Five challenges facing Japan as Abe calls snap poll

Japanese Prime Minister Shinzo Abe has called a snap election, seeking to capitalise on a fractured opposition to win a fourth term at the helm of the world's third-largest economy.

The winner of the election faces a daunting in-tray, ranging from North Korean missiles to a rapidly ageing society.

Here are some of the key challenges for Japan and its next leader:

- North Korea -

North Korea's leader Kim Jong-Un has threatened to "sink" Japan into the sea and blasted two missiles over the northern island of Hokkaido in the space of less than a month.

Both missile launches prompted emergency evacuation orders but, with so little time to seek shelter, many Japanese feel a sense of helplessness in the face of the unpredictable threat from Pyongyang.

Abe has steadily upgraded Japan's military to counter the North's threat, saying the time for talk is over and urging the international community to apply more pressure on Pyongyang.

Adding to the friction between the nations is a simmering anger in Japan after North Korea admitted to kidnapping 13 Japanese nationals in the 1970s and 1980s to train its spies. 

Many Japanese suspect more people have been kidnapped and kept alive in North Korea.

On the other side of the conflict, North Korea says Japan has not sufficiently atoned for its brutal colonial rule of the Korean peninsula through the end of World War II.

- Demographic time bomb -

Domestically, the most pressing issue for Japan is a ticking demographic time bomb that affects all areas of life from the economy to society.

Japan is on its way to becoming the world's first "ultra-aged" country, meaning more than 28 percent of its population will be over 65.

Very low birthrates and an expanding elderly population mean a shrinking workforce is having to pay for the ballooning cost of welfare.

Despite a labour shortage, wages have not risen in a meaningful way and tempered domestic consumption, forcing policymakers to dish out a generous stimulus package to safeguard the fragile economy.

The mix of problems has pushed many young people to postpone marrying and starting a family, only adding to the demographic problem.

The government has done its best to encourage young people to start a family and called on firms to raise wages and help employees achieve a healthy work-life balance. But the efforts have not resulted in significant changes.

As people migrate from the countryside to the cities, experts predict that Japan's regional communities will gradually fade away and urban centres will be swamped by an elderly population.

- Economic growth, but slow -

Japan has managed six straight quarters of economic growth -- its best run in a decade -- but at a rate far behind Asian competitors such as China and India.

The latest annual growth rate stood at a sluggish 1.3 percent, eking out a slight gain from the 0.9 percent when Abe took power.

Abe has sought to pep up the world's third-biggest economy with a high-profile blitz dubbed "Abenomics", a combination of big government spending and ultra-loose monetary policy from the Bank of Japan. 

But while it fattened corporate profits and sent the stock market higher, it has failed in the goal of shrugging off the deflation that has plagued Japan for decades.

- Ballooning debt -

Japanese government debt is the worst of any industrialised nation, more than double the size of its economy.

Experts have long warned Japan must shrink its debt mountain or face a sharp increase in its borrowing costs and even a risk of default.

But Abe has continued to issue new debt to fund stimulus packages to prop up the lumbering economy.

He has also delayed a second consumption tax hike, a step economists say is needed to rein in debt.

Most of the debt is held by domestic, long-term, institutional players, shielding Tokyo somewhat from moves by fickle foreign investors.

- Changing business culture - 

Japan has struggled to keep pace with globalisation and changing times, especially in its once mighty corporations, which now lag behind their foreign competitors in terms of innovation.

The country's firms have been slow to get women in top positions and have struggled to integrate the older population.

Meanwhile, some traditional male-dominated boardrooms have become scenes of scandals, such as at Toshiba where executives ignored codes of sound governance and hid financial losses.

Abe has attempted to cut red tape and encourage innovation, but critics say reform is proceeding at a snail's pace. 

Boosting immigration to reinforce Japan's workforce and ease the population crisis is the subject of much scholarly debate but the idea has never really gained public support.