According to official data reported by the Financial Times, the average per adult annual consumption of alcohol fell in the country from 100 litres per year in 1995 to 75 litres in the 2020 fiscal year. The exchequer there, as in most other countries, depends on alcohol products. But from 3% of tax revenues in 2011, the share dropped to 2% in the year of the pandemic, 2020.
The drop is a big headache for Japan’s macroeconomic policy makers, as the country runs chronic deficits on its budget and its total debt is in excess of twice the economy’s total GDP. And so, the government has come up with an unorthodox response. Its ‘Sake Viva!’ contest has invited Japanese in the age group from 20 to 39 to propose business ideas for revitalising the alcohol industry—not the first such experiment aimed at changing drinking habits and increasing sales of alcohol in the country.
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The country’s population began to shrink more than a decade ago. Declining non-stop from the peak of 128 mn in 2008, it was down to 126.6 mn last year. The country also began to age a decade ago: more than a quarter of the Japanese are over 65. Japan has failed chronically to reverse the falling number of births. According to official data, only 840,000 babies were born in the country in 2020, with the birth rate down to 1.34 children per woman of childbearing age. As a result, the “new adult" cohort, the 20-year-olds in the total population, is down to just 0.96%. These demographic worries show up in the “coming-of-age", seijin shiki, festival in January every year celebrating all those that in the preceding 12 months turned 20, the eligibility age for right to vote, smoke and drink, and to become a grown-up officially.
Such demographics and related economic factors—chronic deflation and economic stagnation that followed after the property and stock market bubbles burst in the 1980s causing Japan to lose out to the new rising stars on the global economic stage, all of which the famed Abenomics tried to remedy—have changed the Japanese people’s attitudes towards consumption and health dramatically, especially for the young.
For decades after the bubbles burst, Japan saw anaemic wage increases, squeezed corporate profits, lower job security, and low propensity for consumption. The Japanese don’t drink, don’t marry, don’t buy cars, don’t take risks, all of which suggests a sense of insecurity. Young Japanese are sometimes referred to as the deflation generation, their lifestyles and choices strike a sharp contrast to those of their parents, who lived in the bubble phase.
The demographic shift poses many other struggles. Thousands of businesses that powered Japan’s postwar economic growth, and built it to be the world’s third largest economy, are shutting down, simply because the owners have no one to pass on the reins to; no children, no trustworthy candidates outside the immediate family and no one to sell off to—a ‘national shortage of heirs’.
According to official data, the single biggest cohort of business owners in the country are 69-year-olds, and every year nearly 40,000 small businesses require new successors. Not many manage to find them. It’s such a dire situation that dating apps have come up in Japan for matching owners with heirless businesses with potential sons and daughters to adopt.
Japan has, in fact, become the global economy’s policy lab for drawing lessons on aging, dwindling populations and a shrinking labour force. An older and smaller population has implications for productivity and long-term economic growth. Responses include automation, artificial intelligence, robotics, technologies to increase productivity per worker, and policies to bring more women than has traditionally been seen and the elderly to join the labour force. A bigger share of retirees in the population than earners and taxpayers makes it tougher to finance social security frameworks, public expenditure on health care, long-term care, and pensions.
The fiscal challenges and debt sustainability concerns increase reliance on taxes on consumption and higher and rising social security contributions.
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