Vital statistics for 2025, released by Japan's Ministry of Health, Labour and Welfare in June 2026, recorded 671,236 births during the year. That was 14,937 fewer than the previous year and the tenth consecutive record low. The total fertility rate also fell to an all-time low of 1.14.
But interpreting these figures only as another step in the declining birthrate misses the larger point. A fall in births returns to society several decades later as an inevitable shortage of workers. AI and robotics are now being squarely tested as practical ways to reduce the labor needed and fill that gap.
Let us trace, step by step, how population figures connect to labor and technology.
The Trajectory Signaled by 670,000 Births in 2025
The fall to the 670,000 range has another significance. The future population projection prepared in 2023 by the National Institute of Population and Social Security Research had expected births to reach this level around 2040.
Reality has arrived about fifteen years early. Deaths totaled 1,589,489—still near a historic high, although down for the first time in five years. Even so, the natural population decline, the gap between births and deaths, reached roughly 920,000 and remained negative for a nineteenth consecutive year. That is equivalent to losing the population of one government-designated major city every year.
The projection's assumptions are also wavering. Its medium scenario assumes that the fertility rate eventually settles at 1.36, but the actual 1.14 almost overlaps the low scenario, which assumes a rate around 1.13. From 126.15 million in 2020, the total population shrinks to 87 million in 2070 even under the medium scenario and to around 80 million under the low scenario.
The share of people aged 65 and older rises from 28.6% in 2020 to 38.7% in 2070. The dependency ratio, which reflects the burden on the working-age population, is also projected to rise from 68 in 2020 to nearly 92 in 2070, approaching a “piggyback” structure in which nearly every working-age person supports one older person or child.
The population is expected to fall below 100 million around 2056. By then, foreign residents are projected to account for more than one in ten people, but this only slightly slows the decline and does not reverse the roots of the low birthrate. An inverted-pyramid structure with a shrinking working-age population and a larger older cohort has already become an unavoidable premise.
A Labor-Supply Constraint, Not a Temporary Labor Shortage
This is where the Recruit Works Institute's concept of a “labor-supply-constrained society” becomes relevant. Its estimates suggest that, on the current course, Japan will face a labor shortfall of about 3.41 million people in 2030 and about 11 million in 2040.
This is not a temporary shortage caused by a strong economy. It is a structural shortage in which society can no longer physically secure the minimum workforce needed to keep operating.
The difficult part is the mismatch between demand and supply. As the older population grows, demand does not fall for labor-intensive services such as health care, nursing care, logistics, and shopping assistance. It increases.
Yet the working-age people who provide those services are rapidly declining. The shortage is especially severe across eight occupational groups: transport and driving; construction; manufacturing processes; retail sales; nursing care; hospitality and food preparation; medical professions; and clerical and technical work.
The report gives concrete examples of fraying foundations of daily life: driver shortages that delay deliveries, infrastructure repairs that cannot keep pace, stalled emergency admissions, and reduced nursing-home capacity that forces family members to leave work and provide care.
Regional disparity is another easily overlooked issue. The institute's prefecture-level estimates suggest serious supply shortages will emerge between 2030 and 2040 in almost every region except Tokyo.
In other words, Tokyo—where the government, large companies, and national media are concentrated—can endure for the time being. People at the center may therefore struggle to feel the deterioration in regional areas, potentially delaying decisions on countermeasures. The report identifies this as a blind spot.
Regional Areas Fray First
An analysis published by the Population Strategy Council in 2024 found that by 2050, the population of women aged 20 to 39, the core childbearing ages, would halve in 744 municipalities—about 40% of the country—placing them at risk of disappearance.
The number was lower than 896 a decade earlier, but the council stressed that this was because inflows of foreign nationals exceeded assumptions; the underlying decline in births among Japanese people had not changed. Only 65 municipalities nationwide, less than 4% of the total, were classified as “independently sustainable” communities expected to retain young women a century from now.
