Why Japan’s Labor Shortage Has Become Its Biggest Economic Constraint
Japan’s economy is no stranger to long-running challenges — from deflationary pressures in the 1990s to an ageing population that has steadily altered the country’s workforce. But in 2026, a persistent labor shortage has emerged as the central challenge, constraining growth, driving wage pressures, and forcing businesses and policymakers to rethink strategies. For decades, Japan’s working-age population has been shrinking, peaking in 1995 and continuing to decline since then. Today, a significant share of the population is elderly, with more than one in ten people aged 80 or older and nearly a third over 65. Meanwhile, Japan’s total fertility rate...
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