In Decline?

Japan’s elderly population makes up for a declining work force in a number of sectors, not limited to service jobs. Konbinis and other stores as well as the manufacturing industry depend heavily on foreign interns and trainees, however foreign workers do not feel all too warmly welcomed in guarded Japan. Over the past years, Japan’s government has realised that this equation has some flaws. From “womenomics” to a renewed migration policy, from advanced automation to improved working conditions: many policies are being rolled out to shake off Japan’s image as a nationalistic, inward-looking island, where robots are replacing the human work force.

Drastic Prospects for the Greying Nation: Sliding into an Unsustainable Society?

Japan’s generation of baby boomers (1947 to 1949) dramatically reshaped its now highly constrictive population pyramid. Life expectancy has increased to 84 years of age. Combined with the low fertility rate of 1.37 children per woman, Japan sees an unprecedented rate of population ageing. The continuous decline of the working-age population is a serious problem for Japan. The UN World Population Prospects (2019) show that Japan’s total working age (15 to 64) population shortage from 2020 to 2050 will be of about 21 million, increasing to a total shortfall of 54 million by 2050. The population aged 65 or older will nearly double – from 18 million in 1995 to 34 million in 2045, decreasing slightly to 33 million in 2050. One in three Japanese will be 65 or older by 2025. The total dependency ratio (ratio of nonworking population per 100 working population) will increase from 69 to 97 per cent during the same period – the highest figure within the OECD. Those figures will be even more drastic if the unemployment rate does not remain low. In January 2020 a rate of 2.4 per cent was recorded – the lowest level in 20 years. However, because of the effects of COVID-19 on the labour market, this figure rose to 2.9 per cent in August 2020.

To cope with its labour shortage, Japan first and foremost needs four policies: female labour participation, the elderly’s labour participation, migrant workers, and technology development. In 2019, the female labour participation rate was at a record high of 72.6 per cent, compared to 74.9 per cent in Germany; the labour force participation rate of those aged 65 years and over was already high (25.3 per cent) in Japan, as compared to 7.8 per cent in Germany. In 2000, the UN Population Division released a report stating that in order to keep the size of the working-age population constant at the 1995 level, or at 87 million, Japan would need more than 33 million immigrants from 1995 through to 2050. This is unfeasible, as Japan would have to accept 600,000 foreign workers annually, which is far from the latest records of 200,000 new foreign workers per year.

Dealing with Labour Shortage: New Migration Programmes Are Aching to Succeed

Between 1945 and 1990, Japan maintained extremely strict immigration controls. During the eighties, foreigner’s rights somewhat improved, while roughly 10,000 refugees from Cambodia, Laos and Vietnam – Indochina’s war-torn countries – were accepted by means of a Cabinet decision. Between 1990 and 2012, ethnic repatriates were allowed back into Japan, and a side door opened for trainees and technical interns. Unskilled workers, though low in numbers, also managed their way into Japan. As of 2012, migration policies were loosened only to introduce a point-based system for highly skilled foreign professionals. In 2019, immigration was opened for middle-skilled workers. This decision became one of the most significant legislations, which the former Prime Minister Shinzo Abe introduced during his time.

As of the end of 2019, the number of non-citizen residents who stayed for more than three months in Japan and registered at the municipal office totalled 3 million, compared to the overall population of 126 million. The technical interns and trainees made up the highest number amongst non-citizen residents, at 411,000, according to the Ministry of Justice. Second in line are the international students, accounting for 345,000.

In 2015, a new status of residence was granted to highly skilled professional workers. They are referred to as specialised and technical labour in the terminology of Japan’s immigration policy, and work as engineers, instructors, researchers, journalists, or in the medical sector. In 2019, this category numbered 270,000.

The number of care workers – a self-evidently essential line of work within an ageing society – currently amounts to 22,700. The Economic Partnership Agreements, signed in 2008 with Indonesia, the Philippines, and Vietnam started to open Japan’s labour markets to foreign nurses and care workers; they are, however, required to pass Japan’s examination in order to stay longer than three or four years. Since 2019, if they fail the examination, but achieve a score of at least 50 per cent of the passing standard, they are permitted to remain for one additional year to bolster the shortage of labour in the growing care homes and nursing facilities.

