I have made these same points several times before...
"Japan combines a very high life expectancy with one of the world’s lowest fertility rates. At the same, net immigration is kept very low. In our view, this is not a sustainable situation. It is, of course, very difficult conceptually, let alone in practice, to determine the optimal size of a country’s or a region’s population. Simple arithmetic suffices to demonstrate that, with a finite habitable territory and an irreducible minimum need for territory or space per person, population numbers cannot continue to grow without bound. And, if a growing population is to stabilize at any constant size, there are but two mechanisms to achieve this: either a higher death rate and/or a lower birth rate. Surely, a lower birth rate is the more civilized way to transit from a growing to a stationary population. This means that the problems of a rising age-dependency ratio may, up to a point, be a hallmark of success.
Nevertheless, one can have too much of a good thing, and a fertility rate well below the replacement rate cannot be maintained indefinitely, in the absence of immigration. Policies aimed at boosting the birth rate will, even if they are successful, take at least a couple of decades before they halt or reverse the decline of the population of working age. If the skill and education levels required to make the labour force economically productive are high, it could take even longer before the economically active population stops falling. And in the meantime, the total economically inactive population (those aged 0 to 16 and those aged 65 and over) will rise.
The growing pressures of labour scarcity make it all but inevitable, in our view, that Japan will sooner or later need to seek a significantly larger inflow of foreign labour to add to its shrinking domestic pool of workers, as other measures to increase the effective supply of domestic labour, including improvements in labour productivity, increases in the participation rate (particularly for women) and a rising age of retirement, are insufficient to compensate for the changes in domestic demographics. The cultural, social and political problems associated with significant inflows of immigrant workers are important issues, not least in ethnically, culturally and linguistically rather homogeneous societies like Japan. They seem manageable, however, when put alongside the consequences of the demographic black hole Japan is about to face."
