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Japan’s population is rapidly ageing, earning it the title of the world’s ‘super-aged’ society. Statistics paint a vivid picture: more than one in ten Japanese citizens are now aged 80 or older, while nearly a third of the population surpasses 65 years. The number of centenarians is surging, a testament to Japan’s remarkable longevity.
This demographic transformation, however, extends far beyond mere numbers. It is reshaping the country’s economy, workforce dynamics, and societal structures. According to the latest Population Projections for Japan (2023), the elderly population aged 65 and above is anticipated to swell until 2044, amid an overall population decline since its peak in 2008.
The working-age population is expected to rapidly decline from 2027, or more specifically, it is expected to shrink by about 12% in 2040 from 2022.
The ramifications of this demographic transition are profound. The World Economic Forum’s Future of Jobs Report 2023 highlights a concerning trend: only 35% of companies prioritize workers aged over 55. Moreover, the International Monetary Fund forewarned in 2020 that Japan’s public finances face strain due to the burgeoning costs of healthcare and pensions amidst a shrinking tax base.
Robert Feldman, Senior Advisor at Morgan Stanley MUFG Securities, highlights three critical challenges confronting Japan: mitigating the social costs associated with increased longevity, bolstering productivity, and offsetting the impact of a shrinking labour force, projected to decline by approximately 1% annually until 2050. “Though its issues with increased longevity are far from solved, Japan has lessons for the rest of the world,” Feldman said.
The surge in longevity inevitably translates into soaring social expenditures, particularly in healthcare and pensions. Japan’s spending in these areas has skyrocketed from 16% of GDP in 1994 to 27% today. Feldman emphasizes that amidst escalating longevity costs, accelerating productivity growth is imperative to sustain living standards and curtail debt escalation.
As per Morgan Stanley, Japan has options to speed productivity growth by accelerating technology diffusion, improving the efficiency and flexibility of the public and private sectors, and expanding business opportunities in key industries such as energy, AI and IT, agriculture, healthcare and education.
Ageing population means investment opportunities in healthcare
The imperative to enhance productivity looms large as Japan grapples with the mounting social costs of an ageing population. Amidst these challenges, however, lie lucrative investment prospects.
Morgan Stanley highlights the investment potential inherent in addressing longevity-related needs, such as care facilities, transportation, and financial services for the elderly. This trend towards longevity-linked products and services presents opportunities for investors, particularly in sectors like AI, technology, healthcare, and education.
Masaru Taguchi, Connected Care Business Marketing & Sales Leader at Philips Japan, underscores Japan’s allure as an investment destination. Taguchi cites the country’s universal health insurance system and robust health checkup infrastructure as pivotal strengths.
“Japan’s healthcare environment is ripe for innovation through collaboration between industry, academia, and government,” Taguchi told the Japan External Trade Organization (JETRO) in an interview. “Numerous health tech companies leverage technologies facilitating the sharing of patient diagnostic images on smartphones, and ambitious startups employ these technologies in clinical settings.”
Japan’s government has recognized the issue of the rapidly ageing society. Reversing Japan’s declining birthrate is one priority for the government, as well as training workers for more high-skilled jobs in the next five years.
Furthermore, as part of Japan’s national “moonshot” research and development policy, aimed at tackling complex societal issues by leveraging global research expertise, extending healthy life expectancy to 100 years stands out as one of the ten overarching goals.