To attract more students, the Japanese government introduced the so-called 300,000 International Student Plan in 2008. Only ten years later this number was achieved. In order to expand employment opportunities for foreign students who have graduated from a Japanese university or graduate school, they are permitted to work provided they achieve Japanese Language Proficiency (N1 level), are a full-time employee, and receive remuneration equivalent to, or more than, a Japanese citizen would receive for the same work.

Two programmes under the migration scheme target foreign unskilled workers and sort them into technical interns and trainees. The so-called technical interns receive minimum wages but no overtime compensation and are allowed to stay for a maximum of five years in a company that applied for this programme. Technical interns have been working across sectors in small- and medium-sized enterprises (SMEs) and large companies since the introduction of the programme in 1993. They are protected by the labour law but cannot change their employer if the company does not agree to let them go. Labourers shy away from complaints because they would be sent home whilst their families depend on their income. Thus, the litigation risks for employers are very low.

Japan suffered harsh criticism in the US State Department 2020 Report on “Trafficking in Persons”, because the migration scheme is still seen as a system for human trafficking. The abuses cited in the report are listed as debt-based coercion, wage-garnishing, confiscation of passports, threats of deportation, poor living conditions, and physical violence. The government is aware of these issues and tries to mitigate the violations.

The trainees, not to be mistaken for technical interns, are permitted to remain for only one year, with the possibility of upgrading to the position of technical intern after that period. With this incentive in mind, the programme is hence the unabashed entrance door to fill up the technical intern positions. Trainees are unskilled workers, paid fees below the minimum wage, and until recently did not even benefit from labour law protections. This programme was originally designed to allow non-citizens to acquire technical knowledge and skills by working in Japan with the objective to transfer knowledge to developing countries. Instead of pursuing this honourable idea, the programme gained a dubious reputation. Workers were subject to constant abuse and human rights violations. The 2017 Technical Intern Training Act aimed to prevent such cases by establishing substantial penalties for rights violations, and requiring a formal training plan for each intern. Figures show that the treatment of trainees has significantly improved since then.

Numbers of irregular residents and visa overstayers have dropped in recent years, mainly due to a tightening of controls. 82,000 Asian nationals, mostly from the Philippines, China, Vietnam, and Thailand, are counted as illegal residents. Most of them stem from terminated technical intern programmes.

A new category was introduced last year to mitigate labour shortages in specified industry fields. These new policies aim at middle-skilled workers for positions that require considerable technical knowledge and special skills. 14 fields within Japan’s economy have been singled out as being in dire need of external work force: the food service industry, food manufacturing, agriculture, construction, industrial machinery, and electronics amongst others. The main obstacle for this programme is the demanding N4 test level of Japanese Proficiency required of workers. In other words: This program does not meet targeted numbers, let alone the required numbers. In 2019, the government expected 47,550 incoming middle-skilled workers, yet only eight per cent came. Another difficulty lays in that the mutual agreements between Japan and the sending countries, such as Vietnam, have been delayed. Finally, the application process is also a lengthy and complicated affair. Realising the low interest, the government will soon have to draw its conclusions and improve regulations for prospective employees and their employers.

COVID-19 Calls

During the COVID-19 pandemic, the government responded swiftly to the disruptions in employment of trainees and technical interns. Those laid off were enabled to seek employment elsewhere in Japan for another year, regardless of the time already served. Those who completed their internship, but could not return home because of border closures, were allowed to stay in Japan and continue to work in the same position, or allowed to look for other employment options.

During the COVID months, the government demonstrated a high degree of flexibility that was unthinkable before. En passant, it has contributed to a “new normal” migration policy, probing another possible model for Japan’s much troubled labour market.

The goodwill of the authorities and the swift solutions they enacted, however, have not helped everyone during the past months. A high number of employers asked their technical interns and trainees to sign a document known as a Confirmation of Will. This serves as confirmation that the signee was suspending their training programme and returning home of their own free will. As soon as the worker quits, all labour protection is lost, and he or she must return to their home country. Since many of the foreign workers contract heavy loans to finance their stay in Japan, this behaviour by numerous companies adds to the woes of foreign workers. Japan’s labour ministry stated that 3,428 foreign technical trainees were dismissed during the COVID months. But this figure does not include the resignations triggered – or forced – by this Confirmation of Will.

