OECD Territorial Reviews: Japan 2016
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OECD Territorial Reviews: Japan 2016

Japan is embarked on a demographic transition without precedent in human history: the population is both declining and ageing rapidly. This raises important questions about the country's future economic geography, as public policies will need both to respond to these shifts and also to shape them. Demographic change will have particularly important implications for the settlement pattern of the country, and this, in turn, will affect Japan's ability to sustain economic growth and the well-being of its citizens. This Review therefore focuses on the spatial implications of demographic change and the response of spatial policies to it, particularly as these interact with other policies aimed at sustaining the productivity growth that a "super-ageing" Japan will need in order to maintain its future prosperity. The Japanese authorities have recently put in place a complex package of long-term spatial and structural policies aimed at meeting this challenge. Their experience should be of first-order interest to other OECD countries, as most face the prospect of rapid population ageing and many are also projected to experience significant population decline over the coming decades.

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Japan’s future prosperity depends on its ability to tackle two enormous and inter-related challenges, which will largely shape its future spatial and economic development. The first is an unprecedented process of demographic change: the country’s population is ageing and shrinking rapidly. The second challenge concerns productivity. With the labour force shrinking as a share of the population, output per worker will have to rise even faster if per capita incomes are to increase. A "super-ageing" Japan cannot sustain rising living standards without strong, sustained productivity growth. This will require efforts to stimulate innovation and entrepreneurship and to strengthen the international integration of the Japanese economy. The productivity of services, in particular, will be a critical concern, because demographic change will create challenges for service delivery, in particular – both increased demand for age-related services and increased unit costs for service delivery in places where population is falling.

 
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