Employment Outlook: Japan
March 20, 2018
by Mary Anne Thompson, Founder and President, GoinGlobal, Inc.
Japan’s industrialized, free market economy is the world’s third largest. Last year, the economy saw respectable, though slow, growth, creating optimism about the country’s future economic and jobs growth. Indeed, hiring is anticipated by more than a quarter of employers over the next few months. According to human resources firm Manpower, employers’ outlooks are the most positive they’ve been in more than a decade.
The country’s 2.9% unemployment rate is lower than it was before the global recession ten years ago and among the lowest reported by OECD (Organisation for Economic Co-operation and Development) members. Employers in all three regions of Japan forecast positive hiring activities, according to Manpower:
- Nagoya: Employers report the strongest hiring plans in nine years.
- Osaka: Employers expect healthy hiring.
- Tokyo: Employers expect solid hiring.
Japan’s labor force consists of almost 68 million workers. Most are highly educated, with about half possessing tertiary (college) education. More than 60% of Japanese people between the ages of 25 to 34 have a tertiary education.
Though there is much optimism throughout Japan, there is also an undercurrent of concern about the country’s future labor force. Japan is the world’s most aged society, and its population is expected to decline from about 127 million to 111 million by 2040 and to below 100 million by 2053. More than a quarter of Japanese are elderly. That portion will increase to more than one-third by 2036. To deal with the ever-shrinking labor pool, Japan will have to encourage more women and foreign nationals to enter its job market.
Employment Trends
Women Needed: Japan’s gender gap in the workforce is a serious economic problem. Recently, the World Economic Forum ranked Japan 114th among 144 countries in its Global Gender Gap Report.
Although some progress has been made, women still perform more than 75% of the country’s unpaid work and care giving. In Japan’s rapidly aging society, increasing the participation of women in the labor force is an economic necessity, according to the OECD.
Foreign workers are also needed to help address Japan’s shrinking labor force. Traditionally, Japanese employers have not been accustomed to hiring foreigners. However, more than 60% of companies in Japan report willingness to hire foreign nationals in skill-short areas, according to recruiting firm Hays.
Government efforts to attract IT professionals, engineers, managers, medical technicians and scientists include attractive incentives, including a fast track to permanent residency. Recently, the number of foreign workers climbed to a record-high 1.28 million, an increase of 18%. Chinese and Vietnamese citizens account for the largest proportion of foreign workers. However, foreign specialists make up a small portion of foreign workers.
Contractors and Temps: Contract and part-time workers make up about 40% of the country’s labor force. Contractors are sought, particularly for positions in accounting and finance and Information Technology (IT), but regulations make it difficult to retain contractors for the long term. A current trend is to promote a temporary worker to a permanent position once they’ve demonstrated their value. Demand for contractors is driving up wages.
Areas of Job Promise
Hiring is expected to increase in all of Japan’s industry sectors, according to Manpower Group. The transportation and utilities and mining and construction sectors have the most robust outlooks, followed by the services sector, with healthy hiring expected. Active hiring is predicted in manufacturing.
Talent Shortages
The demand for high-quality talent in Japan continues to exceed supply. Seventy percent of employers report labor shortages, which have grown worse in the past year. In fact, this is reportedly the worst labor shortage in 40 years. Without resolving the talent shortage, the country will not be able to sustain economic growth. To combat the shortage, logistics and warehousing firms are automating their processes and filling the void with robots.
Skills in Demand
Key skills in demand include mobile application developers, senior digital marketing managers, data scientists, medical doctors and bilingual junior HR professionals. English-language instruction is required starting in elementary school, but recently fewer than 5% of elementary school teachers were qualified to teach English. However, native English speakers often lack sufficient cultural knowledge. Many adults also study English, and instructors are needed there as well.
Shortages of bilingual talent are acute:
- The shortage of bilingual professionals who are fluent in both English and Japanese is the most severe it’s ever been.
- Bilingual English/Japanese translators, copy editors, proofreaders, customer support assistants and game experts are in demand.
- IT professionals can sometimes manage with only basic Japanese.
- The hospitality sector is also in need of bilingual candidates.
- Candidates who are fluent in Chinese, Japanese and English are sought for marketing and hospitality positions.
Salaries
Minimum wages vary by region and industry. The average minimum hourly wage across the country is 848 JPY. Average wages are a good deal higher. Nationally, wages recently averaged 666,448 JPY per month.
The strong labor market may contribute to increases in salary this year, with employers possibly willing to award raises of 3%, which the government is requesting. But in general, pay increases will be sluggish for employees remaining in their jobs. However, bilingual professionals with fluency in English/Japanese and niche skill sets will be able to command increases of up to 15% when they change jobs. Skilled bilingual specialists in emerging technologies may be able to command as much as 25% increases when moving to a new job, according to recruiting firm Robert Walters.
Expatriate managers in Japan earn the highest salaries in Asia; the gross annual pay package for an expatriate middle manager, for example, averages more than 367,000 USD, according to ECA International. However, raises are likely to be very conservative, averaging about 2%.
Conclusion
Japan’s economy is growing, and unemployment is low, but despite the optimism these truths bring, there is still uncertainty about the country’s future labor force. As the most aged country in the world, Japan faces an ever-shrinking working population. To deal with this, the country must recruit more women and foreign nationals to fill in the gaps being created. The current talent shortages will only increase if measures aren’t taken to combat them. Through high wages, recruitment efforts and automation, among other measures, Japan appears to be working hard to face the future with strength and innovation.