6 April 2017

Immigration is the obvious answer to Japan’s economic woes

By Jack May

In recent years, Japan has become a world-leading innovator in some unusual fields.

Care homes have partnered with chefs to explore puréed and soft foods for elderly people who can no longer swallow with ease.

Prime Minister Shinzo Abe has funnelled billions of yen into developing robots that could pick people up and carry them to bed, massage someone’s head and wash their hair, and even administer medication.

For the country that led the way in television design, mobile phones, and music technology, these are perhaps off-the-wall interests. But rather than representing a dynamic shift in Japan’s ultra-modern economy, all this investment and innovation is a sign that the country is on the front line of a battle that many developed economies will soon be drawn into.

Japan’s GDP hasn’t grown by much more than two per cent annually since 1991 – it has lived through an astonishing 25 years of meagre economic growth and limited improvements to productivity.

Much of the economic stagnation is down to the “Lost Decade” of the 1990s, when the collapse of an asset-price bubble caused wages to fall, GDP growth to run dry, and deflation to run rampant. But that is not the whole story.

As the people of Japan have grown older and retired, the workforce has not been replaced. In 2012, almost a quarter of the entire population was over 65 – a level set to rise to 40 per cent by 2050. Meanwhile, younger people in Japan are either not marrying, or not having children, so the population is decreasing year on year.

At its peak, in 2010, Japan’s population was just over 128 million. Based on current UN estimates, that number now stands at 126.1 million, and is predicted to drop to 95 million by 2050. And so Japan is set for a demographic catch-22. A rapidly shrinking workforce is left to earn wages to pay for – and to take time to care for – an ever-growing older population, who are living longer and more care-demanding lives.

But the ageing population isn’t just a care crisis. It’s an economic problem so serious that Japan may not be able to fix it with its existing workforce.

Unemployment stands at only three per cent – which is pretty much as close to full employment as you can reasonably get in a free economy. And with Japan scoring among the top countries in literacy, maths, and sciences, this well-educated workforce isn’t always willing to fill less-skilled jobs at the more menial end of the employment spectrum. A deepening labour shortage means Japan is running out of people to work in its factories and fields.

But Britain and Germany also have low unemployment rates and a motoring economy; and Canada also has a highly-skilled, well-educated native population and lively economy. So why is Japan suffering so much?

In a word: immigration. Japan accepts only 15,000 new citizens by naturalisation every year – and in 2012 accepted 18 refugees for resettlement. By contrast, the US naturalises around 700,000 a year, and accepted 76,000 refugees in 2012. While the US population is about three times that of Japan, those figures are 46 times and 4,222 times bigger, respectively.

For the very few migrant workers who are accepted into the Japanese labour force, conditions are harsh, their treatment is unfair and the climate is hardly welcoming. One migrant told the The New York Times that her bosses treated her and her colleagues “like slaves”. Arriving workers end up mired in thousands of pounds worth of debt to cover state administration fees.

While the government has introduced an “immigrant internship” programme – by which foreign workers come to Japan as “trainees” – it is clear that the fragile status quo cannot hold.

Those foreign labourers already in Japan are starting to unionise, striking to demand better conditions and fairer treatment. Business pressure groups, meanwhile, are urging the government to open the doors wider, giving Japan the immigration numbers it needs to stay afloat.

But there is considerable resistance to this. Part of the explanation is historical. After the first Europeans brought clocks and guns in the 1550s, Japan hunkered down and became a “closed country” in 1639.

Nobody could come in, and nobody could leave, except for the Dutch at a tiny port called Dejima. This policy of isolationism continued until 1853, when US ships turned up, demanding Japan be opened to the world. A contract was signed, giving the US, the UK and Russia trading access to Japan for the first time.

Much more recently, Japan’s expertise in technology has brought it an alternative kind of “outside” work force: its robots. Japan has worked under the mistaken impression that it doesn’t need additional imported labour if it has additional fabricated labour.

But no matter how sophisticated Japan’s robots become, they still won’t provided all the answers, and the economic pressure still rests on Japan getting to grips with its labour-market challenges.

Such a history of isolated living has meant that Japanese culture is still considered relatively unspoiled. Unlike cultures of  many other developed nations, influenced by mass immigration from Europe, as in the case of the US, or from former colonies, as with the UK and France, Japan’s cultural foundations are almost entirely Japanese.

The irony is that the political, economic, and social systems are almost entirely Westernised. But many still fear that allowing large-scale immigration will swamp Japanese culture with outside influences. Japan is fiercely protective of the idea that it is a secluded Eastern powerhouse striking out on its own at the edges of the world has stuck. Nihon, the Japanese world for Japan, means “sunrise land” after all.

But as the country ages and trudges ever further into economic quagmire, the sun threatens to set on the once great country. The political challenge will be to make a strong case for immigration that can still reserve space for Japan to stay somehow ineffably Japanese. If that mantle can be taken up, the economic rewards will be enormous.

Jack May is a freelance journalist.