Japan's Ageing Population
76-year-old Minekatsu Kinugasa (R) and his 74-year old wife Kiyoko seen making "imagawayaki' buns with sweet fillings at their shop in central Tokyo, in 2013. Reuters

Japan's population is ageing and shrinking and that presents two problems for Prime Minister Shinzo Abe's government - Tokyo will have to figure out a way to boost tax revenue from a shrinking labour force while it battles rising costs associated with financing its aging society.

Japan's working population, defined as those between 15 and 64 years old, has dropped to less than 80 million for the first time in 32 years, according to data published by the Internal Affairs Ministry.

Postwar baby boomers are heading into retirement and people aged 65 or older make up 25% of the population in the world's third-largest economy, the ministry said on its website on 15 April.

That reading is the highest in any country the world over, according to the Population Reference Bureau.

Japan's population has declined for a third year, by 0.17% to 127.3 million as of 1 October, 2013, as births drop and deaths rise.

The nation's fertility rate, at 1.39 children per woman, is the fourth-lowest among the member states of the Organization for Economic Cooperation and Development (OECD).

Children up to 14 years old account for just 12.9% of the population, according to the ministry, while people aged 75 or older make up 12.3% of Japan's population

Most-Indebted Economy

Japan's debt has expanded to more than twice the size of the nation's economic output, partly owing to rising social security and health costs associated with its aging population.

Tokyo is trying different things to strengthen the economy and the government's coffers. It has raised the national sales tax to 8% from 5%, and is trying to get more women to join the workforce, while it contemplates easing restrictions on immigration.

"The problem of the low birthrate and aging population is getting more serious and the scale of the fall is remarkable," said chief cabinet secretary Yoshihide Suga, reported Bloomberg.

"Given the circumstances, it is a matter of urgency to build a society where women can shine," he said, adding that more child-care provisions and a better working environment for women were needed.

Mizuho Securities' chief market economist Yasunari Ueno said in a 9 April note to clients: "We have argued for some time that Japan has a lot to learn from Australia and the US, which have demonstrated successfully that welcoming people from a variety of nations, who may think differently and have different cultures but are highly talented, strengthens the economy on both the demand and supply sides."