Editor's Note: Below is a brief excerpt from Demography Unplugged written by world-renowned demographer and Hedgeye Managing Director Neil Howe

A Ticking Demographic Time Bomb In Japan - zsub

In 2018, the number of births in Japan fell to a new low while the number of deaths hit a new postwar high. The country’s annual natural population decline, which is now around 440,000 people, is likely to exceed half a million annually in the decade ahead.

Japan has recovered from its rock-bottom total fertility rate (TFR) of 1.26 back in 2005. But its TFR in 2018 (1.42) is still very low. And despite the best efforts of Prime Minister Shinzō Abe, it has slid backward slightly over the last few years.

More importantly, Japan's TFR has been beneath replacement for 44 years (since 1974), much longer than any other country. In demography, momentum over time is everything. If Japan wants to stop its population decline, it either needs to push its fertility rate significantly above replacement (2.1) and keep in there for many years or it needs to a big boost in immigration.

Neither of these outcomes is likely.

Many demographers doubt that Abe will be able to reach his TFR goal of 1.8 by 2026, which still isn't high enough. And Japan's longstanding aversion to assimilating foreigners will limit Abe's goal to raise immigration. Last year, net immigration reached an all-time high of 165,000--which pushed the foreign-born up to a record 1.8% of Japan's population.

Compare this with the United States, with net immigration of roughly 1 million last year and with the foreign-born comprising 13.7% of the U.S. population. Maybe higher fertility and higher immigration together will stop the population decline, but even in combination, we're looking at a goal that may be twenty years away.

Things could be worse, of course.

Take a look at South Korea, whose TFR (at barely 1.1) is tied with Hong Kong and Singapore (both no more than city-states) for the world's lowest. What's more, South Korea's rapidly rising life expectancy is expected to lead the world by 2030. Immigration? Yes, as in Japan, it's rising. But also as in Japan, most of South Korea's immigrants are from other Southeast Asian countries, nearly all of which are eventually projected to encounter population decline. Hmm, something illogical here: Inter-Asian migration can't be a solution for all of these countries.

A Ticking Demographic Time Bomb In Japan - zhowe