[Future Japan 2030] Where is Japan Headed After Abe?

"Where is Japan Headed After Abe?"

Following its series on the future of US-China competition (China's Future Growth and US-China Relations 2030) and the future of American hegemony (Where is American Hegemony Headed After Trump?), EAI is publishing the "Where is Japan Headed After Abe: Japan 2030" series below.

1. Lee Jeong-hwan: Factors of Internal and External Structural Change and Japan's Response [Read Report]

2. Lee Ju-kyung: Challenges in Japanese Politics and the Future Direction of 2030 Next-Generation Politics [Read Report]

3. Kim Sung-jo: Sustainability and Future Direction of Japanese Welfare Policy [Read Report]

4. Lee Chang-min: The Emergence of Japan as a Mature Creditor Nation [Read Report]

5. Park Myung-hee: Will Japan Transform into an Immigrant Nation by 2030? [Read Report]

6. Lee Ki-tae: Future Japanese Foreign and Security Policy Challenges: US-Japan Alliance, China Policy, and Korean Peninsula Policy [Read Report]

As China rapidly rises, surpassing Japan's economic power in 2010 and engaging in full-scale strategic competition with the United States, Japan is making various efforts to protect its national interests. If China maintains an average annual GDP growth rate of over 5%, it will achieve parity with the US in economic power by 2030, making US-China relations a key variable determining the international order and Japan's destiny. The issue lies in Japan's internal socio-economic changes. Japan's population peaked at 128.1 million in 2008 and has been decreasing by over 500,000 annually since 2022, with an estimated population of 119.13 million by 2030. The working-age population is significantly declining, while the elderly population, particularly those aged 75 and over, is rapidly increasing. Approximately one in four citizens is elderly, and if this trend continues, the aging rate will reach 40% by 2060. From an economic perspective, the decline in the working-age population is a factor normalizing low growth. While the potential for automation due to technological innovation is a variable, the process of replacing Japan's extensive non-cutting-edge/traditional labor with AI/machinery will not be easy. The Japanese economy is unlikely to escape its low-growth trajectory due to low birth rates and aging, and it is almost certain to fall to fourth place globally by 2030.

Due to structural factors such as relative economic decline and the rapid increase in social welfare costs stemming from population decline and aging, Japan faces difficulties in pursuing a strategy of enhancing national power (internal balancing) through increased defense spending. Therefore, Japan may choose to strengthen its alliance as a dependent variable in US-China relations while adopting various risk-hedging measures, or it may attempt more active coalition-building and multilateral engagement beyond alliances. Domestically, the increasing political influence of the elderly, termed 'silver democracy,' may sustain domestically-oriented conservative politics and the Liberal Democratic Party's (LDP) single-party dominance, leading to significant social welfare expenditures. Conversely, the resurgence of nationalism, emphasizing external threats and seeking to restore past glories (imperialist modernization), cannot be ruled out. This represents a retrogressive and reactionary mindset aiming to create a decisive turning point before further decline.

This project forecasts Japan after the Abe administration in the areas of Japanese politics, economy, society, welfare, and foreign relations. Chapter 1 (Lee Jeong-hwan) identifies the factors of structural change Japan currently faces as the rise of China, demographic shifts, and technological innovation, and forecasts the direction of domestic discussions regarding Japan's response. Chapter 2 (Lee Ju-kyung) forecasts the future of Japan's political system. The current LDP-dominant system and fragmented policy competition among parties effectively preclude the opportunity for voters to choose their government, leading to reduced responsiveness and opaque accountability for cabinet leadership. As a partial alternative, new forces within the LDP are attempting to overcome asymmetrical power dynamics within the party and build a next-generation support base by strengthening ties with same-generation voters. Policy competition between new and old LDP politicians and opposition forces surrounding voters is expected to materialize in the near future. The pattern of Japanese democracy will be reshaped depending on the axis around which institutional arrangements for future electoral and policy domains are transformed.

