Japan to Allow More Skilled Foreign Workers to Reside Amid Labor Shortage

Office workers are reflected in a glass railing as they cross a street during lunch hour in Tokyo, Japan, on June 1, 2015. (Thomas Peter/Reuters)

Japan’s cabinet approved Friday a plan to increase the number of industries that can offer a long-term work visa for skilled foreign workers in a move to tackle the country’s acute labor shortage.

During a meeting, Prime Minister Fumio Kishida emphasized the need for Japan to promote the smooth acceptance of foreign workers in order to address “the severe labor shortage,” Kyodo News reported.

At present, only skilled workers in the construction and shipbuilding sectors can apply for a Class II visa, which grants an unlimited length of stay and allows holders to bring family members into the country.

The approved plan expands the sector from two to 11 industries, including fishery, agriculture, and hotel, enabling Class I visa holders from the 11 sectors to apply for long-term residency.

However, workers must pass Japanese language and skill examinations before being qualified for the upgrade. Class I holders are allowed to stay in Japan for five years but cannot bring family members to the country.

The plan will come into effect by this fall. According to the Immigration Services Agency, about 150,000 foreign workers in Japan are Class I holders as of March, while the number of Class II holders was only 11.

The cabinet’s approval of the plan came after Health Ministry data revealed that Japan’s birth rate had fallen to a record low for the seventh consecutive year.

The number of newborns in Japan fell to 770,747 this year, down 40,875 from the previous year and the lowest since the country began record-keeping in 1899, according to the data released on June 2.

Japan’s fertility rate—the average number of children born to a woman in her lifetime—fell from 1.30 in 2021 to 1.26 last year. The number is far below the 2.07 rate necessary to sustain a stable population.

To address the country’s declining birth rate, the government plans to secure annual funding of about 3.5 trillion yen ($25.2 billion) over the next three years for a new childcare package.

Kishida had previously urged his government to create a “children-first economic society” and warned that Japan would cease to function as a society if its birth rate continued to decline.

“Japan is at a critical point of whether we can continue to function as a society. Focusing on policies regarding children and child-rearing is an issue that cannot be postponed,” he told parliament on Jan. 23.

Labor Shortage in Japan

According to the Japan Research Institute report in January, Japan’s unemployment rate could fall below 2 percent in 2024 if economic activity normalizes and the labor participation rate remains the same, resulting in the first labor shortage since the early 1970s.

The report says the number of people who are seeking jobs or have been offered jobs but have not yet started has halved over the past 20 years, meaning the potential labor participation rate can only increase by one to two percent.

“In the face-to-face service sector, while demand is recovering, the labor force, which was depressed by the COVID pandemic, has not yet recovered, and personnel shortages are becoming more severe,” it states.

“This has led to a nearly 5 percent increase in wages in the sector compared to the previous year. In the future, this pressure for higher wages is expected to spread to a wide range of industries.”

Teikoku Databank, a Tokyo-based market researcher, surveyed more than 1,100 organizations in May 2022 and discovered that 45.9 percent of organizations polled faced a labor shortage, Nikkei Asia reported.

According to the ASEAN+3 Macroeconomic Research Office (AMRO), Japan’s working-age population dropped from 87 million in 1993 to 75.3 million in 2018, resulting in a severe labor shortage in the country’s economy.

“Aging population, coupled with a low fertility rate, results in a declining working-age population. This not only hurts a country’s growth potential but also affects negatively Japan’s fiscal sustainability in social expenditure,” AMRO said in a 2019 report.

The Associated Press contributed to this report.