Japan faces labor shortages and demographic crisis as elderly population hits record high

Japan commemorated its "Respect for the Aged Day" earlier this week, with the national holiday underscoring a somewhat problematic fact — the country has a record number of elderly citizens to celebrate. 

Government data released ahead of the event showed that Japan's population aged 65 and over had risen to an all-time high of 36.25 million.

While the country's overall population has been declining, the segment of those aged 65 and above has grown to 29.3% of the population, the highest share of any country, according to the Statistics Bureau of the Ministry of Internal Affairs and Communications. 

According to Robert Feldman, chief economist at Morgan Stanley MUFG Securities, the data fuels further concerns about demographic shifts and a labor crunch in the country.

A survey from Teikoku Databank last month showed that 51% of companies across sectors in Japan feel there is a shortage of full-time employees.

"The labor shortage is just as bad as ever," said Feldman, noting that it's especially felt in labor-intensive industries such as food service.

Meanwhile, 2023 saw the number of Japan's workers aged 65 and over rise for a 20th consecutive year to reach a record 9.14 million, Statistics Bureau data showed. 

Feldman warned that as these elderly workers begin to retire from the workforce, there won't be the same number of young workers stepping up to replace them.

Based on recent trends, Japan's proportion of elderly people is expected to continue to rise, hitting 34.8% in 2040, according to the National Institute of Population and Social Security Research.

Meanwhile, a recent research note from Morgan Stanley's Feldman estimated that based on past demographic trends, the total labor force could drop from about 69.3 million in