Employment and productivity in an ageing society: Japan in international perspective

Japan is ahead of most other countries in the global population ageing process. Its working-age population (aged 20–64) peaked in 1998, compared to 2011 in the European Union, while continued growth is expected in the United States until 2070, albeit at a declining pace. In this paper, we analyse employment and productivity developments in Japan since 1998 and examine how Japan differs from other OECD countries in various dimensions potentially related to ageing. Rising employment among women and older workers has lifted Japan’s employment rate to one of the highest levels in the OECD. However, older workers tend to be employed in low-productivity jobs. Despite rising labour shortages, immigration is much lower in Japan than in most other OECD countries. Ageing has led to the adoption of some labour-saving technologies, notably robots. Nevertheless, business dynamism is weak in international comparison and population ageing creates challenges for business succession. Changes in the consumption structure have been modest. Age-related spending contributed significantly to the deterioration of fiscal positions. Overall, even though Japan has been able to cope with ageing relatively well, its economic developments over the past decades illustrate the challenges of enhancing job quality at the same time as raising employment rates, sustaining innovation and preserving public finance sustainability in an ageing society.