Effect of Aging Population on Labour Productivity in Japan
DOI:
https://doi.org/10.53819/81018102t2580Abstract
Japan is one of the clearest developed-economy cases for examining how population aging affects labour productivity. The country combines a very high share of older persons, a shrinking working-age population, long life expectancy, low fertility, and persistent labour shortages. This paper examines the effect of aging population on labour productivity in Japan using a literature-based and secondary-data approach. It draws mainly on recent evidence from the OECD, International Monetary Fund, World Bank, Statistics Bureau of Japan, Cabinet Office of Japan, and peer-reviewed studies published from 2020 onward. The analysis shows that aging affects labour productivity through four main channels: reduction in labour supply, change in the age composition of workers, pressure on firms to reorganize work, and the need for stronger technology adoption. Aging may reduce productivity where firms rely on labour-intensive routines, weak training systems, mandatory retirement, or low labour mobility. However, the effect is not automatically negative. Older workers can support productivity when their experience is retained, when tasks are redesigned, and when firms invest in ICT, automation, artificial intelligence, and continuous training. The paper concludes that Japan's productivity challenge is not simply that the population is older; it is that many labour-market and firm-level systems have not adjusted fast enough to an older workforce. Policy should therefore focus on lifelong learning, flexible retirement, stronger ICT use, improved labour mobility, productivity upgrading in small and medium-sized enterprises, and better inclusion of women, older workers, and skilled foreign workers.
Keywords: Aging population; labour productivity; Japan; older workers; ICT; automation; labour shortages.
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