By The Straits Times | Created at 2025-01-31 08:42:56 | Updated at 2025-01-31 10:46:32
2 hours ago
The number of foreign workers in Japan reached a new high, underscoring the country’s growing reliance on people from overseas to address its chronic labour shortage.
Japan had a record 2.3 million foreign workers as of October 2024, marking a 12.4 per cent increase from the previous year, according to labour ministry figures released on Jan 31. The number of businesses employing at least one foreign worker also hit a record high of around 342,000, up 7.3 per cent from a year ago, the report showed.
The steady rise highlights Japan’s increasing dependence on overseas labour as the nation struggles with a shrinking workforce, a trend that has persisted since its working-age population peaked in 1995. Japan’s unemployment rate has been below 3 per cent for almost four years, remaining among the lowest in advanced nations. The ageing nation will need 6.88 million foreign workers in 2040 to meet its growth targets, according to an estimate by the Japan International Cooperation Agency.
“The results reflect Japan’s need to accept foreign workers to some extent to cover the shortfall in the labor force,” said Mr Shungo Akimoto, economist at Mizuho Securities.
Small businesses have been hit particularly hard by the labour shortage, with more than 60 per cent of small and medium-sized businesses reporting labour shortfalls, according to a survey by the Tokyo Chamber of Commerce and Industry last year. The Jan 31 report showed that nearly 80 per cent of those 342,000 businesses are smaller firms with fewer than 100 employees.
The construction and medical industries saw a particularly sharp increase in foreign workers, both rising by more than 20 per cent from a year ago. These sectors are among those facing the most severe labour shortages in Japan, with the jobs-to-applicants ratio reaching 5.60 for construction workers and 2.37 for nursing positions, compared to a national average of 1.25 in December.
The report also showed that Japan saw a surge in foreign workers from Myanmar, Indonesia, and Sri Lanka in 2024, many of whom were blue-collar labourers or students rather than high-skilled professionals. A lack of job opportunities in these countries, precipitated for example by Sri Lanka’s 2022 debt default and Myanmar’s ongoing armed conflict, have likely driven more workers to seek employment abroad.
While the demand for foreign workers has been strong, it’s unclear whether Japan can sustain the current pace of attracting people from overseas. One key challenge is a scramble for workers in the region as neighbours including Singapore and South Korea also look to fill their own labour shortages. Singapore’s non-resident population including foreign workers grew 5 per cent last year, while South Korea was set to allow a record 165,000 foreign workers to arrive last year, up 38 per cent from the year before.
“It’s true that Japan has become less attractive as a place to earn money for foreign workers due to the weak yen,” said Mr Akimoto. “Still, there’s attractiveness as Japan’s wages are at the level of developed countries.”
Another shift that may have implications for companies trying to attract foreign workers is tighter regulations, which are expected to take effect in 2027.
The revised system will introduce stricter oversight and allow workers to switch companies more easily, which means it will become easier to demand higher pay. That may mean smaller firms may give up on trying to hire workers from abroad due to higher costs, but Mr Akimoto says that from a broader perspective this could be a positive development.
“If Japan can prepare a system to improve the working environment for foreign workers, the influx of foreign workers could increase further,” he said. BLOOMBERG
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