Matthews Asia Snapshot
Week of 27 April 2018
On May 5, Japan celebrates Children’s Day as part of its Golden Week holiday season. Families fly carp-shaped windsocks called koinobori
for each child in their household. In Japanese folklore, the carp symbolizes good fortune and perseverance—two things the country will need in facing its serious demographic challenges.
Japan’s birthrate has long been below its population “replacement rate.” Last year, the number of Japanese babies born was the lowest since recordkeeping began in 1899. In addition to this diminishing rate, Japan’s elderly account for about 26% of the country’s 127 million population.1
While the central government has been reluctant to alter immigration policies as a solution to boosting population, it has been pushing initiatives to help create more child care facilities, improve work/life balance and subsidize early childhood education. In December 2017, much of the nearly US$19 billion (2 trillion yen) in extra public spending approved by the Cabinet was slated for child care.2
Among Prime Minister Shinzo Abe’s central goals is raising the female participation rate in the labor force, which is critical to addressing Japan’s looming labor shortage, the byproduct of its aging population. Three years ago, the government adopted reforms aimed at substantially raising the percentage of men taking corporate paternity leave and state-subsidized childcare leave by 2020. And despite the country’s fertility woes, Japan recorded eight consecutive quarters of positive real GDP growth in 2017—the longest growth streak it has seen in 17 years.3
Three main drivers of GDP growth have been consumption of durable consumer goods, capital expenditure and exports (within Asia). Japan’s aging population has been driving the purchase of goods that have senior-friendly features, including vehicle safety systems and lightweight vacuum cleaners. The country’s tight labor situation has led corporations to invest heavily in manufacturing automation to improve labor productivity. Now, these automation-related products and services that Japan has been developing for more than two decades are gaining popularity and demand from elsewhere in Asia countries, especially from China, which is starting to prepare for similar labor issues.
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