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Japan is on its way to facing a skilled labor crisis that will severely impact the country’s entire workforce in the upcoming decades.
A state-backed think tank has projected that the country will face a labor shortage of nearly one million foreign workers by 2040 due to an aging population and significantly low birthrates.
Foreign skilled workers are expected to play a large part in filling this vast labor shortage.
Reuters reports this severe shortage poses a threat to Japan’s economic growth goals which targets an average annual growth rate of 1.24%. Currently, Japan’s foreign workforce stands at around 5.91 million people.
The anticipated gap in labor has reportedly widened considerably since 2022. The primary reason for this increase is slower-than-expected economic growth in countries that typically supply an influx of skilled labor to Japan — such as Vietnam, Myanmar, and Cambodia.
As of October 2023, foreign workers accounted for about 3% of the total workforce at 2.05 million. To boost this number, the Japanese government has expanded work visa permits across various blue-collar sectors and skilled jobs, partly due to easing public opinions on immigrant labor. The country is also vying to attract digital nomads with a new specialized six-month visa program, joining over 50 countries now offering such a program for remote international workers.
Despite these efforts, there are several challenges reported to hurt the recruitment and retention efforts of foreign workers to Japan. These include a weakening yen, traditionally low wages, and ongoing human rights issues. Experts argue that these hurdles must be addressed for Japan to remain competitive in attracting global talent.
