Is Japan's Aging Population Really Going to Shrink Into Oblivion?

That's what a Reuters story on the NYT website said Japanese leaders are troubled by. The piece told readers:

"Policymakers are also pledging to draft a vision of how to keep Japan's ageing population from shrinking into oblivion, holding the line at 100 million in 2060, a 20 percent drop from now."

And what bad thing happens if Japan continues to become a less crowded island through the rest of the century and beyond, more room at the beach and less pollution?