>Japan is a good example of a country where the population has been in steady decline for a long time now. The economy has stagnated, but it has not collapsed.

Give it time. Japan only crossed the point of deaths > births about 20 years ago, which was also the time it reached peak population (as recorded by a census around that time).

Give it 20 years for the peak kids to grow above 40 and it will be a dystopia.