Japan is bringing in more foreigners than you think

New statistics regularly pop up to illustrate the accelerating decline of Japan's population. Last week, the first-ever drop of locals in all 47 prefectures made headlines. Numbers even began to decline in Okinawa, which has the country's highest birth rate.

At this stage, it's common knowledge that Japan isn't an outlier when it comes to low fertility rates, merely a frontrunner. The same demographic crunch is starting to hit other nations, notably South Korea and China. Fertility in every European Union country is below the replacement level. When the debate quickly turns to the benefits of immigration, Japan is often painted as hostile, if not downright xenophobic, and rejecting the choice of foreign workers.

Take a closer look at that data from last week, however. It shows the number of foreigners rose 11% from a year earlier to comprise 2.4% of the total population, or just under 3 million people; as the figures are from 1 January, that milestone has now likely already been passed. It often goes unremarked that the number of workers from overseas has more than doubled in the last decade alone, while the broader foreign community (including students and families) has risen by 50%.  

Based on population projections, the conversation has already been shifting to a future where foreigners will make up more than 10% of people in the country 50 years from now — similar to the current levels of the United States, United Kingdom or France. Naturally, this creates some unease; what Japan may lack in economic dynamism, it makes up for in social cohesion. Civil unrest and large, no-go immigrant neighbourhoods are basically unheard of.

Already, this change is tangible — one only needs to go into any of the ubiquitous convenience stores in Tokyo or other major cities. Not long ago, it was a novelty to see a foreigner behind the counter; these days, it feels more unusual to see a Japanese. (And given the range of tasks that convenience store workers are expected to handle, from paying bills to cooking fried chicken to sending parcels, I do not envy them.)

While some media have recently focused on the slight increase in Americans moving to Japan, seeking a country with cheap health care and free of active shooter drills in schools, the majority of the increase is attributable to Japan's Asian neighbours — most prominently, Vietnam, whose nationals have surged 10-fold in the past decade to nearly half a million. 

If you haven't noticed this trend, don't be surprised. The government, treading a thin line between businesses complaining of labour shortages and a public that is broadly cautious over large-scale immigration, isn't exactly shouting about it from the rooftops. But with a post-Covid dearth of workers and retirees departing the labour force in droves, the crunch is growing tighter. Some 85% of eateries say they suffer from a lack of part-time employees, according to research firm Teikoku Databank; nearly an equal amount of hotels say the same about full-time workers. 

That's the main reason Prime Minister Fumio Kishida has expanded a visa that allows foreign labourers and their families to stay in Japan indefinitely from just two industries (construction and shipbuilding) to 11, including the extremely stretched service sector. 

"We have to consider a society where we coexist with foreigners," Kishida said at a speech last month. A long-standing foreign trainee scheme that was criticised for enabling abuse will be scrapped and replaced. For white-collar professionals, initiatives include a fast track to permanent residency for high-earners. The government is also studying the introduction of a "digital nomad" visa to attract those who can live and work anywhere. Another goal is to attract 4,00,000 foreign students by 2033, from a little over 3,00,000 before the pandemic, with half staying on for employment; currently, only around 40% remain after their studies.

There's not much time to lose. With Japan's labour force set to drop by an average of 2,20,000 people a year, Mitsubishi UFJ Morgan Stanley Securities Co. estimates the country needs to be bringing in 2.3 times the number of recent entrants just to keep up. 

Large challenges are increasingly in the way. Many industries already say they can't attract enough workers as it is, much less afford to bring in more. Wages, which have stagnated for decades, look particularly miserly these days when measured in dollars due to the weak yen, even as pay is growing in the home nations of potential migrants. Japan's health care and public safety are compelling, but comparatively high tax rates remain a barrier to encouraging high earners. 

Next to other Asian destinations where English is more widely spoken, Japan certainly has a steeper learning curve. Smaller communities in particular can struggle to accommodate people who can't come to grips with the language, a problem that may only worsen amid growing concern over the level of spoken English. Potential residents need patience, as well as a willingness to learn Japanese, when the tourist honeymoon period ends if they're to be accepted long-term. 

There are broader issues of integration. Some quarters have a tendency to view foreign workers more as a disposable commodity rather than part of the community; infamously, Japan paid laid-off Brazilians, often employed in the auto industry, to go home after the Global Financial Crisis struck provided they agreed not to come back. 

Surveys show that most Japanese are broadly accepting of the need for more foreign workers, but many are given pause by footage of this year's riots in France, or headlines on the failed integration of refugees in many parts of Europe. Japan must learn not just from its own failures, but also from countries that have avoided ghettoisation. 

And it must work harder to make Japan a home: Despite a famously strong passport, and acceptance rates of around 85% of applicants in 2021, the numbers of those seeking citizenship has declined from the 2000s. Some of that is due to the pandemic, but the trend predates it.

Many of these problems are less pressing than they were a few decades ago. Some 70% of those asked by public broadcaster NHK in 2020 agreed with the need to bring in more foreign workers, though that number drops to 57% when asked if they wanted that increase to be in their area. An expansive Pew Research Center survey in 2019 found Japan to be no international outlier on perceptions of migrants, with the same percentage (59%) agreeing with the proposition that "immigrants make our country stronger" as in the US.

The change is most pronounced in cities, where residents are increasingly experienced in using the internet, smartphones and translation apps help bridge the communication gap. More than 10% of those in Tokyo's bustling Shinjuku City are now born outside the country; locals flock to the ethnic cuisines in Shin-Okubo, traditionally a Koreatown but with an increasing presence of Southeast Asian and halal food. 

The weak yen is a worry, but the country has overcome previous concerns thought to put immigrants off, such as the 2011 earthquake and nuclear disaster or the tight border policies of the pandemic. Japan remains a desirable destination — one that's more open than you might think.

Gearoid Reidy is a Senior Editor at Bloomberg.

Disclaimer: This article first appeared on Bloomberg, and is published  by special syndication arrangement.