Jan. 27 (Bloomberg) -- Japan’s barriers to foreign labor are showing signs of cracking as preparations for the 2020 Tokyo Olympics threaten to exacerbate the worst shortage of construction workers in almost 20 years.
Curbs on visas for foreign blue-collar workers may be loosened, Chief Cabinet Secretary Yoshihide Suga said Jan 24. More than 25,000 laborers will be needed for stadiums, arenas and other Games facilities, Tokyo’s government estimates, adding to demand from earthquake and tsunami rebuilding.
Japan’s shrinking population may pressure Prime Minister Shinzo Abe to open the door wider to workers from abroad as part of his drive to sustain a revival of the world’s third-biggest economy. Abe is up against a culture that has valued homogeneity, with foreigners accounting for only about 1 percent of the labor force, compared with 36 percent in Singapore.
“Foreign workers are needed to boost potential economic growth,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. “However, ordinary Japanese people are afraid that foreign workers will take their jobs and cause wages to fall.”
The shortage in the building industry is the worst since 1994, according to labor ministry data. Forty-one percent of construction companies in a November survey said they didn’t have enough workers, while just 3 percent reported a surplus.
Komatsu Ltd., the construction-equipment maker, said last month that the benefits to the company from government spending on disaster reconstruction and prevention and Olympics preparations may partly come from sales of automated equipment to ease a labor shortfall.
“The labor shortage in the construction industry could reach a crisis level in the next few years,” said Martin Schulz, an economist at Fujitsu Research Institute in Tokyo who has done research for the Bank of Japan. “The Olympics may help start a national debate on immigration, and prepare people for an influx of foreign workers.”
Expanding the scope of a so-called “trainees” programme that already lets some skilled laborers into the country, such as Chinese workers for construction projects, could be one way of tackling the issue. The government aims to decide by the end of March on “temporary emergency measures related to the use of foreign talent,” Suga said.
Abe is trying to jump-start a revival of the world’s third-biggest economy and end 15 years of deflation. While his efforts triggered a 51 percent jump in the Topix index of shares in 2013, the third-biggest yearly gain on record, the gauge today extended this year’s decline of more than 5 percent as Japan reported a record trade deficit for 2013.
While Bank of Japan Governor Haruhiko Kuroda said at the World Economic Forum in Davos, Switzerland, that Abenomics is making progress and he’s “quite optimistic” about the growth outlook, the government faces challenges that range from a swelling debt burden to tensions with China to worsening demographics. Japan’s population fell by a record 244,000 last year, trimming a national total of more than 126 million people, according to an estimate by the health ministry. About one-third of construction workers are aged 55 or older, according to government data.
In South Korea, another nation facing demographic challenges, Choi Kwang Hae, a director-general at the Finance Ministry has said that foreign workers are needed to help offset population aging and avoid a path similar to Japan’s “so-called lost decades.”
Immigrants to South Korea have risen sevenfold since 2000, to 2.8 percent of the population, and could make up more than 6 percent by 2030, according to the most-recent government figures available in February last year.
Foreign workers made up 1.1 percent of Japan’s labor force in 2011, up from 0.9 percent in 2009, according to data compiled by the Japan Institute for Labor Policy and Training, which cited a figure of 35.7 percent for Singapore.
Tensions in Singapore related to the nation’s dependence on foreign workers were highlighted by a riot last month in the Little India district after a bus ran over and killed an Indian national. The island’s population has jumped by more than 1.1 million since mid-2004 to around 5.4 million, leading to voter discontent over congestion and competition for housing, and prompting the government to tighten restrictions on workers from abroad.
Japan’s growth plan has already called for easing entry requirements for highly skilled foreign professionals. JPMorgan’s Adachi said the government will likely say it will accept more blue-collar immigrants in the next stage of the strategy, due to be announced in June.
Abe cited the need for more immigrants in a speech in Davos last week. “Support from foreign workers will also be needed for help with the housework, care for the elderly, and the like,” he said.
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