Executive summary

• With the human population expected to peak by the end of this century and long-term fertility decline projected in high-income countries, Japan’s negotiation of the challenges of an ageing population and fertility decline offers an important case study.
• Given the significant impacts of demographic transition on macro-economic and financial effects, the shape of cities, public policy, national budgets and political systems, Japan is faced with the considerable challenge of how to maintain productivity, economic growth and societal cohesion with a shrinking workforce, smaller tax base and increasing demand for social services.
• This paper analyses the interactions of several causal drivers of ageing and fertility decline in Japan, citing policy makers, demographers and population researchers and commentators.
• Rather than continuing to rely on the traditional methods of increased efficiency, financial and technological innovation, research findings and commentary have emphasised reforms at the level of structural organisation.
• This includes addressing cultural norms and values with a particular emphasis on gender and social roles, socio-economic conditions, the labour market and workforce expectations, immigration and naturalisation processes, and electoral asymmetries.
• All of these will in turn have an impact on Japan’s place in the region and its relationships with its neighbours. The extent to which Japan, with a shrinking and ageing population, can effectively recalibrate their policies to address this combination of issues will be of considerable interest for Australia, in the context of close and growing economic, diplomatic and defence relationships. It will also be key to realising sustainable, future-oriented, regionally engaged, long-term outcomes for many countries in the region which face similar challenges now or in the future.

Introduction

For the first time in recorded history, the human population is expected to peak by the end of this century. Population decline and the ‘grey spectre’ are affecting mature economies, including Australia. The world’s population of people aged 60 years and older is expected to double by 2050, while fertility rates in high-income countries appear to be in long-term decline.

As is evident in the large-scale civil demonstrations against raising the pension age in France since January 2023, policies that support cutting benefits, increasing taxes and raising the minimum age of retirement can be vexatious. While the Macron Government has maintained that an older retirement age helps to preserve the pension system, the 8 major unions in France have gained popular support. They argue that low-skilled and low-income workers bear an unfair burden as they begin their working life earlier and often do high-impact manual work, whereas other revenue collection methods are available to the state. The demonstrations have also broadened to include wider concerns relating to inflation, food and energy prices.

Whichever settlement is reached in that country, it is undeniable that the scale of demographic shift in the old-age dependency ratio – the number of retirees compared to the working age population ­– is placing greater financial strain on working populations in affected countries and can aggravate pre-existing structural problems.

At the same time, low fertility rates are presenting significant challenges for policymakers, particularly in the countries of the Organisation for Economic Cooperation and Development (OECD). Demographics are closely related to key macro-economic and financial effects, and their changes can have whole-of-society impacts, ranging from economic and financial performance to the shape of cities, public policy priorities and political systems. To what degree and how fast countries with ageing and shrinking populations can recalibrate their policies will be key to maintaining positive economic outcomes.

Japan offers an important litmus test among low-fertility countries in the OECD. As the world’s third-largest economy, it is a peaceful, prosperous country with the longest life expectancy in the world, the lowest rate of homicide, a world-leading high-end manufacturing industry, comparatively little political polarisation, a generous social support scheme, and excellent public services and infrastructure.

Japan also faces volatile demographic pressures associated with its ageing and shrinking population. In 2005, Japan became the world’s first ‘super-aged’ society, where over 20% of the population is aged 65 or older. As it continues to innovate to maintain an accustomed standard of living through increased efficiency in productivity and investment, taxation and financial policies, in the postwar period the country has steadily increased reliance on a historically non-traditional workforce – namely women, the elderly and immigrants.

This paper analyses how structural organisation and cultural norms, related to gender equality, socio-economic and labour market conditions, minorities and immigration, are important interconnecting drivers to consider in formulating sustainable policy priorities related to retirement age, taxation, social security and other associated factors.

Overview of ageing populations and fertility decline in Northeast Asia

Among economically advanced countries, as demonstrated in Figure 1 below, the ‘lowest-low fertility’ rates are particularly pronounced in 3 regions: Northeast Asia, and Eastern and Southern Europe.[1]

Figure 1    Fertility trends in selected OECD countries 1970–2021

Source: OECD Family Database

For countries with consistently low fertility rates and where the numbers of deaths exceed the number of births, without inward migration, a decline in population is inevitable over the longer term. Among Northeast Asia’s dominant economies – Japan, South Korea and China – all are experiencing unprecedented and rapid population ageing, and have reported drops in population growth in the past year. Singapore, Thailand and Taiwan are also shrinking, while population growth is slowing in Vietnam, the Philippines and elsewhere in East Asia.

