How Japan could resolve its looming immigration dilemma

How Japan could resolve its looming immigration dilemma
Workers toil at a construction site in Tokyo.

The quiet triumph of Abenomics is bringing forward a controversial policy question -- how to deal with Japan's structural shortage of labour. The optimum solution will likely involve an increase in the number of foreign workers, but not mass immigration. Japan has an opportunity to craft a policy that vitalizes the economy while conserving precious social capital.

The last time the subject was debated seriously was in the late 1980s, when automotive manufacturers were suffering from a shortage of factory workers. The policy response was a welcome mat for some 320,000 Japanese-Brazilians, at peak, on the mistaken grounds that they would be more attuned than many others to Japanese cultural norms.

Soon, though, the post-bubble economic doldrums set in. After the global financial crisis of 2008, Japanese-Brazilians in Japan suffered an unemployment rate of up to 45 per cent and the Japanese government set up a programme incentivizing them to return home.

Fast-forward to the present day and the Japanese economy is effectively running at full employment, with the ratio of job offers to applicants at a 23-year high. No surprise, then, that there are signs of increasing pressure on wages. In April, total cash earnings rose 0.9 per cent year-on-year, which sounds low but constitutes the best growth in a decade.

The "precariat"-- those with insecure or unpredictable employment -- are seeing better times too. According to employment agency Recruit's research unit, all categories of part-timers are seeing wage gains, with the average rate at 1.5 per cent. The labour shortage is slowly starting to bite.

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