The Impact of Aging and AI on Japan's Labor Market: Challenges and Opportunities

Kohei Asao, Haruki Seitani, Ara Stepanyan and TengTeng Xu

No 2025/184, IMF Working Papers from International Monetary Fund

Abstract: This paper explores the complex roles of demographic changes and technological innovation in shaping Japan's labor market. We use regression analysis to assess the impact of population aging on labor productivity and shortages. Our findings indicate that the aging workforce contributes to labor shortages and potentially weighs on labor productivity. We also investigate occupational level data to identify the complementarity and substitutability of AI in occupational tasks as well as skill transferability. Our research reveals that Japanese workers face lower exposure to AI compared to their counterparts in other advanced economies, thereby constraining AI's potential to mitigate labor shortages. Furthermore, the disparities in skill requirements across occupations with different AI exposures highlight the importance of facilitating labor mobility from displaced jobs to those in demand.

Keywords: Population aging; labor market; artificial intelligence; skill transferability (search for similar items in EconPapers)
Pages: 20
Date: 2025-09-19
New Economics Papers: this item is included in nep-age and nep-sea
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