Due to extremely low birth rates and an aging population, Japan is increasingly relying on foreign labor to alleviate the growing problem of labor shortages. A forecast report released on Thursday (July 4) indicates that by 2040, the Japanese government will face a shortage of nearly one million foreign workers in order to achieve its economic growth goals.
The report, published by the research department of the Japan International Cooperation Agency (JICA), an executive agency of Japan’s Official Development Assistance (ODA), states that at the current pace, there will be 5.91 million foreign workers in Japan by 2040, falling short by nearly one million compared to the foreign labor force needed to maintain the targeted annual growth rate of 1.24%.
Researchers have updated the data from the agency’s 2022 forecast report. Due to slower-than-expected economic growth in countries such as Vietnam, Myanmar, and Cambodia, the gap between the supply and demand of foreign labor has more than doubled compared to the 2022 forecast.
Foreign labor is crucial for Japan’s economic development as they help fill the severe labor shortages resulting from accelerated aging of the population and a sharp decline in birth rates.
In terms of accepting foreign labor, the Japanese government established a “Specified Skilled Worker” residency status in April 2019, expanding work visa permits to include some blue-collar industries and technical occupations.
The first category is for ordinary workers, covering 12 sectors such as elderly care and nursing, with the right to reside in Japan for up to 5 years; the second category is only open to managerial positions in construction, shipbuilding, and marine machinery industries, allowing indefinite residence and the ability to bring family members to Japan.
In June last year, the Japanese government announced further relaxation of restrictions on the first category, allowing foreign workers to bring their families to work in Japan, with no fixed term of residence in principle.
Benefiting from this measure, the number of foreign workers employed in Japan has rapidly increased in recent years, reaching 138,518 by October 2023, accounting for 6.8% of the total foreign population.
As of October last year, the number of foreign workers in Japan had multiplied in the past 15 years, reaching 2.05 million, approximately 3% of Japan’s total workforce.
While the issue of labor shortages has been somewhat alleviated, it still remains a serious concern. In a survey conducted by the Japan Chamber of Commerce and Industry in September last year, over two-thirds of small and medium-sized enterprises in Japan reported a shortage of manpower.
According to a report released by the Daiwa Institute of Research in January this year, the number of companies going bankrupt due to labor shortages reached 260 last year, 1.9 times higher than the previous year, setting a new historical record.
Experts suggest that in order to maintain competitiveness in the global talent market, Japan must make greater efforts, given challenges such as the weak Japanese yen exchange rate and traditional low wages.