The rapid advancement of low birth rates and aging in Japan leads to increased social security costs, resulting in a nationwide socio-economic crisis. Particularly, social security systems, where intergenerational fiscal transfers are crucial, face numerous challenges in pensions, healthcare, and long-term care due to low birth rates and aging, including increased benefits and burdens on the working generation. Chapter 3 (Kim Sung-jo) presents future policy change directions considering demographic issues, changes in technology and labor patterns, the legacy of past welfare programs, welfare finance, and value shifts. First, due to the results of existing reforms, gradual fiscal increases are expected in the pension system by around 2030, but welfare expenditure is predicted to increase sharply in the healthcare sector. Consequently, conflicts among provider groups, elderly groups, and health insurance organizations in the healthcare sector will intensify. Second, in terms of fiscal composition, while the social insurance-centric program itself will be maintained, the proportion of taxes is expected to gradually increase as social insurance premium hikes reach their limit. Furthermore, the existing elderly-centric approach will gradually weaken, with increased investment in families and the labor market predicted. However, this transition is likely to proceed gradually under 'silver democracy,' where the political influence of the elderly is strengthened. Additionally, while spending related to women and families is increasing, this is largely driven by Abe's conservative reform discourse to address severe functional crises like low birth rates, rather than by the rise of women's civic or political rights.

Chapter 4 (Lee Chang-min) focuses its analysis on the future prospects of Abenomics. The yen depreciation resulting from Abenomics has not led to a decrease in export prices and an increase in export quantities, but rather has expanded import costs. Due to the contraction of domestic investment opportunities, Japanese companies have increased their overseas production bases. Instead of reinvesting improved operating profits domestically or returning them as wages, they have reinvested them overseas or returned a portion of the profits to domestic shareholders. This strategy by Japanese companies has enabled current account surpluses through the expansion of net income from abroad, resulting in Japan becoming the country with the largest net foreign assets globally.

Chapter 5 (Park Myung-hee) examines the debate, policy changes, and social perceptions regarding immigration as a response to demographic changes, which pose the most severe and structural threat among the various future challenges facing Japanese society, and predicts future challenges. Currently, Japan does not have immigration in the conventional sense where immigrants acquire residency and then obtain nationality after a certain period of residence, nor does it have a system for entry based on permanent residency, except for spouses of Japanese nationals. However, the Japanese government has operated systems to secure necessary labor from abroad, distinguishing between unskilled and skilled workers, and maintaining a policy of refusing entry to unskilled workers. In sectors like construction, where labor shortages are constant, the existing policy of not admitting unskilled labor appears to have been effectively abandoned. Furthermore, while immigration based on permanent residency does not exist, 'de facto immigration' is expected to gradually increase. However, compared to countries with large immigrant populations, Japan's comprehensive social integration policies for the social integration of 'de facto immigrants,' including education, political participation, and anti-discrimination measures, are relatively insufficient. In a situation where Japan, like other developed countries, seeks to selectively admit immigrants, prioritizing highly skilled individuals and those in short supply domestically, its competitiveness compared to other nations is not high, indicating significant limitations in the effectiveness of Japan's immigration policy.

Chapter 6 (Lee Ki-tae) forecasts Japan's foreign and security policy, suggesting that Japan will maintain its 'normal state' (ippan kokka) policy, established in the 'National Security Strategy' formulated in 2013, through the 2030 period. Under this policy, Japan's foreign and security policy will continue to be characterized by the strengthening of the US-Japan alliance, exemplified by the 'globalization of the US-Japan alliance' at the global level. At the regional level, the continuous rise of China will coexist with containment and balance through the Indo-Pacific strategy and conflict management. At the Korean Peninsula level, while pursuing stability on the peninsula, Japan's policy toward the peninsula will be a hybrid of efforts to improve Japan-North Korea relations and preparations for contingencies on the Korean Peninsula. Japan is likely to pursue the role of a 'provider of stability' in East Asia and a 'reliable and influential Japan,' thereby fostering a 'balance of power order' in the region. Ultimately, Japan will move towards contributing to the establishment of a 'pluralistic international order' by exercising leadership, cooperating with the United States to maintain its influence, and aligning with Australia, India, and ASEAN.

■ Author: Son Yeol_ Director of EAI and Professor at Yonsei University's Graduate School of International Studies. He holds a Ph.D. in Political Science from the University of Chicago. He has served as Dean of Yonsei University's Graduate School of International Studies, Dean of Underwood International College, and President of the Association for Japanese Studies in Korea, and currently serves as President of the Korean Political Science Association. His main research areas include international political economy, Japanese foreign policy, and East Asian international relations. His recent publications include Japan and Asia's Contested Order (2018, with T.J. Pempel), Korea's Middle Power Diplomacy (2017, co-edited with Kim Sang-bae and Lee Seung-ju), and Understanding Public Diplomacy in East Asia (2016, with Jan Melissen).

