Two-thirds of Japanese companies are experiencing a serious business impact from a shortage of workers, a Reuters survey showed on Thursday, as the country’s population continues to shrink and age rapidly.
Labor shortages in Japan, particularly among non-manufacturers and small firms, are reaching historic levels, the government has said, stoking concerns that this supply-side constraint could stifle economic growth.
Some 66% of respondents indicated that labor shortfalls were seriously or fairly seriously affecting their businesses, while 32% said the impact was not very serious.
“It goes without saying this drives up personnel costs, but it could even pose a business continuity risk,” a manager at a railroad operator wrote in the survey.
The number of bankruptcies caused by labor shortages in 2024 surged 32% from a year earlier to a record 342 cases, according to credit research firm Teikoku Databank.
Nearly a third of respondents to the Reuters survey said the labor shortage is worsening, with only 4% reporting improvements and 56% saying the situation is neither getting better nor worse.
The survey was conducted by Nikkei Research for Reuters from Dec. 24 to Jan. 10. Nikkei Research reached out to 505 companies and 235 responded on condition of anonymity.
When asked about specific measures to address the labor shortfall in a question that allowed multiple answers, 69% said they were intensifying recruitment activities for new graduates and 59% were implementing measures such as extending retirement ages and re-hiring retired employees.
The official retirement age is set at 60 for about two-thirds of Japanese companies, although most have introduced measures allowing employees to keep working until they turn 65, a poll by the Health Ministry showed last year.
In response to a Reuters survey question about investment priorities for 2025, 69% chose capital investment and 63% selected wage hikes and other human resources-related investments. This question also allowed multiple answers.
“What’s essential are wage hikes for retaining employees and capital investment for rationalising production,” an official at a chemicals company said.
This trend in investment priority among Japanese firms aligns with the government’s policy of seeking economic growth through higher wages and investments.
With labor shortages driving up wages and a weak yen raising import costs, 44% of Japanese companies plan to raise prices for their goods and services this year, the survey found. That compares with 17% that intend to keep their prices unchanged and 26% that plan to raise some prices but cut others.
“We just cannot help but raise prices because of an across-the-board increase in wages and other fixed costs, in transportation costs and in costs of raw materials,” a manager at a metals company said in the survey.
Tokyo’s core consumer price index, which excludes volatile fresh food costs, rose 2.4% in December from a year earlier. That was an acceleration from a 2.2% rise in November, keeping alive market expectations for a near-term interest rate hike.
(Reporting by Kiyoshi Takenaka; Editing by Jacqueline Wong)
