Japan and the Global Talent Market

Make a purchase at a central Tokyo convenience store these days and there is a very good chance that the clerk will speak Japanese with a foreign accent. While encountering migrant workers in service industries has long been the norm in other global cities, this represents a major shift in Japan over recent years. Most such staff are university students from around Asia, and more of them are beginning their careers in Japan after graduation. Japan has a mixed track record on its treatment of immigrants, but changes that increase its appeal in the global competition for talent are underway.

Foreign residents topped 3.3 million for the first time at the beginning of this year, with the 11% annual rise also a record, according to data from the Ministry of Internal Affairs and Communications. More than 2 million are employed, a much-needed injection of labour for a shrinking native workforce.

On the Q.T.

The government has made relatively little noise about its easing of immigration rules and plans to attract more foreign workers – probably in consideration of its rural, conservative support base. However, in the cities, there has been almost no pushback from a populace that mostly recognises the dire need for workers across nearly every industry.

Other encouraging signs include the fact that in 2022, for the first time, more than half of overseas graduates from Japanese universities joined companies in Japan, according to the Japan Student Services Organization. With a little more than a third of Japanese firms hitting their recruitment quotas last year, many are now targeting those students who might otherwise return home or start their careers elsewhere.

Show me the money

Wages are always a factor. While pay is finally rising, and Japanese firms are becoming more willing to offer better terms for particularly in-demand roles, higher salaries are often available in other comparable countries. The recent weakness of the yen has not helped Japan’s attractiveness, especially for those looking in from overseas and converting salary numbers into other currencies. A good standard of living and excellent quality of life is attainable in Tokyo with less money than it is elsewhere but that is not obvious to someone who has not experienced it.

Every culture is unique but Japan’s is particularly distinctive. Though there is much to admire in the diligence and attention to detail that characterises corporate Japan, it can be a challenge for outsiders to navigate. Here too, change is happening. Obligatory drinking parties, pointless rules and inflexible practices are gradually fading. Language also remains a barrier, though some internationally-minded firms have made communication in English standard in the office.

There is growing acknowledgement that Japan is now in worldwide competition for the best workers, who are a valuable human resource and no longer a temporary inconvenience to be tolerated.

Upskilling

A Specified Special Worker programme was launched in 2019 to help address shortages in labour-intensive industries including manufacturing and construction. Divided into Type 1 and Type 2 workers, the latter category is for higher skilled workers and allows them to bring family members to Japan and to eventually apply for permanent residency. Around 200,000 workers were employed under the scheme last year, but nearly all in the Type 1 category. The aim is to increase the total to 800,000 over the next five years, and have more workers switching to Type 2 after gaining qualifications, experience and Japanese language ability.

It is at the top end of the market that competition is fiercest. Here, Japan has created new visa categories and relaxed rules for entry and permanent residency.

A new Japan System for Special Highly Skilled Professionals (J-Skip) offers fast-tracked immigration routes for those with post-graduate qualifications and high salaries, and is targeted at engineers, researchers and top management. The Immigration Service Agency has also established a Future Creation Individual Visa (J-Find) for graduates from globally-ranked universities, who can now stay in Japan for up for two years (up from 90 days previously) to look for a job or start a new business.

Taking it up to the next level

These initiatives are part of wider efforts to boost Japan’s startup culture, and promote it as an asset management centre. Residency requirements are being eased for those running businesses, launching new ventures or investing in startups. In addition, Tokyo, Osaka, Fukuoka and Hokkaido have been designated special deregulatory zones to attract foreign asset management companies. Further reforms to lower hurdles for entrepreneurs are in the pipeline.

Progress is being made, as can be seen in the rise in the number of foreign professionals with specialised skills living in Japan. Totalling 270,000 in 2018, according to the Ministry of Health, Labour and Welfare, that figure had more than doubled by the end of last year to around 600,000.

Still, Japan will need many hundreds of thousands more in the years and decades ahead to make up for the shortfalls that the shrinking population will cause. Realising that will require a further shift to fully embrace the mindset that the market for talent is becoming as competitive as those for resources, products and services.

By: Gavin Blair

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