This Vanishing City is a Sign of What’s to Come

The city of Sakura, Japan is disappearing.

According to The Japan Times, the population is dropping by 400 people every year. Its population is ageing.

The town is about an hour away from bustling Tokyo. Yet, there are abandoned houses and shops everywhere.

There aren’t many children around either. The school has lost 75% of its students since 1978.

The town reflects the struggle Japan is going through as the country ages. Especially in the countryside, where young people are moving towards the cities for jobs and leaving ghost towns behind.

Japan is going through a population crisis, and the country is ageing.

Almost 30% of Japan’s population is now 65 years of age or over.

An ageing population means less active workers and more money needed for healthcare and pensions. It also means less growth…and more empty properties.

According to JP Info, one in seven homes in Japan are empty.

And, as you can see below, the trend is set to continue with the elderly population increasing and the working age population decreasing over time.

Future population projection (2012 esitmation - up to 2110) 28-02-19

Source: Japan Policy Forum

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Why is Japan’s population dropping?

There are a couple of reasons for the decline.

For one, there aren’t many births.

The other reason is that Japan doesn’t have much immigration either.

In fact, I was recently talking about this with someone during a barbeque. After the usual pleasantries we got to talking about what he did for a living.

It turns out he was an English teacher, and he had spent the last few years in Japan.

As he told me, he loved the food, the people, the culture. But, as he told me, it’s rare to see many foreigners living there.

But, this could all be changing.

As Bloomberg reports, Japan is about to make an unprecedented move:

The number of foreign workers [in Japan] has doubled in the past five years, entering via a back door for student visa holders and overseas trainees. Beginning in April, the front door will open a bit wider as Japan starts officially issuing visas for unskilled guest workers, something it’s never done before.

‘After years of insisting labor shortages could be solved by employing more women, increasing the retirement age, and using more robots, politicians have come to a grudging realization that those steps won’t suffice. Japan’s aging labor force is forecast to shrink by 23 percent in the next 25 years, according to projections by the Mizuho Research Institute. Vacancies already outnumber applicants by more than 3 to 1 for lots of key jobs.

‘In caregiving alone, the government predicts 550,000 additional workers will be needed by 2025. “It just reached a point where it was clear there was no choice,” says Atsuko Abe, a political scientist at J.F. Oberlin University in Tokyo. “The problem is they want the workers but not the people.”

‘The new visa program, which Prime Minister Shinzo Abe pushed through parliament in December with scant debate, will grant five-year residency permits to as many as 345,000 low-skilled workers over the next five years. Although the terms are still vague, some who pass language and technical exams will be allowed to extend their visas indefinitely and bring their families.

That is, while many western countries like the US are curbing immigration, Japan is doing the opposite.

Japan is not alone though in having an ageing population.

Germany, UK, Spain, the US, are seeing their populations age.

Australia’s population pyramid looks a bit better. But, as you can see in the graph below, much of Australia’s population growth hasn’t come from births, but from immigration.

Components of Australias Population growth 28-02-19

Source: Shaping a Nation

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According to a recent report from the Australian Treasury, immigration has had quite a bit to do with it:

Australia’s population is steadily ageing. The share of working age (15 to 64 year old) people in the population peaked in 2009 at 67.5 percent, falling to 65.9per cent in 2016. After the working age population share in a country peaks, per capita economic growth slows as income is spread over a rising share of those not in the labour force. The share of working age people is expected to continue to fall since young people (those aged less than 15) who will make up the future labour force accounted for 18.9 per cent of the population in 2016, compared to 28.7 per cent in 1971. […]

‘Migrants, particularly skill stream migrants who account for around 70 per cent of Australia’s migrant intake, contribute to GDP per person in a number of ways. They offset Australia’s ageing population, improve labour force participation and productivity, and help businesses to source skills that are difficult to develop at short notice.’

Developed countries may be looking at limiting immigration to protect workers, but the truth is that ageing means that they will need immigration to keep their economies going.

Best,

Selva Freigedo,
Editor, Markets & Money


Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find, in her opinion, the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.


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