Labor depletion is also appearing among regional companies as profitable closures. Teikoku Databank reported 455 bankruptcies caused by difficulty finding a successor in the first ten months of 2024 alone.
Companies are profitable, but nobody is available to take them over. As owners age, the disappearance of technologies and expertise accumulated over many years also affects Japan's overall competitiveness.
Two Breaking Points: Public Finances and Pensions
A smaller workforce narrows the base for taxes and social-insurance premiums, while aging expands benefits. Projections from four government ministries show social-security benefits rising from ¥117.2 trillion in fiscal 2018 to around ¥185 trillion in fiscal 2040, increasing from 20.8% of GDP to the upper 23% range.
Medical and nursing-care costs are growing especially quickly, and local insurance finances are already losing room to maneuver.
What about pensions? The 2024 actuarial valuation published by the Ministry of Health, Labour and Welfare calculated the future “replacement ratio”—pension income as a percentage of a working person's take-home pay—under four economic scenarios.
Starting from 61.2% in fiscal 2024, a growth scenario with solid wage increases ends the adjustment in the late 2030s and maintains a ratio of around 57%.
Under a scenario in which the stagnation of the past thirty years continues, adjustments last through fiscal 2057 and the ratio falls to 50.4%. In the harshest “zero per-capita growth” scenario, reserves are exhausted in fiscal 2059, the system shifts to pure pay-as-you-go financing, and the ratio drops to 33–37%. Pension finances themselves have improved since the previous valuation, but the amount people receive diverges sharply according to future growth and labor participation.
AI and Automation as the Remaining Practical Answer
This is where technology enters the picture. The Ministry of Economy, Trade and Industry's revised 2026 projection of the employment structure in 2040 suggests that if AI, robotics, and reskilling advance, Japan can avoid a major overall labor shortage even as employment falls from roughly 67 million to 63 million.
The estimate rests on bullish assumptions of about 3% nominal annual growth and domestic investment of ¥200 trillion in 2040. Even so, its conclusion is that technology can cover the aggregate quantity of labor.
The breakdown, however, creates a difficult challenge. AI-driven efficiencies leave a surplus of about 4.4 million clerical workers, while the country lacks about 3.4 million people able to use AI and robots and about 2.6 million people who support frontline operations. The workers in surplus and the workers in short supply belong to different occupations.
How can millions of surplus office workers move into frontline or AI-utilization roles requiring completely different skills? This mismatch is harder to solve than a simple labor shortage.
The key is reducing dependence on human labor. Unlike labor-saving measures that replace selected tasks with machines, or staffing reductions that track sales, this means redesigning work that has depended on people and using automation and digitization to raise productivity with fewer workers.
Automated guided vehicles, automated warehouses, service robots, and self-checkouts are no longer minor cost-cutting devices. They are becoming business-continuity preparations—a form of BCP. What happens if this transition fails?
A long-term forecast by the Japan Center for Economic Research expects Japan's global ranking in real GDP per capita to fall from 29th in 2024 to 45th in 2075 if current trends continue. It also finds that greater use of AI and reform of rigid employment practices could soften that decline.
How to Use the Remaining Decade
Population change is a rare predictable challenge: its effects unfold reliably over decades. The Recruit Works Institute believes rapid social deployment of automation and AI can buy roughly ten years before infrastructure begins to fail in earnest. What needs to be done is broadly visible.
Japan needs large-scale systems for reskilling and labor mobility so that surplus clerical workers can move into understaffed AI-utilization, care, and frontline roles. It must also optimize pension, medical, and nursing-care benefits to sustain these systems without placing an excessive burden on the working generation.
And rather than allowing regional infrastructure with a shrinking support base to collapse haphazardly, it needs “smart shrinkage” that consolidates services by design.
Each step brings pain, but none can begin until society abandons the high-growth-era assumption that any number of workers can be hired if enough money is offered. Labor is now a scarce resource. Whether Japan can redesign its institutions and the way each person works around that premise will determine whether it can become a mature society that preserves prosperity even as it contracts.
