JAPAN: Japan’s foreign workforce reached an all-time high in October 2024, reflecting its growing dependence on overseas workers to address chronic labour shortages driven by its ageing population.

According to newly released government statistics from Jan 31, the foreign workforce in Japan reached 2.3 million in October 2024, a 12.4% increase from the previous year, Bloomberg reported. The data shows that about 342,000 businesses now employ foreign workers, marking a 7.3% growth from last year and reaching a historic high.

Record increase in foreign workers

The latest figures represent the most significant year-on-year increase since records began in 2008 and highlight Japan’s ongoing struggle with a shrinking and ageing population. Since the country’s working-age population peaked in 1995, it has increasingly relied on foreign workers to fill gaps in its labour force.

Foreign workers in Japan primarily come from Vietnam, China, and the Philippines, making them key contributors to the nation’s workforce. As Japan faces persistent labour shortages, its growing reliance on foreign employees has become essential, particularly given its consistently low unemployment rate of under 3%—one of the lowest among developed nations.

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This implies that even though most working-age people are currently employed, Japan still needs even more workers, thus the need for outsourcing employees from other countries.

Growing reliance on foreign labour

The ongoing reliance on foreign workers highlights Japan’s dependence on overseas labour to sustain its economy. According to a Tokyo Chamber of Commerce and Industry survey, small and medium-sized enterprises have been hit especially hard by the labour shortage, with over 60% of these businesses reporting difficulties filling positions.

One of the significant categories of foreign workers in Japan is those involved in the “technical intern” programme, a government-backed initiative designed to equip foreign workers with skills to return to their home countries. Japan uses this to incentivise other nations while simultaneously addressing their escalating labour problems.

However, critics argue that the programme indirectly hires foreign workers, circumventing Japan’s traditionally strict immigration controls. Additionally, as the South China Morning Post reported, the programme has faced longstanding accusations of mistreating and abusing workers.

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Foreseeable setbacks

A major upcoming issue is Japan’s regulatory shift, set to take effect in 2027, which will impose new guidelines on the employment of foreign workers. These revised regulations will introduce stricter oversight and allow foreign workers to switch employers more quickly, potentially leading to higher pay demands.

While this may pose challenges for smaller businesses, some experts believe the changes could be a positive development in the long run. According to Shungo Akimoto, an economist at Mizuho Securities, improving the working environment for foreign workers could help attract even more labour to Japan.

“If Japan can prepare a system to improve the working environment for foreign workers, the influx of foreign workers could increase further,” Akimoto said, as published in Bloomberg.

Another problem is that the future of relying on foreign labour remains uncertain. Japan faces increasing competition from neighbouring countries, including Singapore and South Korea, which are also experiencing labour shortages and are ramping up their foreign worker programmes.

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Outlook

Japan’s reliance on foreign workers is set to continue rising, driven by an ageing population and a shrinking workforce. While this reliance helps address immediate labour shortages, the future remains uncertain due to regulatory changes and competition from other countries.

Other countries are likely to continue sending their workers to countries like Japan due to their lucrative offers and the problems in their homeland. Japan now has the responsibility to adapt to these challenges. It must maintain a fair and efficient system for foreign workers to help sustain its economy in the coming years.