Why Has Japan's Fertility Rate Declined?: An Empirical Literature Survey with an Emphasis on Policy Implications

Japan's total fertility rate declined to 1.29 in 2003, the lowest in its modern era. Such a drastic decline in fertility rate is extremely unusual. The decreased birthrate creates an unbalanced demographic composition between the productive and dependent populations. This development may result in agreater burden per person regarding social security and have a negative effect on Japan's long-term economic performance.This article surveys the literature on the decline in Japan's fertility rate. It emphasizes the policy implications with respect to supporting households that want to have children. In the first section of the article, we describe a long-term trend in Japan's fertility rate and show that the decline after the 1970s was primarily attributed to a decline in marriage rates, and partly due to a decline in the number of households with three or more children.We then present a survey empirical studies to examine the relationship between birthrates and several factors: an increase in the opportunity costs of having children caused by increases in female wages and labor participation, the growing costs of child care, the shortage of child care services, poor company support for child care leave, and direct public compensation for having children. We conclude that all policies supporting female workers and child care are especially important.