[AI Library] Chapter 30: Toward Japan’s Future — Population Crisis and Digital Transformation
Beyond the Glass Ceiling
Part 6: Reflection — What is Japan?
Chapter 30: Toward Japan’s Future — Population Crisis and Digital Transformation
Kim Kyung-jin
Numbers do not lie.
In 2023, Japan's total fertility rate was 1.20—the lowest since the end of World War II. Since the Japanese government began collecting statistics, it had never been this low. Tokyo was even more severe at 0.99. This means that, on average, a woman in Tokyo does not even give birth to a single child in her lifetime. In human history, it is difficult to find a case where a capital city recorded such a number.
The total fertility rate required to maintain a population is 2.07. Japan's 1.20 is barely half that figure. To understand what this means, we need to translate these numbers into people. The number of children born in 2023 was 727,277. This was another decrease from the previous year. It was only in 2022 that the number first fell below 800,000, and the record was broken again the very next year. In the same year, more than 1.57 million people died in Japan. The difference between births and deaths—the natural decrease—was 848,728. This was also an all-time high.
Japan's total population already peaked in 2008 at 128.08 million. It has been decreasing every year since. As of 2023, it stands at around 124.35 million. According to estimates by the National Institute of Population and Social Security Research, the population will shrink to approximately 87 million by 2070, which is about 70% of the current level. Those aged 65 and older will account for 40% of the total population. Some projections suggest it could drop to 63 million by 2100—half of what it is today.
It is difficult to truly grasp these numbers when you hear them, because population decline progresses slowly. It is not as if we fall off a cliff tomorrow. However, that is exactly what makes this problem more terrifying. A decline that proceeds very slowly, almost imperceptibly, but without stopping—that is how population decline operates.
When Takaichi Sanae became Prime Minister, these numbers remained unchanged.
In fact, Takaichi's connection to the low birthrate issue dates back long before she became Prime Minister. In 2007, when she first entered the cabinet, one of the positions she held was Minister of State for Measures for Declining Birthrate and Gender Equality. Even then, the low birthrate was recognized as a serious national challenge for Japan. However, the scale of the problem is far more critical now than it was then.
During her time as the minister in charge, she stood at the center of controversy over a single remark. Confronted by outside views questioning whether "a woman who has not given birth is fit to discuss measures for the low birthrate," she publicly disclosed the medical fact that she was unable to have children due to infertility. It is rare for a politician to reveal the deepest parts of their private life. But she did it. Some called it courage, while others called it a defense. Whichever it was, it is true that after that remark, it had the effect of making people feel that the low birthrate issue was not just a policy task for her, but a matter connected to her own life.
After becoming Prime Minister, the scale and nature of her birthrate measures changed.
There were three specific directions. First, reducing the economic burden of giving birth and raising children. This included policies such as expanding support for childbirth costs, increasing childcare facilities, and lowering the burden of educational expenses up to university. Second, creating an environment where people can raise children while working. This aimed to increase the practical use of parental leave and institutionally encourage men's participation in childcare. Third, further strengthening support for infertility treatment. The intent was to ensure that couples who want children do not give up treatment for economic reasons.
However, expert opinions are divided on whether these policies will actually lead to a rebound in the fertility rate.
This is because Japan's low birthrate is not simply a matter of money. It involves shifts in the values of the younger generation who do not want to or are delaying marriage, the astronomical housing costs in cities (especially Tokyo), the still long working hours and the resulting lack of leisure, and the fear of the impact that having and raising a child will have on one's career and life. These are issues that cannot be solved by cash support or the expansion of childcare facilities alone.
In 2023, the number of marriages in Japan was 474,717 pairs. This is the first time since the end of the war that the number has fallen below 500,000. In Japanese society, where the out-of-wedlock birth rate is low, when marriages decrease, births also decrease. Statistically, only a very small minority of unmarried individuals have children in Japan. Policies to encourage marriage are simultaneously needed, but that is an even more complex issue, as it invites controversy about state intervention in individual lifestyles.