The Acceptance Issue: It’s Complicated

To attract human resources, Kato Hisakazu from Meiji University writes, “Japan has to change in many aspects. Japan must create a society, where excellent foreign students will want to continue to work”. Kato questions whether Japan – as an insular country with inward-looking traditions in terms of cultural customs and language – is attractive at all. Like others, he sees the solution to Japan’s work force shortfall in attracting foreign students to serve as future work force, in addition to Japan’s own engaged young generation. This system would, however, neglect the inclusion of those foreign workers already in the country. Those need mid- and long-term perspectives. The very first step towards feeling welcome depends on favourable visa categories and the achievement of resident status. The upper limit of five years residency and the tight regulations regarding family reunifications are not helpful for foreign workers who plan to spend their professional lives in Japan. Although not borne out in reality, a widespread fear remains that an ever-increasing number of foreign workers will cause turmoil at workplaces and disrupt the public order of local communities. However, when one delves deeper into this subject, signs of a slow perception change are visible. With Japan’s population becoming older and smaller, both the government and the population are shifting their deeply conservative views on immigration; public opinion is on the side of change.

In the past, Japanese governments have not used the term “immigration policy” or “integration policy”. Instead, officials used the term “alien policy”. Four stages evolved in the development of integration policies after World War II. From 1945 to 1979, “exclusion, discrimination and assimilation” was the leading policy. Between 1980 and 1989, “equality and internationalisation” prevailed. While international human rights treaties had some influence during the eighties, the national government’s initiatives to improve foreigners’ rights remained weak. This attitude is connected to the fact that Japanese governments in the 1980s did not use the term “integration policy” to refer to their policy, but rather spoke of an “internationalisation policy” in the 1980s. In accordance with the ratification of the International Covenants on Human Rights in 1979 and the accession to the UN Refugee Convention and its Protocol in 1981, the Japanese Parliament amended the social security laws concerning the treatment of non-citizens in Japan. Following, from 1990 to 2005, the leading policy focussed in “settlement and living-together”, while, from 2006 onwards, the “intercultural living-together” policy has set the tone for immigration.

In 2019, the Japanese government issued a revised version of a document titled “Comprehensive Measures for Acceptance and Coexistence of Foreign nationals”. These include 172 measures to promote the acceptance of non-citizens, and to create an environment propitious to the achievement of a society of harmonious coexistence with foreign nationals. A basic survey of non-citizens will be conducted soon to grasp the problems that non-citizens are facing in their work, daily, and social lives. According to the MIPEX (Migrant Integration Policy Index) 2015, Japan ranked 27th out of 38 countries. In a 2019 survey about the specific needs of foreign residents, 63.7 per cent called for more rentable residences for foreign nationals, 44 per cent sought more hospitals with services in English or their mother tongue, and 33 per cent requested the promotion of multilingual administrative services. Shunsuke Tanabe, a professor at Waseda University, believes that Japanese people lack the opportunities to interact with foreigners, despite their increase in numbers. He notes that younger people in particular have less interest in going overseas or in forging relationships with foreigners. Tanabe warns that these attitudes could lead to prejudice and discrimination.

Parallel societies do not pose a problem in Japan. This is firstly due to the low ratio of immigrants, and secondly due to the low unemployment rate in Japan. The non-citizens’ unemployment rate is 5.4 per cent compared to the low overall rate. The International Social Survey Programme National Identity III shows that 56 per cent of Japanese think immigrants should have the same rights (the third highest figure among the 31 countries / regions surveyed); 24 per cent think immigrants should be reduced (the second lowest figure); 15 per cent think immigrants take jobs away (the fourth lowest figure); and only 16 per cent of Japanese believe immigrants have a negative effect on Japanese culture (the second lowest figure). Different opinion surveys by newspapers show that roughly 54 per cent are positive about accepting foreign workers in order to cope with the labour shortage in Japan. Interestingly, 75 per cent of Japanese think that immigrants today want to adapt to Japanese customs and way of life, viewing the choice to migrate to Japan as based on interest in Japanese culture. A first nationwide survey will be published at the end of 2020 with the aim of showing reliable data of perceptions on both sides, and of giving a reliable voice to the foreigner workers’ experiences.

