One thing missing from this analysis is Japan’s external balance sheet.
Japan is usually discussed as a country with low growth, bad demographics, and high debt. Less attention is paid to the fact that it is also one of the world’s largest net foreign asset holders.
That distinction matters.
A shrinking workforce reduces domestic output potential. It does not automatically imply a proportional decline in national income when the country owns enormous claims on the rest of the world and receives substantial investment income from abroad.
The relevant question is not just “How many workers will Japan have?” It is also “What income does Japan receive from assets it already owns?”
Any macro analysis that discusses the liabilities side of Japan’s balance sheet while ignoring the asset side is describing only half the picture.
No serious analysis of Norway ignores its sovereign wealth fund. Analysts automatically include foreign assets when assessing the country’s future because ownership generates income.
Japan deserves similar treatment.
Japan’s net foreign asset position is roughly $3.5-4 trillion. Norway’s sovereign wealth fund is roughly $1.8 trillion.
Of course, Norway’s assets are far larger on a per-capita basis:
* Norway: about $325,000 per citizen
* Japan: about $30,000 per citizen
Norway is wealthier by this measure.
The point is not that Japan is Norway.
The point is that Japan is not a country with zero external wealth.
Very rural (mountains) Niigata checking in. 2 toddlers. Working on #3. Takaichi-san would do well to further promote pronatalist culture and countryside living with remote work and incentives. Homesteading is super popular everywhere for a reason. Often, the people countryside have a pretty high birth rate, it's just that the population is bled off to Tokyo and other larger cities.
Automation in farming is already here, robodeliveries and robotaxis are here as well. Unfortunately, further automation, AI and even immigration won't solve the issues, people need to have families.
1) As someone else noted, immigrants aren't going to move to rural/small town/small city Japan any more than they move to Kansas/WV etc or outside Vancouver/Toronto or big Aussie cities - unless forced to (e.g. Australia has a visa restricting some skilled immigrants to small outback towns etc where they are needed)...
2) I think the hyperventilation over pop decline is capital panicking that workers have leverage over capital to, god forbid, demand better comp & benefits - like after the Black Death e.g. as bad as the plague was, it also made land available to peasants and raised their standard of living leading to more prosperity and ultimately to pop increases... Main problem will be maintaining the infrastructure e.g. Roman built stuff falling into ruins as the empire's pop declined...
Always appreciate your thoughts, John! Let me answer your comments:
1) I believe that Japan is already quietly doing this. Mid-sized industrial cities, especially around Nagoya and in Gunma, are heavily reliant on immigrant labor to keep local economies running. The Technical Intern Training Program (TITP) and the Specified Skilled Worker (SSW) visas effectively tie foreign workers to specific employers and areas based on their sector assignment. These places will degrade rapidly without immigration, and their population will be forced to migrated to large cities.
2). That Black Death leverage only works in a free market. As Richard Katz wrote in an article recently, Japan's labor market rigidity prevents workers from actually capitalizing on the demographic shortage. Companies bypass the need for a bidding war by relying heavily on cheap, non-regular workers and exploiting the "lifetime employment" system, which severely penalizes veteran employees who try to switch jobs. Rather than a true labor shortage, companies are experiencing a "shortage of cheap labor" and are using their market power to hoard productivity gains as profit instead of raising real wages.
Have you done any pieces comparing Japan w/ Korea on, well anything really? I just spent 3 weeks in Korea and was blown away by it! Ok, nothing compares to Kyoto, BUT Seoul has far more interesting things to do (and often FREE - e.g. museums, etc + very very helpful tourism offices/kiosks EVERYWHERE) than Tokyo and Busan is spectacular with alot to do! April/May is also K-Royal festival time + Lotus Lantern festival + lows of trees/plants in bloom... I'd dare to say that aside from visiting Kyoto, Seoul/Busan/Korea are a must visit over the rest of Japan IF those are the options! And the food in Korea is incredible e.g. in a high trust society, you can help yourself to free Kimchi etc in local chain restaurants...
Supposedly Koreans get better pay than Japanese BUT in my headhunting experience, NOBODY in SE Asia (locals) wanted to work for Korean companies b/c locals got paid peanuts/overworked, etc. On the other hand, Japanese companies are very difficult to work for (slow decision making) e.g. need to recruit people w/ experience working for Japanese already or trained in Japan. That's why some of the biggest headhunting firms in the world are Japanese companies that nobody outside of Japan/Japanese world have heard of...
