Stratfor on Japan’s aging population:

Japan’s demographic picture is such that the population has peaked and is now both declining in size and increasing in age. With the total number of people of working age shrinking, the Japanese government will be raising less and less money in taxes while it faces greater and greater demands on spending to support its retirees. As the demographic shifts away from net taxpayers toward net benefits-receivers, the financial crunch will only intensify. Adjusted for population differences, Japan (at 9.2 percent of GDP) already spends more than twice what the United States does on pensions, and that number is expected to increase by half again by 2020.

Mitigation is still possible. The Japanese tradition of elderly people living with their children and efforts to extend the retirement age will blunt the impact somewhat. And if higher consumption can be spurred, it would in turn spur greater tax receipts that would mean less new debt. But the gap — in 2006 alone — was about $325 billion. We used the word “mitigation” and not “solution” for a reason. The trends are too deeply entrenched to be anything but unavoidable. Even an explosion in Japan’s birthrate would not positively affect the budget balance until the new crop of children became net contributors — when they reached their mid-20s.

UPDATE: This Stratfor snippet from a couple of month ago helps to round out the picture:

Japan’s population will decline 25 percent, from 127.8 million to 95.2 million, in 2050, more than the previously forecast 21 percent decline, the Health Ministry reported Dec. 20. The population decline is a result of delayed marriages and a decreased birth rate, the ministry said. The latest report says the number of senior citizens will double to 40 percent of the population, and the population under 14 years of age will fall from 13.8 percent to 8.6 percent.