Retirement: Is 80 the New 65?

The government has recently pushed through new legislation to raise the maximum age for starting pension benefits from 65 to 70 years of age. Civil servants will have to retire at age 65, instead of age 60. The government also plans to reduce pension benefits for workers aged 60 to 65. The bills will go into effect in 2021. The average employee’s pension is of about 150,000 yen (1,200 euros), below the targeted pension-to-wage ratio of 60 per cent, which would mean 220,000 yen (1,800 euros). If fewer workers pay into the pension funds and more elderly citizens draw from it, this ratio will continue to deteriorate. In raising the pension age, the government is betting on the favourable health status of older adults and anticipates that many are highly motivated to continue working, or to participate in community activities.

That a retirement age of 70 is not the end of the road was shown by electronic retailer Nojima. This company decided, in August 2020, to let their employees work until they are 80 years old, if they choose to. The move could spur followers in the retail and other sectors, which rely heavily on human capital and already face a labour shortage. Thus, Japan’s policies may offer ideas to other Asian nations, including China and South Korea, which likewise have to deal with an increasingly ageing population by 2050.

Besides the pension reforms, Abe’s administration brought about further reforms to promote greater flexibility, enabling working from home and reduced working hours. Yet such changes require a cultural rethink, as they challenge traditional norms.

How the Robots Help Out: Technology and Human Work Force

A great hope to mitigate the effects of the decreasing workforce is technology. The steady loss of human resources will inevitably have a negative long-term impact on Japan’s economy. Since Japan has always embraced technology, and is a frontrunner of much technological development, there is a strong belief that Artificial Intelligence (AI) and robots will be able to sustain productivity, enhance the human workforce, and maintain technological progress. In contrast to the perception that automation may pose a threat to the human workforce and have a negative impact on almost all occupations, Japan sees automation as an incentive. Automation and robotics have always been an integral part of, and familiar concepts in, Japanese society. Of the 700,000 industrial robots used worldwide in 2018, 500,000 were used in Japan. Japan is one of the most robot-integrated economies in the world. It is already possible to only be served by robots in restaurants, hotels, clothing stores, airports, convenient stores, banks, and medical consultancies. “Pepper”, a semi-humanoid robot manufactured by a Japanese robotics giant, and other similar models, are widely accepted as cute little automated hosts and clerks. Yet these automated solutions play a serious role, for they are crucial to compensate for eroding services due to lacking human labour. Recent IMF prefectural level data shows that the increased use of robotics has an overall positive impact on domestic employment, productivity, and income growth. Notably, these findings are the opposite results of surveys based on US data.

The ageing and declining population will be reason to further accelerate robotics in Japan. Human labour gaps in health care and elderly care are already to be filled in this manner. For this reason, the Ministry of Health, Labour, and Welfare estimated in 2018 that the number of caregivers needs to rise by 550,000 to 2.45 million by 2025. In order to ensure efficient medical and long-term care, the government has encouraged the use of robots and AI. The latter is already in use for medical and care databases. Highly innovative care robots, such as robotic wheelchair-beds, transfer assistance lifts, and robot assist walker support for helpers are also already in service. Rural areas struggle with shortages of physicians and nurses. Thus, information and communication technologies are currently being developed to create a long-term integrated care infrastructure.

However, robots can only do so much. Given the large number of needed care givers, Japan must keep its doors open to foreign support. The same applies for labour-intensive industries, thus technical interns and specifically skilled workers are still required. Another solution to handle future labour shortages in decisive fields is an inclusive approach, which combines the usage of technology with an infusion of foreign work force. The latter is furthermore crucial to bear the responsibility of social security. Only labourers pay into pension and social welfare funds – not robots. Even if GDP is maintained through automation, and although gains in employment and wages have been noted in areas with high robot density, from 2018 to 2040, Japan’s social security expenditure will rise by 60 per cent. The breakdown of this expenditure shows a 2.4-fold nursing care cost surge, a 1.7-fold health care cost surge, and a 1.3-fold pension cost surge – leading to a very distressed social welfare state. The downside of automation might also hit female part-time labourers, who have been brought into jobs under specific policy measures with great efforts. Moreover, the positions occupied by women are often part-time. Such jobs are especially susceptible to automation, which could have the unwanted effect of leaving more women unemployed.

