Japan is offering young parents a million yen to leave Tokyo: Here's why

Tokyo is the world's largest urban city by population, with an estimated 38 million people

To encourage parents to migrate out of Tokyo, the Japanese government has increased the financial incentive for those who decide to do so. According to a Financial Times (FT) report, from 300,000 yen earlier, the migrating parents will now receive 1 million yen ($7,600) per child if they move out of the capital.

Tokyo is the world's largest city, with an estimated 38 million people.

The country already has a similar plan for relocation, which provides 300,000 yen per child and 3 million yen as a one-off support payment for those migrating. They may claim more money if they start a business of their own in the suburbs. 

The earlier plan has, however, been ineffective, as only 2,400 people opted for it in 2021. This amounts to only 0.006 per cent of Tokyo's population.

Why is Japan offering the package?

Japan is seeing a rapid change in its demography with a falling birth rate and a high proportion of people above the age of 65 years. On top of that, despite several steps taken by the government, the demographic reality has stuck stubbornly.

In 2017, Japan's National Institute of Population and Social Security Research stated that the number of births in a year will fall below 800,000 by 2030. However, the mark was breached in the first nine months of 2022 itself, signalling that the fall is much faster than anticipated.

Fewer people are being born, and younger people are moving to Tokyo and other metropolitan cities like Osaka, leaving the smaller parts of the country in turmoil. Small businesses and shops in smaller towns have difficulty finding customers and workers.

As per the report in FT, the number of empty homes in Japan, which are unclaimed by heirs, will reach 10 million in 2023. On the other hand, property rates in Tokyo are skyrocketing. 

Despite a slowdown in 2021, the price of a condominium in Tokyo topped the peak reached during Japan's property bubble in 1989.

Inheritance tax playing spoilsport

Japan has the highest inheritance tax globally. It ranges from 10 per cent to 55 per cent depending upon the amount of money being inherited. The calculation also depends upon the number of heirs. It applies to both nationals and foreigners.

According to the country's civil code, half of the deceased's property goes to the spouse, and the other half is distributed among the heirs.

How are Japan's municipalities preparing?

The websites of these municipalities are attempting to attract newcomers through sales pitches. For example, Umaji village offers a free day nursery and, "of course, no children on the waiting list".

Another town, Tano, is offering the lure of a "sun-dried salt factory", according to FT.