Japan was the first country to reach the median age above 40 (in 1999) and it reported the highest median age in the world in 2021 at 48.4. A third of Japanese people are over 60, making Japan home to the oldest population in the world, after Monaco. Japan is also among the ‘lowest-low fertility’ countries, beginning its population decline in 2008 and posting its total fertility at just below 1.3, or 811,604 births in 2021, well below the replacement level of 2.1.[2]

South Korea’s population – currently just under 52 million, and with the lowest birth rate of OECD member states in 2021 – is projected to drop below 38 million by 2060; by 2100, its population will have dropped below 16 million, less than a third of what it is in 2023. South Korea’s working population is estimated to decline by 35% until 2050, based on current fertility rates. Taiwan is likely to see a 28.6% reduction. Both South Korea and Taiwan will become super-aged later this decade, and their working-age populations also are shrinking, a trend that will accelerate over the next several decades.

Of global and regional significance is the recent demographic shift in China in 2022. China’s population decreased by 850,000 to 1.412 billion due to a slip in its fertility rate to below 1.1 from its peak of 6.0 in the 1960s. Although likely exacerbated by COVID and its associated impacts, estimates find that by 2035, 400 million people in China will be age 60 and over, representing 30% of the population. The UN’s medium estimate predicts that China’s total fertility rate will rise from 1.18 children per woman in 2022 to 1.48 in 2100. The UN’s low case estimate projects that China’s population may fall to 1.3 billion by 2050 and 800 million by 2100, a third of the current total, while the Shanghai Academy of Sciences estimates that it will reach 587 million in 2100, less than half of the current total. This comes at least a decade earlier than projected. Moreover, for the working-age population in China, more than 40 million will retire in the current 5-year period to 2025, dropping by 35 million in this period due to a lack of replacement, and experiencing a decrease of over 186 million people over the next 27 years.

Some of the possible factors in China’s population decline include years of falling fertility, low or negative net migration, the consequences of the previous one child policy (1980–2016), the rising cost of living, the impacts from COVID-19 and higher incomes for women. China has one of the lowest retirement age plans in the world, however, with female factory and agricultural workers retiring at 50 and male workers at 60. In response, China is campaigning for young people to get married and have multiple children while also gradually raising the retirement age to prepare the population for delayed retirement.[3]

Japan – a demography laboratory for ‘new capitalism’ policies

In Japan, demographic trends in fertility, longevity and immigration are certainly stark, and have earned it the moniker of ‘demographic policy laboratory’ among OECD countries and the Group of Twenty (G20).[4] The population is projected to shrink well into the middle of this century, dropping to an estimated 88 million in 2065 – a 30% decline in 45 years – and to 72 million in 2100.

Dubbed the ‘lost decades’, Japan’s economic and societal gridlock triggered by the bursting of the property market bubble in 1991, has produced prolonged anaemic economic growth and wage stagnation. Contributing factors have included ageing population, labour shortages, slower consumption, a hollowing-out of the manufacturing sector, greater fiscal deficits and lower interest rates.

Together with an ageing population, which is finding it difficult to retire because of the pressure on healthcare and pensions, younger generations are experiencing less take-home pay and have shown a marked hesitancy to start families as part of reduced optimism among Japanese youth in general.

In recognition of the problem of fertility decline, on 19 January 2022, Prime Minister Kishida Fumio launched a plan for a ‘new capitalism’ at the World Economic Forum. Mr Kishida then used his first speech in the new session of Parliament on 23 January 2023, to announce unprecedented levels of spending in 2 priority areas: child care support and defence.

