Japan Pays Families ¥1 Million Per Child. The Birthrate Still Falls.

It takes a particular kind of optimism to believe that cash payments can reverse a demographic collapse three decades in the making. This month, Japan's Ministry of Health, Labour and Welfare announced that the 2025 fertility rate—the average number of children a woman will have in her lifetime—had fallen to 1.20, down from 1.26 the previous year. This is the lowest figure since Japan began keeping records in 1899. It is also the ninth consecutive year of decline, despite a suite of incentives that now includes a ¥1 million ($7,100) payment per child, subsidised childcare, extended parental leave, and housing allowances for young families.

The government has spent approximately ¥8.2 trillion ($58 billion) on pro-natalist policies since Prime Minister Shinzo Abe declared a "demographic emergency" in 2016. The money has not worked. One is tempted to ask why.

The answer, it turns out, is that you cannot bribe people into remaking their lives according to economic models designed in the 1950s. Japan's fertility crisis is not a simple matter of insufficient incentives. It is the predictable outcome of a society that organised itself around lifetime employment for men, unpaid domestic labour for women, and a social contract that has been defunct for twenty years but whose expectations remain legally and culturally enforced.

The Precedent We're Repeating

This is not, of course, without precedent. In 1986, Sweden faced a similar crisis: fertility had fallen to 1.6, and demographers warned of collapse. The Swedish government responded with what became the model for modern family policy—eighteen months of paid parental leave, universal childcare, flexible working arrangements, and a legal right to part-time work until a child turned eight. By 1990, fertility had rebounded to 2.1. Politicians hailed it as proof that state intervention could reverse demographic decline.

Then came the recession of the early 1990s. Unemployment rose, job security evaporated, and fertility fell again—to 1.5 by 1999, where it has remained, with minor fluctuations, ever since. The lesson was clear: family policy can remove obstacles, but it cannot compel people to have children they do not want or cannot afford. Sweden had made parenting logistically easier. It had not made the future less uncertain.

Japan learned the wrong lesson. Its policymakers concluded that Sweden had simply not spent enough.

What the Data Actually Says

The most comprehensive study of pro-natalist policies, conducted by demographer Tomáš Sobotka at the Vienna Institute of Demography in 2023, reviewed data from thirty-seven countries over four decades. The findings were unambiguous: financial incentives produce a small, temporary increase in births—typically among women who were already planning to have children but delayed due to immediate economic constraints. The long-term effect is negligible. In some cases, fertility rates fell faster after incentives were introduced, suggesting that the policies themselves signalled a crisis that made prospective parents more cautious.

The Japanese data supports this conclusion. A 2024 survey by the National Institute of Population and Social Security Research asked 8,400 married couples why they had fewer children than they had initially planned. The top three responses were: the cost of education (78%), lack of job security (68%), and difficulty balancing work and childcare (63%). Only 11% cited inadequate financial support from the government. Among unmarried women aged 25-39—the demographic Japan most needs to marry and reproduce—62% said they had no intention of marrying, up from 38% in 2010. Their reasons were economic, but not in the way policymakers assumed. They were not worried about affording a baby. They were worried about affording a life.

The Social Contract That Broke

To understand Japan's fertility collapse, one must understand what preceded it: a labour market that promised lifetime employment in exchange for total loyalty, and a family structure in which women exited the workforce upon marriage and did not return. This system, established during Japan's postwar economic boom, was predicated on rising wages, stable employment, and a pension system funded by an ever-expanding workforce. It worked until approximately 1991, when the asset bubble burst and none of those conditions held anymore.

What followed was three decades of wage stagnation, the replacement of permanent jobs with precarious contracts, and the collapse of the implicit guarantee that hard work would lead to security. By 2025, 38% of Japanese workers were in non-regular employment—temporary, part-time, or contract positions with no benefits and no job security. For workers under thirty, the figure was 51%. These workers cannot access mortgages, cannot predictably plan their income from one year to the next, and are systematically excluded from the marriage market, where financial stability remains the primary criterion for suitability.

Meanwhile, the expectations placed on women have not changed. Japanese law still requires married couples to share a surname—in practice, the woman takes the man's name in 96% of cases. Corporate culture penalises mothers: 54% of women who take maternity leave report being reassigned to lower-status positions upon return, a practice known as matahara (maternity harassment). Childcare, while subsidised, remains difficult to access in urban areas; Tokyo's waiting list for publicly funded daycare stood at 38,000 children in April 2025. And the total cost of raising a child from birth to university graduation—estimated at ¥30 million ($213,000) by the Japan Research Institute—has risen faster than wages for two decades.

