You might want to check demand curves if you don’t think a shrinking population is a bad thing. If there’s no demand, then many, many people, are going to go out of business. That’s not also addressing the fact that their national debt is still the same. Japan is going to collapse.
There will be fewer consumers, but there will also be fewer workers to produce things with. The Japanese will survive. Japanese socialism will probably die, but the Japanese will survive.