Japan’s new national security strategy, a basic defence program and a medium-term plan to improve Japan’s defence capabilities commits 43 trillion yen (A$483.7 billion) over 5 years from fiscal year 2023; 56% more than the current program and the highest defence budget ever recorded in the history of modern Japan. This includes the capability to conduct long-range and pre-emptive strikes on enemy bases (for example, reinforced missile systems on the Nansei Shoto (Southwest Islands)). This will likely see a tax hike of one trillion yen (A$11.2 billion) by fiscal year 2027, increasing the overall budget for fiscal year 2023 to about 114 trillion yen (US$837.3 billion).

Japan is estimated to have the highest public debt relative to GDP (gross debt-GDP ratio) of any country in the world; an estimated national debt of 263% the size of its A$7.5 trillion economy. Japan spends more on debt redemption and interest repayment than on public works, defence and education combined. The International Monetary Fund (IMF), among other financial service institutions, has indicated that age-related spending pressures are likely to produce sovereign stress.

The Kishida administration is proposing to normalise monetary policy, reviewing its extraordinary stimulus program as part of the Abe administration’s ‘three arrows strategy’ (‘Abenomics’), while raising wages higher than the rate of inflation. Known as the ‘defence tax’, the Government is proposing to introduce 1% of current income tax payments, as well as corporate and tobacco taxes. As this initiative is likely to be contested by the Keidanren (Japan Business Federation), which prefers a flat tax, as a fall-back option, the Government may rely on government and construction bonds, and avoid a review of the taxation system, which would involve corporate and income taxes for higher earners.

Although comparatively less widely reported, the second key policy of child care reform is aimed at reversing fertility decline. Japan has not enjoyed a replacement birthrate since 1974. Described by Mr Kishida as a threat to ‘the very survival of the nation’, the number of babies born in Japan in 2022 fell below 800,000 for the first time since records began in 1899, 8 years earlier than projected. Japan is one of the first OECD countries to experience population decline and its fertility rate of 1.3 has been consistently low compared to the US and Australia at 1.7 and 1.6, respectively. In the 2010s, more than 20% of the population was older than 65. And in the three-year period 2022–2025, Japan’s entire postwar baby-boom population will pass the 75-year milestone. During the next 2 decades, Japan’s future decline will continue to magnify – by roughly 8 million in the 2020s and 10 million in the 2030s.[5]

To avoid a demographic cliff, and to maintain a sustainable level of productivity and economic growth with a smaller workforce and reduced tax base, Mr Kishida announced that the Government would institute a Children and Families Agency to administer the doubled budget for children as outlined in the Basic Policies on Economic and Fiscal Management and Reform to be released in June 2023. This includes pay rises in the fields of care giving, child care and child education, and in the nursing profession. The new child support program will require annual funding exceeding one trillion yen (A$112.9 billion).

Providing cash incentives for having babies, generous parental leave policies and free or subsidised child care is not a new approach. Past financial initiatives to encourage families to have more children, such as in Australia in 2004, have tended to create only a temporary bulge in numbers of babies and a momentary spike in the birth rate. Citing examples of reversed fertility decline in Sweden, some demographers argue that without also addressing social welfare, employment and labour market conditions, gender equality, access to education, housing affordability and supply chain issues, a decline in national birth rates is likely to continue.[6]

‘Womenomics’

Despite the many freedoms for women that were enshrined in the Japanese constitution in 1947, the stereotypical roles of ‘model employee’ and ‘ideal homemaker’ have remained stubbornly consistent; divided between the man, husband and father who dedicates long working hours in fealty to the company or organisation, and the woman, wife and mother who devotes herself to child-rearing, housework and family responsibilities.

Women in Japan have experienced dramatic increases in educational attainment and female labour force participation rates are relatively high. Japanese women’s labour force participation has at times outpaced that of the US. Japan boasts a strong social support system and has increasingly adopted family-friendly policies to encourage more flexible ‘work-balance’ arrangements, including relatively generous parental leave for mothers and high-quality child care. Yet, Japan remains one of the most gender-inegalitarian low-fertility countries in the world.[7]

In recognition of the association between female labour force participation and fertility levels, the Kishida administration has continued the ‘womenomics’ policies of the Abe administration by making it compulsory for companies with over 300 employees to disclose pay discrepancies between women and men.[8] This is specifically focused on competing with US and European companies by attracting Japan’s elite female graduates to Japanese corporations, which are newly promoted as inclusive, diverse and family-friendly workplaces that have redressed their customary gender barriers.