In other words: the state offers ¥1 million to have a child, then presents you with a bill for thirty times that amount, a job market that will punish you for taking leave, and a society that will blame you if the child underperforms academically. One is tempted to ask why anyone accepts the offer.

The Argument They Haven't Made

There is a counterargument here, and it deserves to be stated clearly: perhaps fertility decline is not a crisis at all, but an adaptation. Japan's population in 2025 is 123 million, down from a peak of 128 million in 2008. By 2070, it is projected to fall to 87 million. This is, in historical terms, a return to Japan's population in 1960—the beginning of its most prosperous era. A smaller population could mean less congestion, lower housing costs, reduced environmental pressure, and higher wages due to labour scarcity. Some economists, notably Adair Turner at the Institute for New Economic Thinking, have argued that demographic decline is manageable and possibly beneficial if productivity rises and immigration is permitted.

This argument founders on two facts. First, Japan's population is not merely shrinking—it is aging faster than any society in human history. In 2025, 30.1% of Japanese citizens are over sixty-five, the highest proportion ever recorded in any country. By 2040, that figure will reach 35.3%. The dependency ratio—the number of retirees per working-age adult—is already 1:1.8 and will reach 1:1.3 by 2050. Japan's pension system, designed when the ratio was 1:8, is actuarially insolvent. The government now funds 40% of pension payments from general revenues, a figure that will rise to 60% by 2035 unless benefits are cut or taxes are raised substantially.

Second, Japan has refused the one policy intervention that could offset demographic decline: immigration. Despite a labour shortage of 1.2 million workers in sectors including healthcare, construction, and agriculture, Japan admitted only 148,000 permanent residents in 2024, and restrictive naturalisation laws mean that even long-term foreign workers struggle to gain citizenship. The foreign-born population stands at 2.4% of the total, compared to 14% in the United Kingdom, 15% in the United States, and 30% in Canada. The government has instead invested in automation and robotics—including elderly care robots, which have been deployed in 600 nursing homes despite evidence that they increase isolation and depression among residents.

What History Suggests

There is no historical example of a developed country reversing sustained sub-replacement fertility through policy alone. France has maintained relatively high fertility—1.8 in 2024—but this is attributable to universal childcare established in the 1970s, legal protections for working mothers, and high immigration. Israel's fertility rate of 2.9 is an outlier driven by religious and nationalist ideology, not replicable elsewhere. South Korea's experience is instructive: despite spending $210 billion since 2006, fertility has fallen to 0.72, and the government now projects that the working-age population will shrink by 48% by 2070.

The pattern across all cases is the same: fertility falls when young adults perceive that the future is more precarious than the past, and it does not recover unless that perception changes. Cash payments do not change perceptions. Job security, affordable housing, shorter working hours, genuine gender equity, and a belief that the next generation will have opportunities at least equal to this one—those change perceptions. Japan has offered none of them.

The Policy We're Not Discussing

If Japan were serious about addressing its demographic crisis, it would do the following: eliminate non-regular employment contracts and require that all full-time workers receive permanent status and benefits within two years. Mandate that companies with more than fifty employees provide on-site childcare or subsidies sufficient to cover private care. Reduce the standard working week to thirty-five hours and enforce it. Make parental leave fully paid for eighteen months and legally protect workers from reassignment upon return. Legalise dual surnames and amend corporate governance codes to require gender equity at management level. Increase immigration to 400,000 annually and streamline naturalisation. Raise taxes on high earners and corporations to fund these policies, and accept that pension benefits for future retirees will be lower than for current ones.

None of this will happen, because each measure would require the government to confront entrenched corporate interests, a conservative electorate that opposes immigration, and the structural reality that Japan's economic model since 1945 has been predicated on cheap labour, long hours, and the unpaid domestic work of women. Paying families ¥1 million per child is cheaper, politically safer, and allows politicians to claim they are doing something.

The result is predictable. Japan's fertility rate will continue to fall. The government will continue to increase cash incentives. Demographers will continue to issue warnings. And a generation of young Japanese—who look at the precarious labour market, the unaffordable housing, the sixty-hour working weeks, and the societal expectation that they will somehow also raise children—will continue to make the entirely rational decision not to.

One cannot help but admire the clarity of their judgment. They are refusing to reproduce a system that has already failed them. The fertility crisis is not a failure of family policy. It is a vote of no confidence in the future, delivered one empty cradle at a time.