• To ensure a brighter future, Japan must invest in youth.
  • Generating good jobs is key to Japan's economic growth and youth optimism.
  • With the world's fastest-aging population, Japan must prioritize healthy and productive longevity.

As the fastest-aging country in the world, Japan urgently needs to restore the younger population’s trust in the future.

As a country, Japan faces economic and societal gridlock due to a vicious cycle. Anemic economic growth in the past three decades has depressed wages, and despite several policy changes, the younger population does not have enough confidence to start a family. This results in the gradual shrinkage of the population – a 620K decrease from the same month a year ago, according to the report by Ministry of Interior and Communications. Meanwhile, personal wealth has, naturally, accumulated among the older population, but this does not drive consumption for the country, as this population is more likely to save for ever-extending longevity. These issues are compounded by the fact that traditional culture – which had long valued homogeneity and gender-based roles at home – did not provide enough opportunities for women, youth and foreign-born talent. Unfortunately for Japan, this has stifled innovation, which is so sorely needed for economic growth.

All these symptoms are connected – and to find a pathway out of this logjam, a systems approach is needed.

What does Japan need to ensure a brighter future? Multiple initiatives must occur simultaneously, and they all require public-private partnership. Here are a few ideas.

1. Investing in youth

Public spending should prioritize investment in youth to ensure that they have access to quality education and skills development. This will prepare Japan’s population for the future with globally competitive education and skills regardless of family income levels and location of residence. The private sector needs to be more proactive in re-skilling and up-skilling workers as technological advancements quickly outpace our skills.

2. Generating good jobs

It is clear that the private sector’s primary role is to create economic growth, and that real growth is what provides sustainable wage increases. However, wages in Japan have been stagnant. According to the status of private sector salaries recently announced by the National Tax Agency, the average annual salary for 2020 was JPY4.33 million ($36,000). Even in the mid to long term, Japanese salaries have not increased but declined. This makes it harder for the younger generation to be optimistic about the future.

One way to jumpstart corporate growth is for those firms operating outside of Japan to excel as its domestic market shrinks. To be competitive, diversity and inclusion are must-haves in an organization, as is the integration of foreign talent, while family-friendly workplaces are critical to retain talent. Government can provide the framework to encourage labor mobility with robust safety nets as people change careers – something much anticipated to occur in the era of the Fourth Industrial Revolution, with its rapidly changing connectivity and automation..

3. Making healthy and productive longevity a reality

Take-home pay for the younger generation is depressed, partially because the burden of social insurance premiums has increased in the past 20 years. People over 65 years is the fastest-growing segment in the population, and the burden of supporting this demographic heavily pressures future generations.

By 2040, estimates suggest, more than a third of Japan’s population will be 65 or over.
By 2040, estimates suggest, more than a third of Japan’s population will be 65 or over.
Image: McKinsey/e-Stat Japan

How can we keep the population healthy as life expectancy extends? Technology is one solution. Today, 1 in 5 seniors live by themselves, and there is an abundance of opportunities for innovation. If seniors can get more support from technology and automation, they can continue to live independently. For starters, the public sector needs to de-regulate healthcare and nursing services for businesses to enter and grow. Also, as we see more healthy seniors, there need to be more opportunities for them to remain in the workforce and stay productive. This is an area where Japan leads, exploring and implementing flexible ways to integrate older citizens in its economic system.

In the summer of 2021, the Forum’s Global Shapers Community launched a Youth-Driven Recovery Plan. The plan included 40 policy recommendations – including ones for addressing climate change – to help policymakers integrate the voices and ideas of young people into the conversation and help shape a more equitable future. Young people are taking action on climate because they feel that the global environment that they live in is in danger and that action cannot simply be left up to adults. The same is true for the future of Japan. If we do not set a course for sustainable growth, young people will not have trust in the future.

According to a research by the Cabinet Office, just 38.8% of Japanese youth are either satisfied or fully satisfied with the state of the country (compared to 57.8% in the United States and 56.9% in England). Youth are watching. Rebuilding trust takes more than a bare agreement. Action must follow – and not by one single player, but by all sectors across the nation. With trust from youth, Japan can step up.