Research Team

■ Kim Sung-jo_ Professor in the Department of Social Education at Soonchunhyang University. He graduated from Korea University with a degree in Korean History and received his Ph.D. from the University of Sheffield in the UK for his comparative study on the political dynamics surrounding welfare reforms in Korea and Japan. His main research areas include comparative politics, Japanese politics, and welfare politics. His recent publications include "The Politics of Revising Article 9 of the Japanese Constitution: Focusing on Prime Minister Abe's Constitutional Revision Strategy" in <Peace Studies> (co-authored, 2019), "Japan's Pension Reform and Party Politics: Focusing on the 2004 Pension Reform Case" in <Korean Political Science Review> (2018), and "The Political Dynamics of Japan's Elderly Healthcare Insurance Reform" in <Korean Political Research> (2017).

■ Park Myung-hee_ Legislative Research Officer at the Foreign Affairs and Security Team of the National Assembly Secretariat. She graduated from Ewha Womans University with a degree in Political Science and International Relations (1996) and received her Master's (1999) and Ph.D. (2011) degrees from the same university. She was a visiting researcher at Keio University in Japan and served as a research professor at the Japan Research Center of the Institute of Foreign Affairs and National Security, Korea National Diplomatic Academy (August 2015 - February 2018). Her main research interests include Japanese politics and civil society. Her recent research includes "The Spread of Anti-Korean Sentiment in Japanese Society - Discourse Structure of Self-Regulation and Fluctuations in Korea-Japan Relations" <Journal of Japanese Studies> Vol. 50 (2019), and "The Gap Enlargement Mechanism between Korean-Japanese Perceptions: Focusing on the Comfort Women Agreement (2015.12.28.)".Korea Observer Vol 48(3), among others.

■ Lee Ki-tae_ Research Fellow, Peace Research Division, Korea Institute for National Unification. He obtained a Ph.D. in Political Science from Keio University, Japan. His main research areas include Japanese foreign and security policy and North Korea-Japan relations. His major publications include "Tensions and Reconciliation in Korea-Japan Relations" (2019), "The Formation of the Indo-Pacific Rules-Based Order and the Prospects for Quad Cooperation" (2019), and "The Abe Administration's Security Cooperation with the UK and France: Expanding the Security Network in the Indo-Pacific Region" (2019).

■ Lee Jeong-hwan_ Professor, Department of Political Science and International Relations, Seoul National University. He obtained a Ph.D. in Political Science from the University of California at Berkeley, USA. His main research areas include Japanese political economy and Japanese foreign policy. His major publications include "Decentralization Reform and Public-Private Cooperation in Contemporary Japan" (2016), "The Anti-Local Nature of Japan's Regional Revitalization Policy" (2017), and "The Transformation of the Abe Administration's Historical Policy: The Abe Statement and Internationalism" (2019).

■ Lee Ju-kyung_ Full-time Researcher, Institute for Korean National Culture Studies, Pusan National University. She received a Ph.D. in Political Science from Hosei University, Japan, and served as a visiting researcher at the same university. Her research areas include Japanese politics, policy processes, and party politics. Her major papers and books include "The Interaction Between Central and Local LDP Politicians Regarding Agricultural Issues in the TPP Negotiations" (2019), "Upper House Elections in Japan and Party Campaign Strategies" (2015), and "The Policy Change Mechanism of the LDP Administration" (2014).

■ Lee Chang-min_ Professor, Department of Japanese Studies, Hankuk University of Foreign Studies. He graduated from the Department of Economics at Korea University and obtained a Ph.D. in Economics from the University of Tokyo, Japan. His main research areas include Japanese economics and Japanese management. His major publications include "Japan's National Strategy in the Abe Era" (co-authored, 2018) and "Economic History of Institutions and Organizations" (translated work, 2017).

■ In charge and Edited by: Kim Se-young EAI Research Fellow

Inquiries: 02 2277 1683 (ext. 208) sykim@eai.or.kr

[EAI Commentary] is a commentary series planned to provide a forum for discourse where experts from various fields can offer in-depth analyses and policy recommendations on major domestic and international issues. Please cite the source when quoting. EAI is an independent research institution unaffiliated with any partisan interests. The claims and opinions expressed in reports, journals, and books published by EAI are solely the views of the authors and do not represent the views of EAI.