TOKYO -- Japan's government will formulate a basic policy on accepting foreign residents by the end of fiscal 2026 in March, Prime Minister Sanae Takaichi said Friday, as she tries to balance maintaining the country's workforce and avoiding social disruption.

Speaking during questioning in the upper house of parliament, Takaichi said the government would "present an overall picture of future population simulations and measures to address them." Her government will approve a comprehensive population strategy at the end of this year. While taking steps to raise the birthrate, it will lay out a vision for the economy and society based on the assumption that it will be difficult to reverse the population drop. The strategy will be discussed in conjunction with the basic policy on accepting foreign residents.

The population of Japanese nationals fell below 120 million in January 2026 for the first time in 42 years. Under its medium-growth projection, the National Institute of Population and Social Security Research (IPSS) expects the country's total population to shrink to about 87 million in 2070.

A shrinking workforce will weigh on the country's economy over the long term. There are also limits to how much Japan can expand employment among older people or boost productivity through artificial intelligence.

"There are sectors that need foreign workers amid labor shortages," Justice Minister Takashi Yamashita said at a news conference in September. "It is a fact that Japan is becoming that kind of society." Labor shortages are particularly acute in sectors such as construction, manufacturing and services. Businesses and local governments are calling for greater use of foreign workers.

At the same time, some argue that a rapid influx of foreign residents could result bring disruptive social change.

Sohei Kamiya, leader of the opposition Sanseito party, questioned Takaichi about the population strategy during Friday's parliamentary session. He called for setting numerical targets or caps for the annual net inflow of foreign nationals, the total number of foreign residents, and their share of Japan's total population.

Entrance caps now apply only to certain residency statuses, such as specified skilled workers. There is no law or regulation limiting the total number of foreign residents. As of the end of 2025, 4.12 million foreign nationals lived in Japan.

Foreign workers are on the rise in Japan's manufacturing sector, which is facing a severe labor shortage.

In 2023, the IPSS projected that foreign nationals would account for more than 10% of Japan's population in 2070. The foreign population is currently rising by more than 300,000 a year, significantly faster than the pace assumed when the projection was made.

In July 2025, then-Justice Minister Keisuke Suzuki said the point at which the foreign population reaches 10% of the total "could come sooner." In the upper house election that month, Sanseito made major gains after campaigning on a "Japanese First" platform. A Nikkei poll found respondents nearly evenly divided between those who said Japan should expand its acceptance of foreign nationals and those who said it should not.

The Japan Innovation Party, the junior partner in the ruling coalition, proposed to Takaichi in January that the government strengthen population controls by adjusting visa issuance. It also called for consideration of a cap on the proportion of foreign nationals in the total population.

Takaichi's government has so far refrained from setting a cap or numerical target on foreign residents, instead tightening requirements and screening for residence statuses.

"There are more potential benefits in fine-tuning individual residence statuses than in setting an overall quota," said one Immigration Services Agency official.