By Katsuo Matsushita, The Geneva Association  

September 2011

  Japan

Japan’s accelerated shift to an ageing society
Japan is the front runner in the race to an ageing society. According to the demographic forecast by the government, the percentage of people 65 years and older will increase to 31.8 per cent in 2030, in contrast with 20.2 per cent in 2005 and 5.3 per cent in 1955. Fifteen to 64 year olds will account for 58.5 per cent of the population in 2030 compared to 66.1per cent in 2005 and 61.3 per cent in 1955. Lastly, people under 14 years old will make up only 9.7 per cent in 2030, versus 13.8 per cent in 2005 and 33.4 per cent in 1995.
This reflects the prediction that the low fertility rate (the average number of children per woman) of 1.27 in 2010-2015 will continue unless drastic policy measures are implemented. Among people aged 65 to 74, one in 25 is in need of long-term care and among those aged 75 and older, one in four is in need of the same care. Also, life expectancy is forecast to be 81.9 for Japanese males and 88.7 for females in 2030.
If this trend of longer life expectancy continues, the period for which elderly people receive a pension will lengthen and the funding for its liability will be a tough challenge, meaning the pension system will need to be revised, for example, by increasing the eligible age at which a person receives his or her pension (currently 65 years old).
These demographic forecasts indicate that an ever-larger burden will be increasingly shouldered by the working (age of the) population, if policy measures are not taken.

A strong case for activating the ‘Silver Workforce’
People over 65 years old are more diversified in terms of skill, know-how, life plans, hobbies and health/medical conditions. As long as circumstances allow, they are commonly expected to try to stay healthy, lead independent and active daily lives in order to contribute to reducing the indemnity from medical and long-term care insurance, and to help younger people (65 years old and younger) in lowering their financial burden. They are also expected to contribute to enhancing the GDP per capita, and therefore the Japanese government’s fiscal health, by re-joining the job market as the ‘Silver Workforce’ and increasing the nation’s taxable income base. By remaining part of the workforce, older people can have definite life aims and a stronger motivation to live healthily, creating a positive cycle between the quality of individual life and the general economy.

Necessary policy measures
As discussed above, given the worsening of the government debt situation and the internationally longer life expectancy of the Japanese population, it is expected that more Silver Workers will continue to work longer.
In fact, while the situation differs by industry sector and company, some Japanese companies have already been valuing their Silver Workforce as company assets, such as experienced engineers with specific know-how and skills, and have been expecting them to coach or train younger engineers. In other companies, management encourages experienced employees to speak at local schools about
the role their company plays in society and the community. These may sound like public relations activities, but in reality it is a kind of corporate social responsibility (CSR) activity since employees provide orientation about working life and value pertaining to its younger students.

In Japan, a larger workforce is urgently needed in the long-term care service provider sector. So, the physically healthy Silver Workforce is expected to participate in this sector with growing demand. Having said that, several policy measures are needed to build structures to promote the Silver Workforce’s participation in the job market.
(1) In order to improve the matching of supply and demand in the workforce, a database should be built. The skills, specificities and an appraisal of each individual Silver Worker must be compiled as a human resource database.
(2) Better use of Information and Communication Technology (ICT) can allow the Silver Workforce to work flexibly where and when they want.
(3) In order to encourage employees to prepare for a better work/life balance for example, companies must facilitate skill management, career planning and health management for every employee. The government and healthcare insurers are expected to provide incentives to such an end.

Challenges ahead
Japanese companies have been facing a business-unfriendly situation for years. Japan has the highest corporate tax rate in the world; the Japanese Yen is more valuable in foreign exchange markets and Japan suffers from inflexible labour market regulations and other unnecessary regulations. Political paralysis and inertia have kept Japan far behind countries like Korea in concluding Free Trade
Agreement (FTA) and Economic Partnership Agreement (EPA), putting Japanese companies in a substantially disadvantageous position. These factors combined with the growing markets in Asia and other emerging countries mean that Japanese companies have been forced to increase the portion of production, distribution and sales in foreign countries, by shifting part of their manufacturing plants to these markets. On top of all this, the huge earthquake and tsunami that hit Northeastern Japan on 11 March aggravated the situation. If the 11 March events had only been about the earthquake and tsunami, the general business environment might not have worsened.

However, TEPCO’s Fukushima nuclear power plant problem has caused a strong anti-nuclear power public sentiment. Almost 30 per cent of the country’s electricity has been generated by nuclear power. Currently, only 19 out of 54 nuclear reactors are in operation. The operation of these 19 reactors will be
suspended for routine inspections and safety checks and may not be restarted if the governments of the prefectures that are hosting these plants no longer allow the operation of reactors in view of the strong opposition and concerns of local communities.

This situation may result in an uncertain supply of electricity and an increase in its price because running costs of natural gas power plants are more expensive than nuclear plants. So, how does this situation affect the strategies of the Japanese companies ? The inconsistent remarks and speeches of the ruling party politicians on nuclear power policy have been aggravating the uncertainties of electricity supply prediction, increasing concerns of business communities. Some of the Japanese companies may seriously consider increasing the pace of moving part of their manufacturing plants to other parts of Asia, the U.S. or the EU, etc.

This concern is an urgent issue, not only for Japanese business people but also for Japanese society as a whole. Or can we expect a much better scenario for the reconstruction of the Japanese economy following 11 March?
To this avail, we might achieve an explosive breakthrough in innovation of new energy resources that results in economic growth and fiscal sustainability with deregulations in the utilities sectors under stronger political leadership. If realised, this paradigm may keep Japanese companies in Japan. And the Silver Workforce may also have more opportunities to activate their potential to its full extent. If this
ends as being just another fantasy, our Silver Workforce may face a critical juncture. Japan will continue to face rough roads ahead.