Japan’s Baby Bust Is an Opening for Experimentation

(Bloomberg Opinion) -- Japan's population is shrinking. There are about 127 million people in the country today, but by the year 2050, this is projected to drop to about 102 million — and to keep falling thereafter:

This will cause all sorts of problems. A shrinking population is also an aging one — a smaller base of workers supporting a larger number of retirees means lower living standards for everyone. An older population also tends to be less productive. Additionally, a shrinking population means a shrinking domestic market, decreasing the incentive for companies to invest in the country. It could also reduce the natural rate of interest, forcing the Bank of Japan to keep quantitative easing running forever in order to keep the country out of a liquidity trap. And it will certainly reduce Japan's power and importance in the world.

So there are many reasons to want to stabilize the Japanese population. There are two ways to do this: immigration and higher fertility. Under Prime Minister Shinzo Abe, Japan has been admitting a lot more immigrants:

But while this will help cushion the blow of population decline, it won't solve it, for several reasons. First, the sheer numbers required to prevent population decrease would be enormous — Japan is not accustomed to being a nation of immigrants, as America or Canada is, and tens of millions of newcomers would be likely to provoke a dangerous political backlash. Second, relatively low salaries and the language barrier mean that Japan has lots of trouble attracting high-skilled permanent residents, meaning that too much of its immigration is of the low-skilled guest-worker variety.

So a rise in fertility would be a very good thing for Japan. The rate has risen, in fact, from a low of 1.26 children per woman in 2005 to 1.46 in 2015. But that's still well below the 2.1 required for long-term population stability.

The bad news is that birth rates are very hard to raise with government policy. Almost all rich countries have subreplacement fertility. The most successful country has probably been France, which has promoted work-life balance and provided generous subsidies for child care. Japan is now seeking to emulate that model, providing more cheap child care and trying to push companies to give employees more time at home.

Those are good ideas, but it's unlikely that they'll be enough to stabilize the population. Fortunately, Japan is in a highly innovative mood in term of policy. Although many rich countries turn inward and retreat into either nostalgic populism or reflexive conservatism, Japan has experimented with unconventional monetary policy, increased immigration, new corporate governance strategies and other bold moves. So the Land of the Rising Sun might be the perfect place to try out new ideas for increasing fertility rates — ideas that, if successful, could be exported to all the other developed nations that are in a similar boat.

One idea would be to promote suburban living. More than 94 percent of Japan's population lives in cities, and that number has actually risen in recent years. Though home sizes have been rising, urban apartments and houses still tend to be small places, unsuitable for larger families. That may be one reason fertility rates tend to be higher in suburbia. Japan, with its excellent rail networks and flexible zoning laws, is great at density, but it might be time to reconsider the all-urban focus. Cheaper roads and gasoline would help make car-centric suburban life more feasible in Japan.

Japan could also leverage its large population of old people, as well as teenagers, to provide cheap accessible childcare. Many able-bodied retirees in Japan might enjoy turning their homes into small daycare centers to inject some energy and life into their days, and teenagers could be certified to become babysitters — something that is still rare in Japan.

A third idea is to encourage young people to live in communal housing, in order to facilitate social activity and marriage. In Japan, most people still want to get married before having kids, but the anomie and isolation of urban life can prevent them from finding spouses. Communal living is becoming slightly more popular among the country's youth, as noted in the reality TV show "Terrace House." But government encouragement could accelerate the trend.

A final strategy would be to leverage popular culture. There is good evidence that Brazilian soap operas depicting small families had the effect of reducing fertility rates in that country. Japan's government might prevail upon its producers of television, comics and other media to depict larger families living in typical modern Japanese settings, as a way of spreading higher-fertility norms.

These ideas are all fairly speculative. But when nothing works, it's time to go try something bold and unconventional. With its highly effective government and its newfound tolerance for out-of-the-box thinking, Japan is perfectly positioned to be a laboratory for approaches toward stabilizing population in rich countries.

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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