Otherwise, like when I visited Tokyo/Kyoto a few years ago, there seemed to be alot of people, including young people/kids and highrises everywhere. Maybe a bit more new construction in Korea + Taipei construction has noticeably picked up post covid AI boom. There supposedly is alot of foreigners buying Korean property e.g. Chinese, Taiwanese and Koreans abroad or probably foreigners married to Koreans. So again, don't know how "dire" the pop situation really is BUT yea, I bet rural/small town areas are getting depopulated like many other places in favor of cities (except in the USA where cities are rapidly deteriorating / dangerous and people are leaving them...)...
I know most about Japan, so it's what I write about, but I have actually worked a couple of months in Korea. Koreans will bash me for this, but I must say the two countries are extremely similar in terms of mannerisms, culture, and what they enjoy doing. I really believe Korea is basically Japan without the 1989 bubble that trapped everyone's mindset in a cycle of risk aversion and doom. People are far more outgoing, risk-taking, and aggressive. I could feel it when I was working there, which is probably why their productivity and salaries have overtaken Japan.
With that said, Korea is in many ways speedrunning Japan's problems: Birth rates are lower, Seoul is far more dominant in SK than Tokyo is in Japan, and the corporate sector is far less diverse. I think Korea will have a harder time recovering than Japan if the AI bubble bursts, but if it doesn't, Korea will continue to see higher growth
Consider ways to reduce the cost of production to as near to zero as possible, improve recycling by leveraging cheap energy and materials science to try to reach 99% recycling rates (the start of a near closed loop). So SMR, Fusion, followed by Hydrogen for transportation, in parallel AI and Robotics where it makes sense and take the debt and nationalise it over a much longer period as the raise the money needed for the technology deployment. You're looking at a programme that will take 40-60 years and payment terms in the debt for longer but the lower the cost of production, the more growth you will see per capita and the stupid assumption that increased GDP = any and all immigration can be finally discarded. This is the route we need to take in the UK too. Probably neither of our countries will do it but you probably have a better chance than we do at the moment. We can not let our respective civilisations fail because we needed to service debt, not least because rebooting civilization back to where we are now will be almost impossible if everything falls apart and that's the big picture no one looks at.
Sure, if all that futuristic tech actually kicks in perfectly, you have a point. But betting your entire argument,and our economy, on far-flung future tech is a fool’s game. It’s mostly an excuse to avoid making hard choices today.
Whenever governments or forecasters base actual policy on amazing-sounding future tech, it usually ends in disaster.
Just spending some time on google can give you some great examples on when this goes wrong:
- The Japanese government has spent billions on hydrogen tech and cars, just waiting for it to be adapted by the world. So far, almost zero countries have adapted any of this tech…
- In the 50s, people were so convinced mini nuclear reactors would power everything, from cars to computers, that governments redirected billions on other energy projects to nuclear. That money was mostly wasted.
I think you have some good ideas, but please debate them with the technologies we have today so we can get some policies worth discussing
SMR are in proof of concept build so 5-10 years out. I have a c-suite friend in Fusion and they are in-build but it's 15 years. The difference today is that in the 50s it took decades to do the math and materials science research but computational materials science has changed the length of iterations. It's a tipping point and it's right now. You are however 100% right to be sceptical, or rather pragmatic as the decisions to drive these technologies as civilizational critical need to be made now, not in 20 years time because of the delivery time scales. The advances are 10 years behind the curve of where we needed them so there will be a lot of pain before they are in place and if we don't build and deploy policy now we will end up with tsugi-hagi. We need to decide now how we won't suffer later and it's a combination because there's 15-25 years overlap at least.
btw Hydrogen really requires cheap power, and in the UK that doesn't exist and won't until we deploy nuclear baseload and fusion. This is the same for recycling, if you take metal recycling to get high purity you use a huge amount of energy so it's just not worth it at high quality.
Japan might become poorer, it might even become much poorer, but it will still be Japan. There will still be a corner of the earth for the Japanese to work out their common destiny as Japanese. That is worth it.
Between Japanese no immigrants and European all immigrants (regular or illegal) are allowed there’s Middle East way: all immigrants are welcome but they must have a job first…..not first you come and than will see … as a matter of fact Middle East is 100 times safer than Europe on top of that
If you want to experience what a country could be like without immigration, I think traveling to smaller Japanese cities like Toyama or Shikoku would be incredibly enlightening. It’s an amazing perseverance of Japanese culture, but there are also glaring issues staring you right in the face
One thing missing from this analysis is Japan’s external balance sheet.
Japan is usually discussed as a country with low growth, bad demographics, and high debt. Less attention is paid to the fact that it is also one of the world’s largest net foreign asset holders.
That distinction matters.
