Kazuo Ueda: Japan's labor market under demographic decline - evolving dynamics and macroeconomic implications

Remarks by Mr Kazuo Ueda, Governor of the Bank of Japan, at the panel "The policy implications of labor market transition" at "Labor markets in transition: demographics, productivity, and macroeconomic policy", an economic symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, 23 August 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Let me begin by thanking the organizers for inviting me to this conference. This year's theme, "Labor Markets in Transition," is highly relevant to Japan. Our labor market is indeed undergoing a significant transformation, but the direction and underlying causes are somewhat unique to our country.

For many years after the burst of the asset price bubble in the early 1990s, the combination of near-zero inflation, economic stagnation, and structural policies aimed at stimulating labor supply masked the demographic pressures on labor market tightness. The large-scale monetary easing since 2013, together with post-COVID-19 global inflation, has finally pushed inflation into positive territory. Wages are now rising, and labor shortages have become one of our most pressing economic issues. Today, I would like to discuss the evolution of Japan's labor market and its interaction with broader macroeconomic developments.

I. Demographic Trends

Like many other countries, Japan's demographics have been shaped by two major forces. First, the birth rate (total fertility rate) fell sharply from around 4 to around 2 in the 1950s, resumed its decline in the early 1980s, and stood at 1.15 in 2024. Second, the life expectancy of men rose from 63.6 years in 1955 to 81.1 years in 2024, and that of women rose from 67.8 years in 1955 to 87.1 years in 2024. As a result, the working-age population peaked in 1995, while the total population peaked later, in 2008 (Chart 1).