The Solved Equation?

It has been a priority for Prime Minister Abe’s administration to address the public policy challenges posed by an ageing and declining population. With policies aimed at birth rate decline, such as the “Plus One Policy” plan in 2009, the government allocated funds to childcare facilities, reduced educational costs (although these are still immensely high) and improved family housing in 2017. Shinzo Abe’s comprehensive economic policy package, dubbed Abenomics, focusses on technological innovation to raise productivity by reducing physical labour, reducing the caregiver’s burden through AI, minimising health care costs, investing in child education, and providing incentives to increase female labour participation. Last year, the consumption tax was raised from 8 to 10 per cent (stalled during the COVID-19 pandemic) to bolster the heavily burdened social security system. With the world’s highest life expectancy and lowest birth-rate, further changes will have to be made to adapt the welfare system to these population shifts. Another significant move was to relax Japan’s strict regulations for foreign workers. This could be a durable longer-term solution for the immigration-shy but rapidly ageing country.

Considering the current changes in the admission policies, Japan already implements a de facto immigration strategy – much to the dismay of some conservative members of the Liberal Democratic Party. Those have been traditionally cold on the idea of accepting more foreigners, citing concerns such as a higher crime rate and loss of homogeneity. The Yamato soul and spirit, referring to “pure” Japan, kept its influence throughout the Meiji period and inspired nationalistic thinking in the twentieth century. And to some extent, this view still exists.

To receive the foreign workers that Japan wants to attract, the government needs to lower the entry barriers for the skilled-worker programme. Otherwise, this migration scheme will only function on paper. The projected and challenging numbers of 300,000 workers per year will not be reached any time soon – giving ample time to Japan’s population to digest the current influx of workers and non-residents, and to become more receptive.

The technical intern system, prone as it is to heavy abuses, should be abolished for the sake of justice alone. “Confirmations of Will”, whereby companies forced interns into self-dismissals during the months during the pandemic illustrate how volatile employment for foreign nationals still is. As a solution, the Intern scheme could be absorbed into the skilled-worker programme. The trainee system, if strictly adhering to protection schemes and human rights, is sufficient and a sensible contribution to development assistance, as its original idea intended.

The newly appointed Justice Minister Yoko Kamikawa, one out of two female ministers in the Cabinet of new Prime Minister Yoshihide Suga, has pledged to improve the situation of foreign nationals residing in Japan. Kamikawa plans to address the challenges faced by foreign nationals, and hopes for a more supportive environment where foreigners are treated as ordinary citizens and “where people of various backgrounds are accepted (…) and don’t feel isolated.” Kamikawa is tackling thorny issues. The empty seat in the train, which occurs when nationals choose not to sit next to foreigners, is a true symbol of isolation and an unsupportive environment. The dire need for foreign labour may have changed the somewhat hostile attitude towards foreign residents and workers over the past years, but the daily discrimination is still felt in many ways by workers, students, and longer-term residents. A more open and honest dialogue between all stakeholders might help in reducing discomfort on both sides. It is about time for the Japanese Government to close the gap between the work force Japan needs to bridge its demographic shortcomings, and the less favourable living/working environments for foreigners. To solve the equation further, the government also needs to invest more in families, in childcare, and education facilities. If women are to participate in the labour market it should be full time and in secure jobs. The “womenomics” programme has by no means unfolded its true potential yet.

As much as the clock is ticking for Japan’s society, if greater equality was brought to the labour force (between regular and non-regular employees, or between foreign workers and Japanese nationals) and if automation and new technologies were smartly integrated into the work process, Japan could serve as a prime model for countries sharing the same population prospects. Yet, raising the retirement age to 80 years may not be a solution for everyone, and might meet with resistance in other states with a less healthy and diligent population.

Rabea Brauer is Head of the Konrad-Adenauer-Stiftung’s office in Japan.

Atsushi Kondo, LLD. is a Professor at Meijo University’s Faculty of Law in Nagoya, Japan.