TOKYO (Reuters) - Japan's population is expected to fall by 30 percent to below 90 million by 2060, with two out of every five people 65 or older, a government agency said on Monday, underlining the financial burden looming over the fast-aging society.
The grim forecast underscores the failure of efforts to encourage people to have more babies and will add urgency to efforts on tax and social security reform, and could also stir debate on immigration.
By 2060, the number of people aged 14 or younger is forecast to be less than 8 million while there will be nearly 35 million people aged 65 or older.
The population is aging at the fastest pace among developed countries because of a low birthrate and long life expectancy.
"The trend of the aging society will continue and it is hard to expect the birth rate to rise significantly," Chief Cabinet Secretary Osamu Fujimura told a news conference.
"Thus, comprehensive tax and social security reform is needed."
Prime Minister Yoshihiko Noda has vowed to double a 5 percent sales tax in two stages by October 2015 to help fund bulging social security costs, which are rising by 1 trillion yen ($13 billion) a year and aggravating a public debt already twice the size of Japan's $5 trillion economy.
But the biggest opposition party, although agreeing on the need for a tax increase, is threatening to block legislation in parliament's upper house. The opposition argues that the ruling Democrats' plan to revamp public pensions would require a higher levy than planned.
The population is expected to fall below 100 million in 2048 and dip further to 86.74 million by 2060, from 128.06 million in 2010, according to a projection by a research arm of the Health Ministry.
By 2060, the number of people aged 14 or younger is forecast to fall by more than half, to 7.91 million. By contrast, the number aged 65 or older is seen rising 18 percent to 34.64 million, accounting for 39.9 percent of the population, compared with 23.0 percent in 2010.
The pace of aging has slowed somewhat from the previous estimate made in 2006 but the overall trend has not changed.
The fertility rate, the expected number of children born per couple, is expected to reach 1.35 in 2060 from 1.39 in 2010, below the 2.08 needed to keep the population from shrinking and compared with a global rate of about 2.5.
Some experts have called for the liberalization of immigration rules but many Japanese are cautious about opening the door to foreigners who, many believe, have trouble assimilating in a society where homogeneity has been seen as a source of stability.
Hidenori Suezawa, chief strategist at SMBC Nikko Securities, said the government needed to tackle the sluggish birth rate to help fix the nation's tattered finances and social security system.
"It is necessary to reaffirm that policies to address the low birth rate are an urgent and vital issue," he said in a note.
Japan has been trying for at least two decades to raise the birth rate without success and critics say making it easier for women to work and raise children at the same time is key.
The ruling Democrats promised to beef up childcare allowances when it took power for the first time in 2009 but it has had to revise that pledge because of a worsening fiscal problem.
The population estimate also showed that average life expectancy will rise by more than four years in 2060, to 84.19 for men and 90.93 for women.
The population projection is compiled roughly every five years based on data including a census and demographic statistics and serves as a reference for government social security policy.
($1 = 76.7350 yen)
Reporting by Tetsushi Kajimoto; Additional reporting by Kaori Kaneko; Editing by Chris Gallagher and Robert Birsel