Many countries around the world are grappling with the implications of ageing populations. The issues vary slightly between countries, but some are common to all―not least of which is the challenge of financing healthcare systems to meet the increasing pressures placed on them by an ageing population. This is no simple matter. With advances in healthcare and the standard of living, people are living longer and healthier lives. And they are demanding a better quality of life. Catering for this demand represents an enormous market opportunity. Japan, with the most rapidly ageing society and challenging demographic profile, is well positioned to take the lead in capitalizing on this opportunity. But will it do so? This paper examines Japan’s approach to the opportunity, looking at government policy, misconceptions about ageing, and how Japan can improve its innovation environment. Among the main findings:
- Japan’s demographic challenge is complicated by a low birth rate, increasing longevity and the rapid pace of ageing. This threatens not only a labor shortage, but also a difficult fiscal challenge as the dependency ratio―the number of workers compared to the number of elderly―worsens. As well as overhauling the healthcare system and its finances to meet the needs of the elderly, the government will need to come up with innovative ways to raise revenue and cover the labor shortfall by, for example, encouraging more women to work and making better use of the talent available in the elderly population.
- The government has taken the lead in creating a vision of the opportunities an ageing population presents, but now must encourage others to follow. As part of its strategy to foster demand-led economic growth, the Democratic Party of Japan (DPJ) government that took office in 2009 has unveiled an ambitious vision to turn the ageing of society into a growth opportunity, while catering for the twin needs to contain healthcare costs and improve the quality of life. Now it must focus on the details. Among the fundamental issues to be addressed are a lack of high-quality research on the state of the country’s elderly population and shortcomings in the innovation environment (see below).
- The market opportunity is in helping seniors live the lives they want to lead, not simply catering for those with severe disabilities. Japan’s elderly are not as dependent on care as one might assume. According to one study, 70% of Japanese men begin to see a gradual decline in their self-sustainability only around the age of 75, and 10% retained their self-sustainability into their 80s and 90s. Many elderly people can continue to lead active lives with only minor assistance. This suggests that scientists, innovators, and businesses need to think more broadly about what the market needs.
- The environment for innovation needs improvement. Taking advantage of the market opportunity that the ageing of the population presents will require innovation across many sectors. Though Japan has a reputation for technological innovation, its top innovators note the need for broad changes to the way innovation is approached. Many of the issues are cultural, rather than regulatory. For example, the country needs to embrace global talent, whether homegrown or foreign-trained. Its industries must also learn to collaborate in order to reap the benefits of cross-functional innovation, and to focus on integrating and applying technologies rather than focusing on technical innovation per se. A key agenda item is to better harness Japan’s strengths in information technology to serve the elderly market.
Japan’s experience will be instructive to other countries facing similar challenges. Among the broader issues that will be closely observed is how Japan manages its limited resources in terms of medical and nursing care, and determines the role of the private sector, both in caring for the elderly and in developing products and services to improve their quality of life. Valuable lessons could come from how Japan uses innovation (such as community redesign) to support home-based care and, more broadly, “ageing-in-place” for the growing number of elderly living alone in cities where neither community ties nor family members are available to support them.
