Japan’s reliance on foreign workers continues to grow, with the number of foreign employees reaching an all-time high of 2.3 million as of October 2024. This marks a 12.4% increase from the previous year, according to a report from the Ministry of Health, Labor, and Welfare. The number of businesses employing at least one foreign worker also hit a record 342,000, reflecting a 7.3% rise.
Rising Demand for Foreign Workers
The steady increase in foreign workers highlights Japan’s ongoing labor shortage, driven by its aging population and declining domestic workforce. Japan’s working-age population has been shrinking since it peaked in 1995, and with an unemployment rate consistently below 3%, businesses are struggling to find enough workers. According to estimates by the Japan International Cooperation Agency, Japan will need approximately 6.88 million foreign workers by 2040 to sustain its economic growth.
Small and medium-sized businesses have been particularly affected, with more than 60% reporting labor shortages, according to a survey by the Tokyo Chamber of Commerce and Industry. Nearly 80% of the 342,000 businesses employing foreign workers have fewer than 100 employees, underscoring the importance of foreign labor in keeping these businesses running.
Industries Facing the Biggest Labor Gaps
Foreign worker numbers surged in critical industries like construction and healthcare, both of which saw increases of over 20% from the previous year. These industries are experiencing some of the most severe labor shortages, with job-to-applicant ratios reaching 5.60 in construction and 2.37 in nursing, far above the national average of 1.25 in December.
Additionally, Japan has seen a rise in workers from Myanmar, Indonesia, and Sri Lanka. Many of these individuals are employed in blue-collar jobs or are students working part-time. Economic challenges in their home countries, such as Sri Lanka’s debt crisis and Myanmar’s ongoing conflict, have driven more workers to seek opportunities in Japan.
Challenges in Attracting Foreign Talent
Despite the increasing demand, Japan faces growing competition from neighboring countries like Singapore and South Korea, which are also expanding their foreign worker programs. In 2024, Singapore’s nonresident population, including foreign workers, grew by 5%, while South Korea increased its foreign workforce intake by 38%, allowing a record 165,000 new workers into the country.
Another challenge is Japan’s weakening yen, which has made the country less attractive for workers looking to maximize their earnings. However, Japan still remains competitive due to its developed economy and stable job market.
Upcoming Policy Changes and Their Impact
Japan is set to introduce stricter regulations on foreign labor by 2027, which could reshape the job market. These changes will allow foreign workers to switch employers more easily and demand better wages. While this could make hiring more expensive for small businesses, experts believe it may ultimately lead to a better working environment and increased interest from foreign workers.
“If Japan can improve conditions for foreign workers, we may see even more overseas talent coming here in the future,” said economist Shungo Akimoto from Mizuho Securities.
As Japan continues to adapt to its labor crisis, foreign workers remain an essential part of the country’s workforce. With policy adjustments and efforts to enhance job conditions, Japan could strengthen its position as a top destination for overseas talent in the coming years.