A shrinking workforce reduces domestic output potential. It does not automatically imply a proportional decline in national income when the country owns enormous claims on the rest of the world and receives substantial investment income from abroad.
The relevant question is not just “How many workers will Japan have?” It is also “What income does Japan receive from assets it already owns?”
Any macro analysis that discusses the liabilities side of Japan’s balance sheet while ignoring the asset side is describing only half the picture.
A useful comparison is Norway.
No serious analysis of Norway ignores its sovereign wealth fund. Analysts automatically include foreign assets when assessing the country’s future because ownership generates income.
Japan deserves similar treatment.
Japan’s net foreign asset position is roughly $3.5-4 trillion. Norway’s sovereign wealth fund is roughly $1.8 trillion.
Of course, Norway’s assets are far larger on a per-capita basis:
* Norway: about $325,000 per citizen
* Japan: about $30,000 per citizen
Norway is wealthier by this measure.
The point is not that Japan is Norway.
The point is that Japan is not a country with zero external wealth.
I actually did write a whole article about this: https://www.konichivalue.com/p/how-inflation-is-wiping-out-japans
Very rural (mountains) Niigata checking in. 2 toddlers. Working on #3. Takaichi-san would do well to further promote pronatalist culture and countryside living with remote work and incentives. Homesteading is super popular everywhere for a reason. Often, the people countryside have a pretty high birth rate, it's just that the population is bled off to Tokyo and other larger cities.
Automation in farming is already here, robodeliveries and robotaxis are here as well. Unfortunately, further automation, AI and even immigration won't solve the issues, people need to have families.
I linked to this post in my Monday EM links roundup: https://emergingmarketskeptic.substack.com/p/emerging-markets-week-june-8-2026
1) As someone else noted, immigrants aren't going to move to rural/small town/small city Japan any more than they move to Kansas/WV etc or outside Vancouver/Toronto or big Aussie cities - unless forced to (e.g. Australia has a visa restricting some skilled immigrants to small outback towns etc where they are needed)...
2) I think the hyperventilation over pop decline is capital panicking that workers have leverage over capital to, god forbid, demand better comp & benefits - like after the Black Death e.g. as bad as the plague was, it also made land available to peasants and raised their standard of living leading to more prosperity and ultimately to pop increases... Main problem will be maintaining the infrastructure e.g. Roman built stuff falling into ruins as the empire's pop declined...
Always appreciate your thoughts, John! Let me answer your comments:
1) I believe that Japan is already quietly doing this. Mid-sized industrial cities, especially around Nagoya and in Gunma, are heavily reliant on immigrant labor to keep local economies running. The Technical Intern Training Program (TITP) and the Specified Skilled Worker (SSW) visas effectively tie foreign workers to specific employers and areas based on their sector assignment. These places will degrade rapidly without immigration, and their population will be forced to migrated to large cities.
2). That Black Death leverage only works in a free market. As Richard Katz wrote in an article recently, Japan's labor market rigidity prevents workers from actually capitalizing on the demographic shortage. Companies bypass the need for a bidding war by relying heavily on cheap, non-regular workers and exploiting the "lifetime employment" system, which severely penalizes veteran employees who try to switch jobs. Rather than a true labor shortage, companies are experiencing a "shortage of cheap labor" and are using their market power to hoard productivity gains as profit instead of raising real wages.
Have you done any pieces comparing Japan w/ Korea on, well anything really? I just spent 3 weeks in Korea and was blown away by it! Ok, nothing compares to Kyoto, BUT Seoul has far more interesting things to do (and often FREE - e.g. museums, etc + very very helpful tourism offices/kiosks EVERYWHERE) than Tokyo and Busan is spectacular with alot to do! April/May is also K-Royal festival time + Lotus Lantern festival + lows of trees/plants in bloom... I'd dare to say that aside from visiting Kyoto, Seoul/Busan/Korea are a must visit over the rest of Japan IF those are the options! And the food in Korea is incredible e.g. in a high trust society, you can help yourself to free Kimchi etc in local chain restaurants...
Supposedly Koreans get better pay than Japanese BUT in my headhunting experience, NOBODY in SE Asia (locals) wanted to work for Korean companies b/c locals got paid peanuts/overworked, etc. On the other hand, Japanese companies are very difficult to work for (slow decision making) e.g. need to recruit people w/ experience working for Japanese already or trained in Japan. That's why some of the biggest headhunting firms in the world are Japanese companies that nobody outside of Japan/Japanese world have heard of...