It remains to be seen how effective the Takaichi cabinet's birthrate measures will be. Most demographers believe it is difficult to expect a meaningful turnaround in the fertility rate with the current intensity of policy. Even if the fertility rate rebounds, it will take more than 20 years for that effect to manifest in the actual population size. Until then, Japanese society must endure within a structure that is increasingly aging and shrinking.
There is the option of immigration.
Other developed nations facing population issues, such as Germany, Canada, and Australia, have supplemented their working populations by actively accepting immigrants. However, Japan has traditionally taken a very cautious stance on this path.
Takaichi Sanae tends to be reluctant toward expanding immigration. A conservative worldview does not align well with large-scale immigration. From a perspective that sees cultural homogeneity as one of the foundations of social stability, concerns follow that an influx of many foreigners in a short period could create social tension. Of course, this does not mean she rejects foreigners themselves. In fact, Japan has pursued relatively active acceptance policies for foreign professionals in specific technical fields. Examples include a system that grants permanent residency early to highly skilled foreign professionals and the expansion of foreign labor introduction in specific functional fields.
The Takaichi cabinet, while inheriting this direction, chose to selectively attract foreign talent with skills and expertise rather than simple labor. This is different in nature from a large-scale opening to immigration. it is a pragmatic approach somewhere in the middle—neither complete acceptance of immigration nor complete isolation. Whether this choice can secure a sufficient working population in the long term is uncertain. Critics argue that without more bold population policies, Japan cannot solve its labor shortage problem.
Separately from the population issue, there is another major pillar the Takaichi cabinet is focusing on: Digital Transformation, known in Japan by the abbreviation DX.
Japan is the world's third-largest economy. It is home to many companies with cutting-edge technology, and its innovation in manufacturing is recognized worldwide. Yet, there is something strange. In the realms of administration and office work, Japan has been surprisingly analog.
Fax machines are still running in government offices. Contracts require a stamp, or seal (hanko/seal (印鑑)). Many administrative procedures can only be processed by going to a counter in person and submitting documents. Companies manage internal documents on paper, and approval is granted by stamping the documents. This is the reality occurring in many Japanese organizations even in the 2020s.
COVID-19 revealed just how serious this problem was. In 2020, as the pandemic began, the Japanese government decided to provide a special payment of 100,000 yen per citizen. Although online applications were made possible, the penetration rate of the My Number Card at the time was so low that most citizens could not even apply. In the end, they had to return to the old-fashioned method of sending application forms by mail and processing them at counters. While other countries paid out support digitally within days, Japan took months. Global media reported on this, and the shock within Japan was significant.
The My Number Card can be thought of as the Japanese version of a resident registration card. The card contains a personal number and can be used for digital identity verification. However, its adoption was slow. In the early stages of its introduction, many citizens did not obtain it due to concerns over personal information leaks and administrative inconvenience. Takaichi has worked hard to promote this card since her time as Minister of Internal Affairs and Communications. Since becoming Prime Minister, she has pushed for its adoption in earnest.
The results are showing. As of 2024, the cumulative number of My Number Cards issued has surpassed 75% of the population, approximately 93 million cards. The integration of health insurance cards and My Number Cards (the Myna Insurance Card) is also underway, with about 79% of My Number Card holders having registered this function. Integration with driver's licenses is also being pursued. The range of administrative services that can be handled online is gradually expanding.
The Digital Agency (デジタル庁), launched in 2021, is at the center of this change. The Digital Agency is tasked with integrating and standardizing the IT systems that each ministry and local government used to operate separately. Simply put, it is the agency that makes the entire government communicate in a single digital language. Before then, each ministry used different systems, and because the systems were not linked, citizens frequently had to repeatedly submit the same information to multiple agencies.
However, the path of DX is tougher than expected. Old organizational cultures do not change easily. Survey results show that only about 30% of Japanese companies respond that their DX is progressing successfully. This is a significant difference compared to approximately 80% in the United States or Germany. It means that while many companies have begun adopting the cloud and utilizing AI, they remain at the level of 'partial optimization' rather than transitioning to an organization-wide digital transformation.
