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The Number Of Declining Birthdate In Japan Essay

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Introduction:

            Japan is one of the models of perfection in Asia.  From a country that was ravaged by the effects of two atomic bombs into a country that has one of the world’s strongest economies, the Japanese model is certainly one that is worthy of all the praise that it gets.  From the standpoint of the outside world, the Japan seems to defy all odds; it manages to maintain its solid financial growth despite all the challenges brought by globalization.

  Culturally and Politically, Japan has also managed to evolve a system that the world marvels at.

            The problem, however, is that while Japan continues to progress and develop, its population is slowly getting older.  Japan is now faced with a problem that cannot be solved by any technological invention.  As more and more Japanese reach their golden years, the younger generations who are supposed to replace them are steadily decreasing in number because of the low birth rate of Japan.

            This short discussion will dwell into the basic demographics, cultural heritage, economic position and governmental structure of Japan.  It will then proceed to analyze these elements within the framework of the viability of finding business opportunities in Japan.  In arriving at this analysis, it is important to first shed light upon these key elements.

Hypothesis:

  • The decreasing birth rate of Japan has a negative effect on the economic growth of Japan for the next decade
  • As the cost of living begins to increase, it is projected that Japan’s birthrate will also decline correlatively

 

Background of the Study:

            This study will attempt to discuss the problems that are plaguing Japan, with particular emphasis on the gradually decreasing growth rate.  As an integral part of this study, there will also be an analysis of the effect of such negative growth rate on the culture and economy of Japan.  This section will provide a brief overview on certain key elements of Japan that will help in providing a better perspective of the discussion.

 

Demographics:

            Japan’s total population is estimated to be at 127,463,611.  While the population growth has been in steady decline due to the decrease in birth rate and lack of net immigration, it still possesses one of the highest life expectancy rates in the world with an average life span of 81.25 years of age as per the survey conducted for the year 2006.  Given this high life expectancy and low birth rate, Japan currently has one of the oldest populations in the world.

This population growth problem can be traced back to the early 80’s when the median age of the Japanese elderly population steadily rose.  Statistics reveal that the 65-85 age brackets are expected to increase from merely 6% of the general population in 1985 to over 15% by early 2025.  This has been projected to cause a problem with the health care and pension systems of Japan due to the low birth rate.

Population of Japan

2007 estimate 127,433,494 (10th)
2004 census 127,333,002
Density 337/km² (30th)
872.8/sq mi

Culture:

            The culture of Japan has changed over the centuries.  While the basic hierarchical system still exists in Japan, the contemporary culture that exists in Japan today is more of an amalgam of influences from different parts of the world such as China, North America and Europe.  The designs of the houses in Okinawa reveal a certain Chinese influence that has been infused with designs that are of Thai and Malay origin.

            Another important aspect of Japanese culture is its literature.  To date, Japan has one of the widest reading populations in the world.  The popularity of more contemporary forms of literature such as manga, which is directly translated into comic book, has even spread to other parts of the world.  It has also influenced the creation of a number of animated features and full length films, not only in Japan but in the United States as well.

            While Japanese culture traditionally produced haikus, this all changed during the Meiji era when Japanese culture began assimilating different aspects of western literature.  The Japanese soon excelled in this new writing style as evidenced by Nobel Prize winning authors, Kawabata Yasunari and Oe Kenzaburo.

            The musical affinity of the Japanese is seen in the popularity of a new brand of music called J-Pop which is a collaboration of Japanese, American and European musical influences.  The number of Karaoke clubs in Japan also signifies the popularity of singing as one the most widely done cultural activities in Japan today.

It remains to be seen, however, just how this cultural aspect of Japan will remain given the declining population and the steady increase of foreigners who have begun to reside in Japan.  While the culture has remained resistant to outside influences over the years, the steady decline in power of the elderly could mean a shift in certain ideologies and traditions in favor of newer and more western values.

Economics:

            Japan has steadily risen to become one of the strongest economies in the world following the collapse of its economy after the Second World War due to economic embargoes and sanctions that were levied upon its economy.  However, due to a unique work ethic and minor spending on national defense, Japan has quickly become one of this world’s economic elite.

