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Record 2 million foreign workers are changing the face of Japan

Opening up to foreign workers may ultimately be Japan's best hope for stemming a rapid population decline. (Photo: Takaaki Iwabu/Bloomberg)
Opening up to foreign workers may ultimately be Japan's best hope for stemming a rapid population decline. (Photo: Takaaki Iwabu/Bloomberg)

By Erica Yokoyama

(Bloomberg) — Japan’s demographic struggles are forcing companies and communities to open up at an unprecedented rate.

Last year, the number of foreign workers hit a record 2.04 million, up 12.4% from 2022, according to labor ministry figures released late last month. That inflow is set to continue at a fast pace as Japan seeks more assembly line staff, construction workers, vegetable pickers and care-givers for the elderly.

“Japan is entering an era of mass foreign immigration,” said Junji Ikeda, president of Saikaikyo, a Hiroshima-based agency that sources and supervises foreign workers. “Incremental adjustments will not suffice.”

While many of the newcomers meld into the cosmopolitan fabric of big cities, their impact is especially conspicuous in small towns such as Oizumi, located about a two-hour train ride from Tokyo in Gunma prefecture.

On any given weekday it isn’t immediately obvious that about a fifth of Oizumi’s roughly 42,000 residents are foreign-born, because most of them are at work. But evidence of their presence is plain to see upon arrival. Signs at the local train station feature directions in Portuguese, Spanish, Chinese, Korean, English and Japanese.

Oizumi shows that Japan’s rapidly aging society, known for its resistance to immigration, can open up to foreign workers to plug its labor shortage. That may ultimately be the country’s best hope for stemming a rapid population decline that puts its economic might, its standard of living and the upkeep of its welfare system at risk. Japan’s chronic labor crisis has been brewing since the working-age population peaked in 1995. More and more businesses are struggling to keep running. A year ago, Prime Minister Fumio Kishida warned that “the country now finds itself on the brink of being unable to maintain social functions” because of its low birthrate.

Japan will need 6.74 million foreign workers in 2040 to meet its growth targets, according to a study by Japan International Cooperation Agency.

More than two-thirds of small- and medium-sized businesses say they face labor shortfalls, one survey found, and the number of bankruptcies attributed to manpower constraints reached a record high last year, according to a report by Teikoku Databank.

Yet even with the steady inflows of workers, Japan’s immigrant population is only around 2%, the lowest among the Group of Seven advanced economies, with the other six having such numbers in the double digits, according to the Organization for Economic Co-Operation and Development.

The 2% proportion reflects a reluctance to encourage foreign workers to build a life in Japan. A lot has changed in the past century and a half since the country first opened up after more than two hundred years of isolation, but mixed feelings linger.

A signage at Nishi-koizumi station in Oizumi, in January. About a fifth of Oizumi's roughly 42,000 residents are foreign-born. (Photo: Erica Yokoyama/Bloomberg)
A signage at Nishi-koizumi station in Oizumi, in January. About a fifth of Oizumi's roughly 42,000 residents are foreign-born. (Photo: Erica Yokoyama/Bloomberg)

A 2018 survey found that only 23% of respondents felt more immigrants should be allowed in, and other polls reflect fears that rising inflows would “lead to a spike in crime rates” and “jeopardise security and order.”

Wary of public discomfort over immigration, the government took baby steps under the guise of different initiatives. An early wave of South Americans of Japanese descent that began around 1990 projected the image of an intergenerational return to Japan. When Japan first welcomed “foreign technical interns” back in 1993, the invitation to work was characterised as a program for teaching foreigners new skills. Oizumi was at the forefront of these initiatives, welcoming workers into the region to work at factories for companies including Panasonic, Ajinomoto and Subaru, along with their subcontractors.

Mario Makuda, a Brazilian of Japanese descent who still lives in Oizumi, first arrived in 1991, and it didn’t start well. Makuda, now president of Promotion Brasil, a firm that organises cultural events linking Japan and Brazil, initially assembled prefabricated walls on the factory line, working 16 hours a day without weekends before he was forced to retire due to pneumonia.

His co-workers refused to remember his name and instead called him gaijin, or foreigner. He was excluded from company get-togethers.

“The Japanese people should recognise the tremendous economic contribution foreigners have made,” said Makuda. “Many companies in Oizumi, from electronics retailers to supermarkets, have managed to survive with the help of the Brazilians.”

