Asia’s advanced economies now have lower birth rates than Japan

Much of Asia has now caught up with or overtaken it. Japan’s fertility rate of 1.3 in 2020, the latest year for which comparable figures are available, puts it on a par with mainland China, according to the Population Research Bureau, an American outfit. China’s birth rate is likely already to have fallen behind Japan’s: there were 10.6m Chinese births last year, down from 12m in 2020, a decline of 11%. The number of births fell only 3% in Japan.

Japanese fertility is still ultra-low compared with almost any society in human history. Yet it is now higher than that of any well-off East Asian or South-East Asian economy. The numbers in Hong Kong, Macau, Singapore, South Korea and Taiwan ranged between 0.8 and 1.1 in 2020 (see chart). Nor is this a temporary blip caused by the pandemic: Japan’s figure was higher than all those countries in 2019, too.

Rich, baby-averse Asian countries in the region have three things in common. First, their people rarely have children outside marriage. Only around 2% of births in Japan and South Korea are to unmarried mothers, the lowest levels in the oecd, a club of rich countries. In wealthy Western countries that figure is typically between 30% and 60%. In China, the few who become pregnant out of wedlock are often denied benefits. The region’s decline in births has closely tracked a decline in marriages. The age at which people commit to a lifetime of entanglement has also been rising, further delaying child-bearing.

A second shared factor is expensive schooling. Pricey private tutoring and other wallet-emptying forms of “shadow education”, as such extras are known, are common in East Asia. The most frequent reason cited by Japanese couples for having fewer children is the cost of raising and educating them. Lucy Crehan, an education researcher, says that these problems might be even worse in other parts of Asia. Japanese pupils face their first high-stakes exams only at the age of 15. In contrast, children in Shanghai and Singapore must take such tests as early as primary school, piling on the parental pressure to perform and adding to the family’s tuition bills.

Yet it is the third factor that might explain why Japan is out-sprogging its rich Asian peers. A flurry of research in recent years suggests that high house prices cause young couples to delay having children. One paper found that an increase of $10,000 in house prices in America led to a 5% increase in fertility rates among homeowners, but a 2.4% decrease among non-owners. Across much of East Asia and especially in urban China, buying a home is an uphill struggle for young people. South Korea, whose fertility rate of 0.8 is the lowest in the region, correspondingly has a house-price-to-income ratio (the number of years of income needed to buy a home) of 16.6, the highest in the oecd after New Zealand. Japan’s ratio of 7.5 is among the lowest.

The problem of high house prices keeping young families from settling down is not unique to Asia. But Japan’s housing market is different. Unlike most rich countries, it has planning rules that make it relatively easy to build more homes. Housing stock in Tokyo has consistently grown faster than the city’s population (which is also still rising). Also, Japanese homes are not built to last, so they are demolished and replaced regularly. Wooden Japanese homes are deemed by the tax authorities to depreciate in value to zero over 22 years. That means that the secondary market in residential property is more limited, and gives landowners an extra incentive to rip down old buildings and build taller ones.

Economists debate how much of Japan’s relatively affordable housing is down to those policies on supply and construction, and how much is down to the country’s slow economic growth. But either way, the ease of building in popular areas is likely to keep prices in check.

Many Japanese are glad that their country seems likely to avoid total demographic collapse. But Japan still has by far the worst old-age dependency ratio, or the number of people over 65 (a lot) relative to the number of working-age people (not enough), among rich Asian countries. That has effects on everything from the affordability of health care for the elderly to the size of the government budget dedicated to pensions. The drop in fertility rates elsewhere presages similar problems to come for the countries following in Japan’s footsteps. They may find there are lessons to be learned from Japan. ■

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