The consumer price index isn’t the only instance where Japan is threatened by deflation.
The country faces a deflating population as well. Japan’s population is expected to drop by a staggering 32 percent — from 127 million currently to 86.7 million — by 2060, according to the country’s National Institute of Population and Social Security Research.
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The country’s population fell by more than 430,000 people in 2018, according to figures published by the Ministry of Internal Affairs.
According to the FT, the decline “hat ”was partially offset by a record net inflow of more than 161,000 migrants but the overall pace of decline still hit a new high of minus 0.21 percent. That has left the population at 126.4m, down from a peak of 128m in 2010.”
That’s bad for the economy in the long term. Fewer young people in the workforce could mean less capacity for technological innovation and ultimately lower productivity.
A concerned government is trying to keep the population above 100 million over the next 50 years by encouraging families to have three or more children and by calling for a greater allocation of state funds for child raising and education.
Credit Suisse calculates that in order to keep the population above that level, the country’s fertility rate would need to increase from its current 1.43 to 1.88.
It’s probably an unattainable goal, given that 60 percent of women would need to have at least three children in order to offset the number of women who aren’t having kids.
Moreover, that would come into direct conflict with another government goal: increasing the female labor force participation rate.