            The major industries in Japan include banking, transportation, electronics, telecommunications, real estate, insurance and retailing.  The capacity of Japan to produce automobiles on a large industrial scale has also helped increase the country’s GDP to around US$ 4.2 trillion.

GDP (PPP) 2006 estimate
 – Total $4.220 trillion2 (3rd)
 – Per capita $33,1002 (12th)
GDP (nominal) 2006 estimate
 – Total $4.911 trillion2 (2nd)
 – Per capita $38,341 (14th)

            One of the largest industries in Japan remains to be construction due to the high government financial support in this area.  Massive construction projects have helped keep the Japanese economy afloat with the government often granting multi-billion dollar projects to the private sector.

            Another important facet of the Japanese economy is its banking sector.  The world’s largest bank, Mitsubishi UFJ Financial Group, with over US$1.7 trillion in assets is based in Japan.  This has played a major role in the growth of the Japanese economy by controlling the liquidity of the market to a certain extent in order to spur growth and development.

            Other notables in the Japanese financial sector are the Japan Post, which is the world’s largest postal savings system, and the Tokyo Stock Exchange, which is the world’s second largest stock exchange.  Japan is also the site of some of the largest financial service companies, business groups and banks in the world.

            The problem that remains, however, is how the market will be able to sustain its growth given the massive pension payments that are expected to be paid out in the next decade.  As Japan’s population continues to age, the number of younger working class who were expected to make contributions to the government pension fund are also decreasing.  This means that as more payouts are required the payments to cover those payouts will dwindle.

 

Methodology:

            This section will briefly cover the statistical tools that will be used in order to arrive at the correlations that have been previously mentioned in the other sections.  It must be pointed out that a simple regression model will be used to project the impact a lower birth rate has on the Gross Domestic Product (GDP) of Japan.  This will be done by taking the decrease in birth rate over the past 20 years and analyzing it with respect to the changes in GDP of Japan over the same period of time.  In order to achieve this, a linear correlation and regression model will be used.

            Due to the presence of other factors that may affect this result, such as technological innovations that increase production, a two-sided versus one-sided test will also be done.  This will be used to determine whether or not there are other factors that may affect the results in the first statistical test.

            Finally, since the results can vary where more than one factor may influence the results, these must be distinguished from merely random effects.  An analysis of variance will also be used to ensure the accuracy of the results.

            The weakness of this methodology is that it will not be able to totally capture random effects on the population and economy.  Factors such as foreign grants and environmental incentives have been shown in certain models to affect GDP directly.

The strength of this methodology, however, lies in the fact that it will allow for the presence of the aforementioned factors in the models and will double check just how much of a difference such factors will make.

Scope and Limitations of the Study:

            Due to the complexity of certain economic variables that are involved, the study must be limited to the previous 20 years.  The availability of data from a longer period will be more difficult to secure and may not be as accurate.

Current Progress:

            To date, the researcher had compiled a significant number of data for the statistical tests that will be used.  Primary research on the figures from 20 years back has already been found.  There is a need, however, to conduct more inquiries with regard to the subject matter to determine whether or not there has been enough data that has been gathered to come up with an accurate regression model.  Furthermore, more time will be needed to test the significance of the data gathered in relation to the hypothesis that has been presented.

            It is expected that these can be completed by (insert date here).  As for the other factors, certain changes might be expected due to the recent adjustment of Japanese domestic policies.  As of this writing, the Diet of Japan has been discussing methods by which to counteract this projected birthrate problem.

 

 

 

 

 

 

 

References:

De Bary, William Theodore (2005). Sources of Japanese Tradition. Columbia University Press, 1304. ISBN 023112984X. Retrieved on 2007-01-29.

Hubbard, Glenn (2005) A Free-Market Cure for Japan’s Chronic Cold Business Week on April 25, 2005

Ogawa, Naohiro.”Demographic Trends and Their Implications for Japan’s Future” The Ministry of Foreign Affairs of Japan. Transcript of speech delivered on (7 March 1997). Retrieved on 14 May 2006.

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