This Could Lead to Total Collapse... 90% of Companies Face Labor Shortages, Record High 'Bankruptcies' in Japan

90% of Japanese Companies Faced Hiring Difficulties Last Year
Record High Number of Bankruptcies Due to Labor Shortage
"Need for Foreign Worker Influx and Wage Increases"

Japanese companies are struggling with labor shortages, and foreign workers are emerging as an alternative, Bloomberg reported on the 6th (local time).

According to a report by Teikoku Databank, 67% of small and medium-sized enterprises in Japan complained of facing labor shortages, and the number of bankruptcies due to labor shortages among Japanese companies reached a record high last year.

According to research by recruitment consulting firm Morgan McKinley, 90% of surveyed companies experienced difficulties in hiring last year. Seventy-five percent of technical recruiters stated that the shortage of skilled talent in the labor market has intensified hiring competition. This contrasts with U.S. tech companies, which have already cut 32,000 jobs this year alone.

Through the research report, Morgan McKinley suggested, "Japan is falling behind in digital transformation due to a shortage of software engineers," and "it should move toward recruiting skilled foreign workers."

According to statistics released last month by Japan's Ministry of Health, Labour and Welfare, the number of foreign workers in Japan last year reached 2.04 million, a 12.4% increase from 2022. However, despite the steady influx of workers, Japan's immigrant population remains the lowest among the G7 at only 2%. The Japan International Cooperation Agency (JIA) projected that the number of foreign workers needed for Japan to achieve its target growth rate will reach 6.74 million by 2040.

Junji Ikeda, chairman of Saikaikyo, headquartered in Hiroshima and responsible for dispatching and supervising foreign workers, said, "Japan is entering an era of large-scale foreign immigration," and "gradual adjustments will not be sufficient to cover the labor shortage."

Foreign worker from Indonesia, Oizumi Town, Japan 2018.
Photo by Bloomberg

There is also a view that fundamental solutions such as wage level adjustments should precede the influx of overseas labor. Morgan McKinley pointed out in the report that technical workers prioritize high salaries when changing jobs, and Japan's low real wages discourage them.

Lionel Kaidatis, Managing Director of Morgan McKinley Japan, said, "Japan is still lagging behind in salary levels and needs to place considerable emphasis on wage increases."

Improving the poor working conditions of foreign workers is also mentioned as a countermeasure. According to a 2022 survey by the Japan Ministry of Health, Labour and Welfare, 74% of about 10,000 workplaces employing foreign workers violated labor standards laws and regulations. Safety standard violations were the most frequent.

There is also an opinion that Japan's outdated foreign worker-related systems, such as the Technical Intern Training Program and the Specified Skilled Worker Program, need to be improved. In particular, the Specified Skilled Worker Program limits the applicant's stay period to a maximum of five years, and only 29 people among those who participated in the program have obtained unlimited re-entry qualifications.

Yasuko Iwashita, associate professor at Hiroshima Bunkyo University, said, "It would be better for Japan to welcome foreigners who intend to stay long-term rather than repeatedly sending them back," and added, "Foreign workers are often perceived only as social costs, but they are also taxpayers and consumers."

Meanwhile, Japan is planning to abolish the Technical Intern Training Program, which has been maintained for over 30 years, and introduce a "new foreign worker system" starting next year. The policy is to allow unrestricted job changes for those with a certain level of Japanese language proficiency and skills.

This content was produced with the assistance of AI translation services.