As part of the Kishida plan to implement a ‘virtuous cycle of growth and distribution’, on 19 January 2023, the Minister of Women’s Empowerment and Gender Equality, Ogura Masanobu, declared the administration’s intention to ‘mainstream gender issues’. This involves increasing female participation in traditionally male-dominated areas, including in digital/STEM education; women’s entrepreneurship in start-ups; women’s roles in a decarbonised society; disaster prevention and peace and security; and increasing gender-egalitarian awareness of men and youth.

In 2021, women earned on average 22.4% less than their male counterparts and held only 17% of Japan’s total wealth (in 2022, Japan placed 116th out of 146 countries in gender gap rankings). Women remain overwhelmingly underrepresented in corporate managerial positions (13%) and as parliamentary representatives (10%). Moreover, women remain overrepresented in irregular employment.

Causal drivers of fertility decline – some theoretical frameworks

Social demographers such as McDonald, who utilise Gender Equity Theory, have emphasised structural changes, including women’s shifting gender roles in the public and private spheres as a causal driver in fertility decline.[9] Although women have increased their access to higher education and labour market participation, they typically continue to face unequal expectations in terms of child care and housework. These scholars maintain that improving women’s economic opportunities and changing gender-inegalitarian family institutions would effectively address the balance (for example, gender relationships, discrimination, attitudes, and policies).

The Gender Equity Framework is often placed in contrast to Second Demographic Transition (SDT) theory. In contrast to the first demographic transition that involved twin declines in mortality and fertility, SDT seeks to explain sub-replacement fertility trends in primarily Western countries as based on widespread value or ideational change. Such change includes religious secularisation, a separation between marriage and procreation, increased population movement and a transition from materialist to post-materialist societies (that is, self-realisation and individualism).[10]

To an extent, SDT is complemented by Gender Revolution Theory, which focuses on the transformation of gender roles in a changing society to explain both local and regional variation in fertility decline. This theory identifies 2 main phases in societies experiencing the ‘shrinking family’ phenomenon:[11]

• a trend towards smaller families due to women’s increasing participation in the labour market, delaying marriage, decreasing the probability of marriage and delaying childbearing, as well as an increase in divorce
• increased fertility rates together with increased women’s labour participation.[12]

The Gender Revolution Theory in the second phase, also reverses the trends normally linked with SDT, in which men (or full-time partners) are more involved in caretaking responsibilities, such as housework and family relationships. This co-parenting and shared caretaking is associated with family stability and higher fertility in countries with ultra-low fertility.[13]

Like SDT, however, Gender Revolution Theory also tends to occlude distinctive and heterogeneous sociocultural characteristics in non-Western countries.[14] It is consequently criticised for its unidirectional and deterministic trajectory which assumes that self-actualisation is experienced in the same way by men and women across socio-economic conditions and in different cultures.[15]

Similarly, while Gender Equity Theory might offer a link between women’s labour market opportunities, cultural norms and expectations, and low fertility in more affluent countries, it also remains limited to factors which are attributable to individual behaviour and agency.[16] Given the spectrum of individual attitudes and behaviours (in addition to contextual differences within and across countries), it is difficult to produce empirical aggregate studies on fertility decline by focusing solely on these.

Rather than individuality and self-actualisation, in the Japanese context in recent decades it appears that socio-economic conditions and existing gender-essentialist social organisation continue to inform fertility choices. Labour market structure and workplace norms, which encourage employees to work long hours, see 53% of female employees work in part-time or low-paid jobs. These play an important part for a majority of women in deciding to leave the labour force at least temporarily around the birth of their first child.[17] These women are typically placed in a position of greater dependency on their husbands’ salaries (as non-marital child-bearing and single-parent households have remained at negligibly low levels) and the generous social support and retirement arrangements therein. Although this may change over time, these factors continue to inform the postponement of marriage and childbearing.[18]

While studies of full-time couples in Japan have shown that males often maintained gender-egalitarian attitudes, their caretaking responsibilities were severely curtailed due to workplace demands compared to their female partners, who ‘tacitly accepted’ more housework.[19] Moreover, practical realities such as the cost and relatively short opening hours of child care centres also make it less feasible for both parents to work full-time (alongside commonly longer office hours than in other OECD countries).

