, the small Japanese town of Nagicho was able to double its birth rate from 1.4 to 2.8 in 2014.

From Grey to Gold: Economic opportunities in aging Japan

In 2016, more 7.3 million people were engaged in Japan in the Medical, Healthcare and Welfare industry. This industry was only surpassed by Retail and Manufacturing. In 2025, with the baby-boomers turning 65, Japan will lack more than 270,000 care workers. The strict immigration policy and tough work conditions partly explain why the Japanese Government is now promoting local and foreign startups to develop innovative solutions to address the lack of carers.

In October 2019, the Ministry of Economy, Trade, and Industry (METI) held the 2nd Well Aging Society Summit Asia-Japan in Tokyo. During two days, more than 650 participants from 22 countries from all over the world discussed the technologies developed to support healthy aging. The aim is for Japan to be at the forefront of innovative technologies such as robotic care to support the elderly.

Two Israeli companies were awarded as being particularly innovative:

  • EchoCare Technologies: This startup develops non-wearable elderly care and home monitoring system.
  • BestBrain is a company created to offer practical and clinically-proven cognitive enhancement solutions that can be used autonomously by consumers in the comfort of their homes.

According to John D. Halamka, professor of international healthcare innovation at Harvard Medical School, Telemedicine will play a central role. He emphasized the importance of telemedicine in dealing with Japan’s super-aged society’s needs.

Rather than adapting products and services to the elderly, Japan’s aging population is a threat to the country but carries numerous opportunities for companies to identify new customer segments among seniors and to develop specific products and services to address their needs.