Sunday, June 21, 2009

Japan's ageing population lures foreign migrants

Many years back, I went to Bali as part of the Philippine media team that covered the ASEAN Economic Summit there. One of the agenda in that summit was an agreement that would allow ASEAN citizens, particularly professionals and other skilled workers to work in any of the ASEAN-member countries within the region. In the same summit, Japan had even agreed in principle to allow foreign workers from ASEAN to fill up its impending labor shortage. The willingness of Japan to soften its hardline stance to allow foreign workers to come in was a welcome move on the part of the ASEAN member countries. Perhaps, it was Japan's role to share in the ASEAN's program of strenthening its trades in goods and services within the region itself.

The Philippines, for one, is expected to benefit from this latest development. In fact, President Arroyo already went to work it out with the Japanese government on the possibility of fulfilling its previous commitment that would pave the way for Filipino professionals and skilled workers to work in Japan. Japan is not a member of the ASEAN, but as one of the most important trading partners in the region, along with South Korea and China, it is willing to help in some ways in a manner that will not hurt its immigration and labor laws.

The reason is clear as to why Japan came to the point. Obviously, Japan is experiencing a growing level of baby boomers where sooner or later, the Japanese government will have no option but to address the growing concern for the rising number of retirees and ailing elderly population, which are now growing at a fast rate. Most Japanese at this time are busy with their jobs and other livelihood so that raising enough children is not in their vocabulary. Many of them still believed in the saying that: "He who walks alone, walks the fastest." Besides, many women do not want to bear more children anymore, knowing how fast-paced life and costly to keep the standard of living in Japan. Also, there is underlying belief among the Japanese, particularly those who were still teenagers when the war broke out, the less children one has, the more savings one could have. The JETRO Economic Report stated in 2006 that "Elderly households hold more financial assets than other generations." It adds: "Households comprised of people in their 60s are worth an average of 17.03 million yen, followed by those people 70 or above at 14.96 million yen."

It explained further the reason for this accumulation of assets is that they are no longer tied up to child-rearing costs and have less to pay back on home loans and are able to accumulate greater assets. In fact, the total value of financial assets held by baby-boomers accounted to approximately 130 trillion yen as of Fiscal Year 2004. The same report cited that the boomers' transition to old age with significant assets, in addition to retirement bonuses, will create an elderly population holding assets of enormous scale."

Unlike the U.S. whose aging population is not as extreme as that of Europe, Japan is already experiencing rapid fertility decline, says the International Institute for Applied Systems Analysis in its study titled "Economic Impacts of Population Aging in Japan." According to the McKinsey Quarterly, by 2024, more than a third of the poulation in Japan will be over 65, adding that retired households will outnumber households in their prime saving years, so savings rates will fall drastically.

With approximately 27 million elderly people and the largest proportion of over-65s of any country, Japan also has the smallest proportion of people under the age of 15 (13.6%), which will result in huge difficulties for Japan in the future, as the number of working people will be unable to support the population. If this is not corrected in due course, it could put Japan's economy in a dilemma.

As this is being written, Japan is faced with two major problems related to the increasing elderly population. One is that as more Japanese reach the age of 65, looking after them will be a big headache for the government is so far as healthcare is concerned. Secondly, younger workers are adamant to fill up the jobs that the retirees have vacated. There is also a tendency for the government to raise the retirement age of workers to more than 65, if only to save more time and money for their benefits. If these problems are not solved, many elderly people will suffer as the country tries to provide adequate healthcare to the rising elderly population in the future, demographers said.

With Japan's labor market now faced with an impending labor shortage, it will have no choice but to relax its immigration laws and encourage foreign workers to work there even temporarily. Figures showed that there's about 2 million foreign workers in Japan right now. Accordingly, this number is not enough to fill the labor shortage considering that many young Japanese do not want to do the dirty jobs. At least, Japan needs as many as 500,000 migrants each year for the next 40 years in order to keep pace with its industrial development, a demographic report said.But the stumbling block right now is that the Japanese government is on the wait-and-see attitude as to whether to allow migrants to come in or not. The reason, perhaps, is that Japan doesn't want to pollute its cultural heritage.

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