Compounded by economic uncertainties, including the rising cost of living and divergent work opportunities between social strata within a gender-essentialist social structure, these factors contribute to the social and economic context for the low fertility rate in Japan.[20]

Immigration: a viable option for reversing fertility decline in Japan?

Together with fertility rates, Japan’s work force and labour markets have steadily shrunk since 1990. While Japan’s population is set to shrink to 100 million in 2050 from 128 million in 2010, Japan's working-age population (aged 15–64 years) sank to just over 75 million in 2020, comprising just below 60% of the population and down 13.9% from the 1995 peak. While the working age population rose from 80 million in 1950 to 100 million in 1990, it is projected to decline to 60 million by 2050. Since the 1970s, Japan and South Korea have off-shored much of their production to Asia-Pacific countries with a younger median age and larger and cheaper workforces (for example, Bangladesh, India, Indonesia, Philippines, Vietnam). Countries such as the Philippines, and increasingly Vietnam, also have some of the world’s largest sources of emigration.

At the same time, Japan has long maintained strict immigration policies with popular support. Roughly 3% of Japan’s population is foreign-born, compared to 15% in the UK and 30% in Australia. The traditional consensus on immigration policy in Japan, characterised by the nation’s ‘insular mentality’, has been such that attempted reforms have typically been regarded as a political death-wish.

This has placed Japan at a critical juncture, in which it faces an acute demographic crisis and resulting labour shortage that will require it to more than quadruple its foreign workforce (to an estimated 6.74 million) just to maintain current levels of economic output.

Government policy over the longer term has been to compensate for the shortfall in the national workforce by investing in ‘labour-saving technologies’. Prime Minister Kishida’s plan for a ‘new form of liberal democratic capitalism’ has not deviated from this strategy; investing in AI technology, the Internet of Things (IoT) and robots to improve anything from traffic accident statistics to remote, automated health care to information flows through machine learning (that is, as consistent with the Fourth Industrial Revolution).

On the other hand, enhanced efficiency and velocity in the industrial, social services and financial sectors are not always constructive, as they also contribute to increased unemployment (particularly in the ‘low-value’ workforce) while exacerbating pre-existing structural problems such as income inequality.

Nonetheless, under combined demographic and industrial pressures, Japan has also increased its population of foreign workers from one million in 1990 to 1.72 million foreign workers in October 2020 (although this number is likely higher), out of more than 2.9 million residents of foreign nationality in total (or, 2.39% of the total population of 125.5 million).

In 2018, the Abe Government introduced a new guest worker program under the ‘Specified Skilled Worker (SSW) i & ii statuses’ to bring an estimated 345,000 foreign workers to Japan over 5 years. When this program came into effect in 2019 it permitted skilled blue-collar workers in only 2 of 14 sectors with labour shortages – construction and shipbuilding – to renew their visas and bring their families to Japan. The Kishida administration has since expanded eligibility for visa renewal in all 14 worker-shortage categories.

Despite this recent boost in foreign workers, the official number based on Japan’s limited definition of ‘immigrant’ provided by the Ministry of Health, Labor and Welfare (for example, permanent resident of foreign nationality, which requires over 10 years of residence in Japan), estimates only 1.8 million foreign workers as reported by around 300,000 companies.[21] Given the discrepancy between foreign residents and workers, it may be that not all companies are reporting their foreign workers and that some foreign residents are students, self-employed, retired or have moved from their original jobs.

Higher fertility in immigrant populations is often regarded by policy researchers as one way to assist in resolving shrinking and ageing populations, by revitalising communities in decline.[22] Immigrant populations in Japan, however, have typically recorded lower fertility rates than their native counterparts.[23]

High social and legal barriers and utilitarian treatment faced by foreign workers, as well as harsh immigration detention policies, have tended to undermine the social integration of immigrant populations as permanent members of society (for example, naturalisation, social inclusion and immigrant population growth).[24]  

As the late prime minister Abe Shinzo stated in 2018, for example, the boost in immigration has been primarily to fill short-term labour needs with ‘human resources with a certain level of expertise while limiting their length of stay’. These ‘human resources’ have primarily been international students who work part-time and trainees registered in the Technical Intern Training Program. This program has been a boon to companies, which can hire young, unskilled workers on low wages – but still higher than those in developing countries.

