“At first glance, Tomiya Isshiki’s retired life seems carefree,” writes Sebastian Moffett in today’s Wall Street Journal.

“The trim 67-year-old leads a vigorous calisthenics session every morning in his local park. To wind down, his group claps along to a cheerful song. ‘In our 50s and 60s we are young buds,’ go the lyrics. ‘At 99, we reach fruition.’ “

“But that bright message also makes Mr. Isshiki nervous. In a country with the world’s longest average lifespan, he is worried about outlasting his savings. ‘I’m retired, and the proportion of working people is falling,’ he says. With fewer workers, there will likely be lower pensions to support those like himself. ‘We are all worried about the future, so we have to save.’ “

“Japan is wrestling with an unprecedented demographic time bomb. With the average woman bearing 1.33 children, the government projects Japan’s population will start declining in three years. By around 2007, the proportion of the population over 65 will have jumped to 20% from 10% in just 21 years, a rate of graying that’s nearly twice as fast as any other major nation.”

“Until very recently, most Japanese assumed these population pressures were problems looming in the future. But evidence is mounting that consumers and businesses, anticipating this future, are already taking action that is hurting the world’s second-largest economy now. Anxious households are saving far more than expected, stifling economic growth. An expensive, aging work force is squashing corporate profits — and thus stock-market values — by adding extra payroll costs. And Japan’s top companies such as Toyota Motor Corp. are shifting their operations overseas in search of more-vigorous growth.”

“These worrisome developments are an overlooked factor contributing to Japan’s decade-long economic crisis. Population pressures will continue to sap the country even if it shakes off its deep banking crisis and a crippling bout of price deflation. ‘People have rational expectations for the future, and their behavior today is affected,’ says Naohiro Yashiro, president of the Japan Center for Economic Research. ‘The aging society is not only a matter of the future, but a matter of the present.’ “

“A decade from now, some economists say Japan could even slip into semipermanent recession because of the declining working population, and its national pension system could collapse.”

“How Japan copes with its unfolding demographic crisis has crucial lessons for other countries facing similar trends. With the world’s longest life expectancy — 85 for women, 78 for men — Japan’s society is aging faster than any other now. But by midcentury, the populations of Italy and Russia are expected to have declined even more drastically. Even China, the world’s emerging economic powerhouse and most populous nation, will age rapidly starting in 2010, with the elderly making up 22.7% of the population by 2050, up from 6.9% now, according to the United Nations Population Division.”

“Such jumps in age, coupled with declines in fertility in virtually every country, have led at least one expert to predict that, after zooming ahead in the next 50 years, the world’s population could begin to decline. That marks a reversal of long-held predictions of unsustainable population explosions.”

” ‘Japan is like a laboratory — a canary in the coal mine,’ says Koichi Akaishi, a fellow at the Research Institute of Economy, Trade and Industry, a government-affiliated think tank.”