The potential labour force in Japan, those aged 15 to 64, has fallen to just over 59% of the population and is expected to continue to decline. There is also unusually limited immigration in Japan, so there are no foreign workers to increase this potential labour force.
This means that there are insufficient workers to maintain current levels of economic activity in Japan. This will obviously have a knock on effect on Japan’s ability to maintain a pension system.
The answer to this, suggested by the IMF, is to increase female participation in the labour force, as well as encourage older workers to remain working.
Japan also has high levels of automation, AI, and robotics use and this may be a potential way to increase economic output despite the declining labour force.