One of the areas the Takaichi cabinet is focusing on in 2026 is Medical DX. This is a system that allows medical institutions nationwide to share electronic medical records, enabling patients to receive treatment based on their medical history regardless of which hospital they visit. Once completed, the efficiency and quality of Japan's healthcare can be greatly improved. Especially in a situation where the number of elderly people is increasing explosively, Medical DX is not just a matter of convenience, but a matter of the sustainability of the social system.
Economic security and digital transformation are interconnected.
During Takaichi's time as the Minister in charge of Economic Security, she made strengthening the semiconductor supply chain a core task. At that time, economic security was an unfamiliar field that only experts were interested in. However, it has now become the very foundation of digital transformation.
Without semiconductors, there is no AI. Without AI, digital transformation cannot proceed properly. Cloud services, data centers, smart factories—all of these depend on semiconductors. In a geopolitical situation where China threatens Taiwan, if Taiwan, which accounts for a significant portion of the world's semiconductor supply, is shaken, Japan's entire digital economy could take a hit.
Takaichi was one of the first to grasp this link. Through the enactment of the Economic Security Promotion Act, support for advanced semiconductor factories (such as attracting TSMC to Kyushu), and the fostering of the domestic semiconductor industry, she focused on laying the physical foundation necessary for Japan's digital future. This direction has been further strengthened since she became Prime Minister. AI has been designated as a core area of "crisis management investment," along with semiconductors and quantum technology, and is being supported at the national strategy level.
This is the core logic of Takaichi's economic policy. Economy and security are not separate. Technology is a weapon. Protecting semiconductors is protecting the country. And only when semiconductors can be protected is digital transformation possible.
What, then, will Japan look like 30 years from now?
Japan in 2056. The population will be significantly smaller than it is now. Those aged 65 and older will well exceed one-third of the total population. Many local cities will disappear or shrink significantly. A society where young people are rare and the elderly are the mainstream—this is the future shown by demography.
However, other imaginings are possible.
If we become a society where AI and robots replace human labor, population decline might not necessarily mean a decrease in economic power. If per capita productivity becomes several times higher than it is now, the total output of the national economy can be maintained even if the number of people working decreases. If medical technology advances and the elderly participate in economic activities more healthily and for longer, "aging" might not necessarily mean only a burden.
Japan is the country where aging is progressing the fastest in the world. However, precisely for that reason, Japan is also the first country in the world to grapple with this problem. If Japan is the first to discover a way to operate an aging society sustainably, it can be a valid answer for other countries that will face the same problem decades later. South Korea, China, and various European countries will all eventually face similar issues.
In that sense, how Japan navigates aging and population decline is not just a problem for Japan. It is an experiment that the entire human race should be interested in.
Takaichi Sanae stands in the middle of that experiment.
The results are not yet known. However, setting the direction, allocating resources, and persuading people—that is the job of the Prime Minister. She is doing that job now. In a country where the numbers are growing increasingly dark, the attempt to design a future that is not defined by numbers—history will judge whether that attempt succeeds.
But if you do not try, the result is already determined.
References
- 2023 Total Fertility Rate 1.20, All-Time Low (Nikkei): https://www.nikkei.com/article/DGXZQOUA03CEI0T00C24A6000000/ - Japan Vital Statistics 2023 (Ministry of Health, Labour and Welfare): https://www.mhlw.go.jp/toukei/saikin/hw/jinkou/geppo/nengai23/dl/kekka.pdf - Current Status of My Number Card Penetration Rate (Digital Agency): https://www.digital.go.jp/en/resources/govdashboard/mynumber_penetration_rate - Status of Japan's DX Policy (World Economic Forum): https://www.weforum.org/stories/2024/04/how-can-japan-navigate-digital-transformation-ahead-of-a-2025-digital-cliff/ - Japan population decline future projection (CNN): https://www.cnn.com/2024/03/01/asia/japan-demographic-crisis-population-intl-hnk-dst/index.html