24 October 2018
2017 - Yokohama - Chinatown Street

Immigration Changes Are Imperative for Japan

Immigration changes are imperative for Japan, if the country is to revitalize its economy, writes John West.

Immigration has become a topic of lively debate in Japan over the past couple of decades, especially since its working-age population began declining in 1995. Yet, Japan’s foreign residents’ population has only increased from about 1 percent of the total population in 1990 to 2 percent today. Now, however, change is being talked about seriously; indeed, it is necessary.

Japan has the lowest foreign-born population, as a share of the total, of all the advanced OECD countries except for Mexico. It has traditionally been averse to immigration due to the notions of cultural uniqueness and homogeneity that pervade Japanese thinking.

Japan’s immigration policies remain highly restrictive for lower-skilled migration. And while Japan is very welcoming, in policy terms, to highly skilled migration, the country has had difficulty attracting such migrants. Many of them choose Hong Kong or Singapore instead. Japan ranked a low 48th out of 60 countries for its “attractiveness to foreign-born, highly skilled professionals.”

The most dynamic response to Japan’s immigration imperative has been the establishment of an internship program in 1993, which gives people from developing countries the opportunity to learn skills they could take back home. There were 274,000 interns at the end of 2017, an increase of 20 percent over the previous year, with China, Vietnam and the Philippines being the biggest sources. But as the U.S. government has observed, this program “has effectively become a guest-worker program” as many interns are “placed in jobs that do not teach or develop technical skills,” and “some of these workers … experience conditions of forced labor.” Japan’s labor ministry also found that abuses such as the failure to pay adequate overtime and subjecting workers to unsafe conditions are common in this program.

Surmounting Numbers and Challenges

With the continued decline in Japan’s working-age population, the country is now beset with labor shortages that are adversely affecting economic growth, as the IMF has argued. Seventy-one percent of Japanese companies say they are short of workers, according to the results of a Ministry of Finance survey released earlier this year.

Japan’s labor shortages are most pronounced in construction, health care, home service and long-term care, as well as in restaurants. This presents a particular challenge for dealing with the series of natural disasters that Japan has experienced in recent years and also with respect to preparing for the 2020 Olympic Games.

The corporate sector and some commentators have argued for greater openness to immigration. For example, while talking of the need to welcome more foreign workers, Hiroaki Nakanishi, chair of Keidanren, the Japanese Business Federation, said “Japan needs to increase diversity in order to become more industrially competitive, boost its research capabilities, and improve the level of scholarship.” And the government’s “Abenomics” program also includes a policy to increase the use of foreign workers. The government has implemented some measures for highly skilled foreign professionals and for lengthening the stay of internship migrants from three to five years. But these responses remain very modest.

The Future Looks Grim

Looking ahead, there is little end in sight to Japan’s labor-shortage problems. Under one scenario, the Japanese government is projectingthe working-age population to shrink from 75.2 million in 2017 to 67.7 million in 2030, which would leave the Japanese economy stagnating. Japan needs to abandon its ad hoc, reactive approach to immigration. It should develop a comprehensive immigration policy as an integral part of the country’s medium-term growth strategy.

Taking this step is even more important as immigration is an important complement to other policy issues. This perhaps applies more on Prime Minister Shinzo Abe’s signature policy issue—“womenomics”—than elsewhere. Enhancing women’s participation in the economy is constrained by restrictions on immigration of home service and care workers. That makes it difficult for Japanese women to combine work and family life.

Entrepreneurship and innovation are two other areas where Japanese performance has been relatively weak. In particular, the OECD has highlighted the weakness of entrepreneurship in Japan, where the number of entrepreneurs, as a share of those employed, is among the lowest in the OECD, especially for women. Many studies have shown that well-managed immigration can be a powerful source of entrepreneurship and innovation. Where would Silicon Valley be without its immigrants, for instance?

Immigration Policies Need a Rethink

Prime Minister Abe’s ambitious target of doubling the stock of foreign direct investment into Japan from the very low 4 percent of GDP could also be facilitated by greater openness to immigration. Many immigrants arrive with a stock of assets for investment and can also be useful workers for international companies requiring bilingual staff. At a time when Japan is seeking to court more diplomatic friends in the Asian region in the context of geopolitical rivalries, greater openness to immigration would be an important gesture of friendship.

Given its concern about the cultural suitability of potential migrants, Japan should also make greater efforts to facilitate the integration of its international students into the economy following their graduation. After a few years of study, they are usually at ease with the Japanese language and cultural customs. But according to some reports, Japan has not been a very attractive job choice for its international students. Targeting international students as potential immigrants might also improve the attractiveness of Japan as an international education destination—something countries such as Singapore and Australia have done with a great degree of success.

Japan could also enhance its position as a responsible stakeholder in the international community by reforming its closed-door refugee policy. Few nations are as financially generous as Japan in financing international relief efforts for persons displaced by war, civil strife and natural disasters. Japan is the fourth-largest donor to the UN High Commissioner for Refugees, with a grant of $152 million in 2017. Conversely, few nations are as miserly as Japan in providing physical asylum to refugees. In 2016, the Immigration Bureau only approved 28 of the 10,901 applications—0.26 percent of total—for refugee status.

Can Immigration Policy Changes Revitalize Japan?

The Japanese government has implemented some measures to increase the participation of foreign workers in the economy. And there is a growing chorus of business, academic and media commentators arguing for more foreign workers in Japan.

However, the Japanese government remains steadfast against having an explicit immigration policy, often citing the social problems experienced in Europe and elsewhere with large-scale immigration. As Mr. Nakanishi said, “we must also consider the social costs of accepting people with different cultural and social backgrounds. I regard Prime Minister Abe’s real intention as making it easier for more people from overseas to visit and work in Japan, rather than dwelling on migrant status.”

Nevertheless, a well-designed immigration strategy could make an important contribution to Japan’s future. Without more serious efforts to address the challenges of its aging population, there is a risk of Japan being heavily burdened under the weight of poor demographics and massive public debt and increasing its vulnerability to the growing fragility of its regional security environment.


This article was first published by Brink Asia on October 17, 2018.
Tags: japan, abenomics, womenomics

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