Issues & Insights Vol. 09 - No. 10

Japan is in the midst of a demographic transformation. The country’s population has started to decline and is projected to shrink nearly 30 percent by 2055. The fertility rate has fallen well below replacement. The elderly share (age 65 and above) of the population is 21.5 percent, and will reach 38.9 percent by 2050, making Japan the grayest nation in the world. These changes have profound implications for Japan’s future. The number of working-age citizens is shrinking. This influences GDP growth, cuts tax revenues, squeezes government budgets, and reduces financial options. All will have a significant impact on foreign and defense policy. A demographic transformation will also influence values and preferences, affecting priorities and transforming national goals.