This situation was exacerbated in the COVID-19 years as the Suga and Kishida governments implemented strict border control policies, including an initial re-entry ban on long-term residents who were outside of Japan and a complete entry ban on new foreign residents. This triggered secondary effects such as xenophobia and the scapegoating of foreigners based on ‘security and order concerns’, and pseudo-scientific explanations for foreigner-transmission of COVID. The ban was lifted in 2022 to admit entry to a waiting list of eligible workers.

While by no means limited to Japan, immigration programs can also be fertile ground for polarising narratives in host societies. With demographic transition as a primary concern under an overarching theme of decline and existential threat and exacerbated by heightened economic insecurity, anti-immigrant, identitarian or ethno-nationalist ideas such as replacement theory can become popular. Replacement theory, which anticipates the substitution of an imagined homogeneous and harmonious majority population with a disruptive immigrant minority population, has received greater public attention in recent years. It has been reported to have had some influence in some countries in Europe, India, the Middle East, Australia, Canada, New Zealand, South Africa and most visibly, in the US, and has been linked to acts of violence perpetrated by individuals and groups.

Given that Japan’s rapidly ageing population is expected to need 21 million workers in 2040, a disproportionate growth in the secondary industrial sector for social security-related services will increase demand for nurses and long-term care givers in the health and social services sectors, and for migrant female workers from Southeast Asian countries on temporary visas in particular.[25]

One way to understand Japan’s conflicted need for foreign workers and population growth alongside a notably deep reluctance to permanently include immigrant communities is the political context. As in many countries, working populations in Japan migrated from rural villages and towns to the cities for employment in waves in the 1930s, 1950s and since the 1980s. Serviced by construction, transportation and infrastructure programs, elderly, rural populations typically represent the traditional strongholds of the Liberal Democratic Party (LDP). These electorates also enjoy a disproportionate degree of influence compared to the more densely populated peri-/urban voting districts. And they are strong advocates for the (protected) agricultural industry and social security spending.

As much as the more conservative electorates may seek to preserve their ‘way of life’ and ideas of the Japanese nation and identity, as they rapidly age and pass away, and as the continuing trend in diversification of political parties and increasing prominence of some female politicians albeit relatively few in number, demographic and political change may follow, including immigration and further electoral reforms and incoming migrant populations.

Japan’s attractiveness to foreign worker populations is not a given, however. As the Southeast Asian region is tipped to become the economic powerhouse that East Asia has been for at least the past 30 years, future economic growth in primary emigration countries such as Vietnam, Indonesia, and the Philippines, may reduce future foreign labour supply in Japan. The Japan Centre for Economic Research (JCER) estimates that by 2032 the wages of factory workers in these countries will rise to more than 50% of those earned by trainees under the program. Japan’s wages are already among the lowest in developed countries, and the weak yen further suppresses the earning potential for foreign workers.

Although the political establishment in Japan is such that it seems unlikely to find the will to overcome entrenched cultural norms and suddenly declare Japan an ‘immigration nation’, the LDP is likely to continue to prioritise less contentious (and more popular) factors which inform fertility intentions such as child care, gender inclusivity and working conditions, as a national security issue.

Eventually, a formalised immigration policy may assist Japan in adapting to shared challenges with countries in the region through the development of regional and multilateral interconnectedness. Investment and cooperation in renewed infrastructure, energy systems and urban redesign, for example, as well as the provision of more affordable housing and quality education and skills, could better support Japan’s resilience to the impacts of demographic transition.

Demographic change in the Indo-Pacific

Demographic change is a worldwide phenomenon with global implications. Often understood as the ‘flying geese model’ of Asian economic development, rapid economic growth that drove Japan’s successful return to the world economy in the 1950s and 1960s, followed by other now powerful economies in Northeast Asia, were fuelled, in part, by ballooning labour pools which are now shrinking.

