Japan's fertility rate has sunk to a record low, the health ministry said.
One lingerie company has highlighted the birth rate decline
The rate, which measures the number of children an average woman is expected to give birth to over her lifetime, was 1.25 in 2005, down from 1.29 in 2004.
The declining rate threatens to leave Japan with a labour shortage, a reduced tax base and a strained pension system.
Japan's government last year began a five-year project to lift the rate, building more day-care centres and encouraging men's paternity leave.
The 2005 rate was the lowest since the government began keeping records in 1947.
"The trend towards having fewer children will have a grave impact on the economy and society as it slows economic growth, increases the burden for social security and taxes, and reduces the vitality of regional society," Chief Cabinet Secretary Shinzo Abe told a news conference on Thursday.
"It is natural that we should take firm steps to cope with the trend towards fewer children," he said.
Long working hours
But many Japanese women say it is social attitudes, rather than policies, which put them off getting married or having children.
Men are still expected to spend long hours at the office and little time at home, while there is pressure on women to give up work when they have children.
Japan has one of the lowest birth rates in the world, although birth rates are also falling in European countries. The average in developed countries is 1.6.
Demographers say a rate of 2.1 is needed to keep Japan's population from declining.
Demographers use the fertility rate, which measures the number of children an average woman is expected to give birth to over her lifetime, rather than the birth rate, which just measures the numbers of children born in each year, and is therefore more liable to fluctuate.