Mario Makuda. (Photo: Erica Yokoyama/Bloomberg)
Mario Makuda. (Photo: Erica Yokoyama/Bloomberg)

Inviting unskilled workers from abroad often exposed how unprepared Japan was to embrace cultural diversity. Locals complained about rising noise levels, parties, trash handling breaches and other behaviour that disturbed the harmony and social conformity revered in Japan.

To this day, some attitudes haven’t changed. “Some people still think of foreigners more as units of labor to fill gaps rather than as human beings,” said Shuichi Ono, vice president of the Oizumi-machi Tourism Association.

The town does its part to help. In addition to posting multilingual signage, city hall publishes a monthly newsletter in Portuguese and English, and Portuguese interpreters are available to help with bureaucratic chores.

Such administrative support has helped smooth the integration of foreigners into the community, but the bigger factor has been the passage of time, according to Ono.

Huynh Nguyen is one of the many Vietnamese who make up 25.3% of the total foreign worker population, now the largest group by nationality in Japan.

In his first few years in Hiroshima, Nguyen lost about a quarter of his body weight due to poor eating habits and stress after Japanese colleagues clanged his safety helmet with hammers and tossed shovels at him when he couldn’t understand their instructions.

In addition to xenophobic abuse, operational lapses have also plagued the intern program. About 74% of nearly 10,000 establishments with foreign workers probed for misconduct in 2022 were found to be in violation of laws and regulations. Breaking safety standards was the most common infringement, the labor ministry said, based on inspections.

Nguyen said he temporarily lost his eyesight twice after not having access to proper protective wear while welding at construction sites.

Now in his eighth year in Hiroshima, he says he has no regrets. Eventually he changed jobs and found better working conditions. “I’ve had a tough time until now, but my life has just begun.”

The current version of the foreign workers program was brought in by former Prime Minister Shinzo Abe in 2019 and largely limits its applicants to a maximum five-year stay. Only 29 people on that program have qualified for unlimited re-entry to the country.

The government is now revamping the program with a view to making it more appealing to foreign job seekers. The new version, expected to be rolled out as early as next year, will introduce enhanced oversight and make it easier for workers to transfer to new companies, an option that may compel employers to treat staff better in order to retain them. Its goals will also become more transparent.

“The significant change is that the new system makes it clear that it’s also for securing a workforce,” said Saikaikyo’s Ikeda, whose firm is one of more than 9,300 agencies engaged in sourcing personnel from overseas.

The government may also add the transportation industry to the program, local media reported in January. Stricter industry rules on working hours that will take effect from the spring risk exacerbating a truck driver shortage and slowing deliveries of everything from factory component supplies to fresh food on supermarket shelves.

The arrival of foreign workers is helping more than half of Japan’s prefectures see net population inflows, according to former Bank of Japan executive director Kenzo Yamamoto.

In Hiroshima prefecture, where Nguyen works, the foreign workforce rose by 13.9% through October 2023 from a year earlier. The region, which curls around the coast of the Inland Sea in the west, has suffered the highest and fastest drain of locals among all prefectures.

In response, authorities have sought imported labor for industries ranging from manufacturing and elderly care to oyster harvesting and processing. The prefecture produces about 60% of Japan’s oysters.

“Japanese workers alone are not sufficient to secure the necessary labor force, especially in the manufacturing and shipbuilding industries,” said Tatsuya Hasegawa, director of Hiroshima prefecture’s employment and labor policy division.

Regional authorities host seminars on how to navigate the process of onboarding foreign workers and distribute materials illustrating how to use simple Japanese expressions to smooth workplace interactions.

“More and more firms are asking for information about accepting foreign workers,” said Hasegawa. “We have witnessed a surge in the demand from companies for these seminars.”

At Onomichi, Hiroshima-based oyster processor Kunihiro, about 15% of the staff are Vietnamese who bread oysters and pack them on to conveyor belts. Vietnamese manuals are provided to explain some operations, and pictogram posters advise workers to be careful with their arms around dangerous machines, and to tread carefully over slippery floors.

Still, more could be done to encourage foreign workers to stay and provide better social infrastructure to enable them to lay down roots. That would provide more stability for the labor force while also providing more spending and revenue for local communities to maintain shops and services rather than pulling down their shutters.

“It would be better for Japan to welcome foreigners willing to stay long term, rather than just repeatedly sending them back,” said Yasuko Iwashita, associate professor at Hiroshima Bunkyo University. “All the talk is about the heavy burden of accepting foreign workers, but they are also taxpayers and consumers.”

©2024 Bloomberg L.P.