Currently, the cascading effects on national economic and political power in countries in Northeast Asia, albeit on different timelines, are being felt at all levels. Alongside structural and cultural factors in Japan as explored above, with working-age populations shrinking in parallel, political and budgetary pressures will become more acute in the region. Demographic change will steadily alter regional security dynamics and demand adjustments to manage both existing security challenges and to meet new ones.

Beyond Japan, in the broader Indo-Pacific region, it is estimated that 11 of 16 major security actors will also reach ‘super-aged’ status by 2050.[26] The Indo-Pacific, which is both a security concept and a geographic area, now constitutes the majority of the world’s population with many lower income countries with relatively young populations. It is the region in which world population growth will occur before peaking at the end of the century. India has now overtaken China as the world’s most populous state. And other states with large, younger populations such as Vietnam, Indonesia, the Philippines and Bangladesh are anticipated to continue to grow in the next several decades.

Through the security lens, the Indo-Pacific region is growing increasingly complex with a more diverse set of actors with greater distribution of power and interests. With demands for increased participation in regional security over the next 30 years, the regional security environment will become more multipolar in nature.

At the same time, the US, with the highest military budget in the world, continues to expand its military, while Australia, China, Indonesia, India, Japan and South Korea all have increased their military budgets and military activities in the past decade. Moreover, all regional countries that are security allies with the US (except the Philippines), are focused on offsetting military recruitment deficits and higher labour costs by integrating high-technology, including in the cyber and outer space domains.

Japan, for example, cannot obtain a workforce at the scale required to build an industrial manufacturing base and military capacity necessary to project power comparable to that of China and the People’s Liberation Army (PLA). Since the first Abe administration in 2006, at least, increases in defence spending and national security strategy revisions in Japan have supported a military transformation focused on high-technology capabilities requiring fewer personnel, and greater interoperability with allied countries, alongside constitutional revision.[27]

As stated by the Defence Ministry in 2020, of priority is ‘reinforcing the human resource base in light of the aging [sic] population with a declining birth rate and reinforcing the technology base due to advances in military technologies’. [28] In continuation of this trajectory, the Kishida administration’s push to reverse fertility decline to raise the national birthrate and boost the military budget can be understood as an interlocking program of rapid strategic and economic transition.

Japan serves as an example for Australia, which currently has a falling birthrate and which is predicted to stabilise at 1.62 after 2030. The Centre for Population has forecast that Australia’s population will increase by an additional 4 million people to reach 30.8 million by 2032, but this may not be sufficient to address the country’s needs.[29] Although Australia has proven capable of adjusting to significant demographic changes, due to abundant natural resources and population increases through migration, it is also considered to be in relative decline due to its smaller population, domestic market and industrial base, longer supply chains due to geography, and limited manufacturing capacity compared to other OECD countries. Like Japan, Australia’s migration system is currently under review, so as to reduce overreliance upon an ‘uncapped, unplanned temporary program’ and to increase pathways to permanent residency.

Australia’s resilience also relies upon strong purchasing power and a solid network of security partnerships. The latter includes its traditional allies, the US and the UK (as reflected in the AUKUS agreement), as well as newer partnerships with Japan, South Korea, India, Indonesia, Singapore and several Pacific Island countries.

Like Japan and several other countries in the region, Australia faces the ‘exquisite dilemma’ of relying upon China as its largest trading partner, which is also widely considered to be its biggest security concern. As demonstrated with some of the constraints and challenges in the AUKUS nuclear submarine program (Pillar I), Australia will seek to expand its industrial base (including building a skilled workforce capacity) alongside the integration of quantum technologies, artificial intelligence and autonomy, advanced cyber, counter/hypersonic capabilities and electronic warfare (AUKUS Pillar II).

Australia stands to learn valuable lessons from Japan and other countries in Northeast Asia, as they negotiate a host of interrelated realities in ‘super-aged’ societies. It is also well-placed to engage in reciprocal exchange with younger and growing regional neighbours as they manage the opportunities of short-term ‘demographic dividends’ together with the attendant pressures of rapid growth, while also seeking to stabilise the regional balance of power. And with the immediate and urgent, direct and cascading security impacts from large-scale and accelerating climate change also affecting the region, as with the case of Australia, many states will see increasing pressures on their militaries to provide additional assistance for internal and external humanitarian security engagements.