Japan’s population declines by over 900,000 in 2024, signalling major economic and labour risks

Japan’s demographic crisis has reached a critical juncture, with official data revealing nearly a million more deaths than births in 2024, marking the steepest annual population decline on record. This stark imbalance underscores a deepening structural challenge for the world’s fourth-largest economy, where an ageing population and persistently low fertility rates threaten long-term growth prospects, labour market dynamics, and fiscal sustainability.

The Scale of the Decline

According to government statistics, Japan recorded approximately 687,000 births in 2024, the lowest figure since records began in 1899 and a drop of more than 5% from the previous year. In contrast, deaths exceeded 1.5 million, resulting in a natural population decrease of over 900,000. This represents the 17th consecutive year of population shrinkage, with the total populace falling to around 120.65 million—a decline of 0.75% from 2023. The fertility rate, hovering at about 1.2 children per woman, remains well below the 2.1 replacement level needed for population stability.

These trends are not new; Japan’s birth rate has been falling since the 1950s, with a brief uptick in the early 1970s. However, the acceleration in recent years has amplified concerns. Prime Minister Shigeru Ishiba has described the situation as a “quiet emergency,” highlighting the urgency for policy interventions. The data, as of 13 August 2025, paints a picture of a society where one in three citizens is aged 65 or older, straining healthcare systems and pension funds.

Economic Implications: Labour Shortages and Productivity Pressures

The demographic shift poses profound risks to Japan’s economy, which has long relied on a robust workforce to drive innovation and exports. With fewer young people entering the labour market, companies face acute shortages in sectors like manufacturing, healthcare, and technology. Historical data from the early 2010s shows labour participation rates beginning to plateau, and projections suggest the working-age population could shrink by 20% by 2040 if current trends persist.

Analysts at institutions like the International Monetary Fund (IMF) forecast that without significant immigration or productivity gains, Japan’s potential GDP growth could average just 0.5% annually over the next decade—down from the 1% seen in the 2010s. This is partly due to the “demographic drag,” where a smaller workforce must support a growing retiree base. For instance, the dependency ratio—the number of non-working individuals per 100 workers—has climbed from 60 in 2010 to over 70 today, based on pre-2025 figures.

In response, some firms have turned to automation and robotics, areas where Japan leads globally. Yet, this shift raises questions about job displacement and inequality. A 2023 study by the Bank of Japan noted that while technological adoption could offset up to 30% of labour shortages, it might not fully compensate for the loss in consumer demand from a shrinking population.

Fiscal Strain and Public Debt

Japan’s public debt, already exceeding 250% of GDP as of historical benchmarks from 2023, faces further pressure from demographic realities. Social security expenditures, which accounted for about 25% of the national budget in the early 2020s, are projected to rise sharply. Analyst models from Fitch Ratings, labelled as of 2024 outlooks, warn that without reforms, debt servicing costs could consume an even larger share of revenues, potentially leading to credit rating downgrades.

Government efforts to boost birth rates, such as expanded childcare subsidies and parental leave incentives, have yielded limited results. Births fell for the ninth straight year in 2024, despite these measures. Immigration, another potential lever, has increased—with non-Japanese residents rising by 10.7% to 3.68 million in 2024—but remains politically sensitive and insufficient to reverse the decline.

Investment Angles: Opportunities Amid Challenges

For investors, Japan’s demographic woes illuminate both risks and opportunities. Sectors like elderly care, pharmaceuticals, and robotics stand to benefit from the ageing trend. Historical performance data from the 2010s shows healthcare stocks outperforming the broader Nikkei 225 index by an average of 15% annually during periods of demographic focus.

Conversely, consumer-facing industries such as retail and real estate may suffer from reduced domestic demand. Property values in rural areas have declined by up to 20% over the past decade, per 2023 reports, as depopulation accelerates. Urban centres like Tokyo, however, could see sustained demand due to internal migration.

Sentiment from credible sources, such as Moody’s Investors Service in their 2024 Japan outlook, remains cautiously stable, citing the country’s strong institutions and export prowess. Yet, they flag demographics as a key downside risk, potentially capping credit ratings at current levels.

Global Comparisons and Broader Lessons

Japan’s experience offers a cautionary tale for other ageing economies, including South Korea and Italy, where similar fertility declines are underway. In South Korea, the birth rate dipped below 0.8 in 2023, per historical data, prompting aggressive policy responses. For global investors, diversification into emerging markets with younger demographics, such as India or Indonesia, could hedge against these risks.

Model-based forecasts from the United Nations, updated as of 2024 projections, estimate Japan’s population could fall to under 100 million by 2050, implying a 20% contraction from current levels. This could reshape global supply chains, given Japan’s role in semiconductors and automobiles.

Policy Pathways and Future Outlook

To mitigate the crisis, experts advocate a multi-pronged approach: enhancing work-life balance to encourage family formation, liberalising immigration, and investing in education to boost human capital. Dry humour aside, Japan’s challenge is akin to trying to fill a leaking bucket—plugging one hole often reveals another, as cultural norms around long working hours deter parenthood.

In conclusion, the near-million gap between deaths and births in 2024 signals more than a statistical anomaly; it heralds a transformative era for Japan’s economy. Investors should monitor policy developments closely, as successful adaptations could unlock resilient growth, while inertia risks stagnation. As of 13 August 2025, the data underscores the need for bold, innovative strategies to navigate this demographic headwind.

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