Otherwise, like when I visited Tokyo/Kyoto a few years ago, there seemed to be alot of people, including young people/kids and highrises everywhere. Maybe a bit more new construction in Korea + Taipei construction has noticeably picked up post covid AI boom. There supposedly is alot of foreigners buying Korean property e.g. Chinese, Taiwanese and Koreans abroad or probably foreigners married to Koreans. So again, don't know how "dire" the pop situation really is BUT yea, I bet rural/small town areas are getting depopulated like many other places in favor of cities (except in the USA where cities are rapidly deteriorating / dangerous and people are leaving them...)...
I know most about Japan, so it's what I write about, but I have actually worked a couple of months in Korea. Koreans will bash me for this, but I must say the two countries are extremely similar in terms of mannerisms, culture, and what they enjoy doing. I really believe Korea is basically Japan without the 1989 bubble that trapped everyone's mindset in a cycle of risk aversion and doom. People are far more outgoing, risk-taking, and aggressive. I could feel it when I was working there, which is probably why their productivity and salaries have overtaken Japan.
With that said, Korea is in many ways speedrunning Japan's problems: Birth rates are lower, Seoul is far more dominant in SK than Tokyo is in Japan, and the corporate sector is far less diverse. I think Korea will have a harder time recovering than Japan if the AI bubble bursts, but if it doesn't, Korea will continue to see higher growth
Dead towns will happen no matter what. Immigrants won't go to them.
Consider ways to reduce the cost of production to as near to zero as possible, improve recycling by leveraging cheap energy and materials science to try to reach 99% recycling rates (the start of a near closed loop). So SMR, Fusion, followed by Hydrogen for transportation, in parallel AI and Robotics where it makes sense and take the debt and nationalise it over a much longer period as the raise the money needed for the technology deployment. You're looking at a programme that will take 40-60 years and payment terms in the debt for longer but the lower the cost of production, the more growth you will see per capita and the stupid assumption that increased GDP = any and all immigration can be finally discarded. This is the route we need to take in the UK too. Probably neither of our countries will do it but you probably have a better chance than we do at the moment. We can not let our respective civilisations fail because we needed to service debt, not least because rebooting civilization back to where we are now will be almost impossible if everything falls apart and that's the big picture no one looks at.
Sure, if all that futuristic tech actually kicks in perfectly, you have a point. But betting your entire argument,and our economy, on far-flung future tech is a fool’s game. It’s mostly an excuse to avoid making hard choices today.
Whenever governments or forecasters base actual policy on amazing-sounding future tech, it usually ends in disaster.
Just spending some time on google can give you some great examples on when this goes wrong:
- The Japanese government has spent billions on hydrogen tech and cars, just waiting for it to be adapted by the world. So far, almost zero countries have adapted any of this tech…
- In the 50s, people were so convinced mini nuclear reactors would power everything, from cars to computers, that governments redirected billions on other energy projects to nuclear. That money was mostly wasted.
I think you have some good ideas, but please debate them with the technologies we have today so we can get some policies worth discussing
SMR are in proof of concept build so 5-10 years out. I have a c-suite friend in Fusion and they are in-build but it's 15 years. The difference today is that in the 50s it took decades to do the math and materials science research but computational materials science has changed the length of iterations. It's a tipping point and it's right now. You are however 100% right to be sceptical, or rather pragmatic as the decisions to drive these technologies as civilizational critical need to be made now, not in 20 years time because of the delivery time scales. The advances are 10 years behind the curve of where we needed them so there will be a lot of pain before they are in place and if we don't build and deploy policy now we will end up with tsugi-hagi. We need to decide now how we won't suffer later and it's a combination because there's 15-25 years overlap at least.
btw Hydrogen really requires cheap power, and in the UK that doesn't exist and won't until we deploy nuclear baseload and fusion. This is the same for recycling, if you take metal recycling to get high purity you use a huge amount of energy so it's just not worth it at high quality.
Japan long survived without immigration and is a very special country for doing so.
Japan might become poorer, it might even become much poorer, but it will still be Japan. There will still be a corner of the earth for the Japanese to work out their common destiny as Japanese. That is worth it.
I wish I could say the same for my people.
Between Japanese no immigrants and European all immigrants (regular or illegal) are allowed there’s Middle East way: all immigrants are welcome but they must have a job first…..not first you come and than will see … as a matter of fact Middle East is 100 times safer than Europe on top of that
Which Middle Eastern countries are you referring to, and do they offer anything more than oil money and artificially low taxes?
It's complete nonsense, he's deluded. Look what happened to Lebanon.
If you want to experience what a country could be like without immigration, I think traveling to smaller Japanese cities like Toyama or Shikoku would be incredibly enlightening. It’s an amazing perseverance of Japanese culture, but there are also glaring issues staring you right in the face