(Bloomberg) — The number of foreign workers in Japan reached a new high, underscoring the country’s growing reliance on people from overseas to address its chronic labor shortage.
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Japan had a record 2.3 million foreign workers as of October 2024, marking a 12.4% increase from the previous year, according to labor ministry figures released Friday. The number of businesses employing at least one foreign worker also hit a record high of around 342,000, up 7.3% from a year ago, the report showed.
The steady rise highlights Japan’s increasing dependence on overseas labor as the nation struggles with a shrinking workforce, a trend that has persisted since its working-age population peaked in 1995. Japan’s unemployment rate has been below 3% for almost four years, remaining among the lowest in advanced nations. The aging nation will need 6.88 million foreign workers in 2040 to meet its growth targets, according to an estimate by the Japan International Cooperation Agency.
“The results reflect Japan’s need to accept foreign workers to some extent to cover the shortfall in the labor force,” said Shungo Akimoto, economist at Mizuho Securities.
Small businesses have been hit particularly hard by the labor shortage, with more than 60% of small- and medium-sized businesses reporting labor shortfalls, according to a survey by the Tokyo Chamber of Commerce and Industry last year. Friday’s report showed that nearly 80% of those 342,000 businesses are smaller firms with fewer than 100 employees.
The construction and medical industries saw a particularly sharp increase in foreign workers, both rising by more than 20% from a year ago. These sectors are among those facing the most severe labor shortages in Japan, with the jobs-to-applicants ratio reaching 5.60 for construction workers and 2.37 for nursing positions, compared to a national average of 1.25 in December.
The report also showed that Japan saw a surge in foreign workers from Myanmar, Indonesia, and Sri Lanka in 2024, many of whom were blue-collar laborers or students rather than high-skilled professionals. A lack of job opportunities in these countries, precipitated for example by Sri Lanka’s 2022 debt default and Myanmar’s ongoing armed conflict, have likely driven more workers to seek employment abroad.