Japan's population declined by a record 244,000 people in 2013, according to health ministry estimates.
The ministry said an estimated 1,031,000 babies were born last year - down some 6,000 from the previous year.
Meanwhile, the number of people that died last year was 1,275,000 - a rise of around 19,000 from 2012.
Japan's population has been shrinking for several years now. If current trends persist it will lose a third of its population in the next 50 years.
A quarter of the population is currently aged over 65 and that figure is expected to reach nearly 40% by 2060.
The government says the population totalled 126,393,679 as of 31 March - down 0.2% from a year earlier.
Japan has taken aggressive measures in recent months to spur growth in the world's third-biggest economy, after years of stagnation.
The government of Prime Minister Shinzo Abe is trying to boost the economy through a combination of quantitative easing and cash injections, higher taxes, higher government spending and longer-term structural reforms.