Falling yen unravels Japan’s quest for foreign workers

The yen’s recent slump has taken the sheen off Japan as a destination for foreign workers, a worrying sign for an ageing economy in desperate need of more people to keep its factories, farms and care homes running.

Japan’s government, which historically maintained low rates of immigration, has gradually opened the door to overseas workers in recent years to make up for the dwindling population.

As a result, the number of workers from overseas tripled in just over a decade to around 1.7 million by 2019, with Vietnam becoming the largest source of foreign workers in jobs from agriculture and manufacturing to IT.

But the number of arrivals has flattened since the pandemic, and it’s unclear if the pace will pick up even with the borders now open.

The yen hit a three-decade low against the dollar last month, also shrinking in value against a range of Asian currencies including the Vietnamese dong.

“My friends who used to study or work in Japan don’t think it’s worth going, as the salary is now one-fourth lower than what they could earn before,” said Vietnamese software engineer Tran Trong Dai.

The 29-year-old is sticking with a plan to move to Japan next year, but now expects to save less money than he’d originally anticipated.

Pham Duc Manh, head of recruitment and human resources at IT services provider FPT Japan, said the number of Vietnamese candidates for posts in Japan was poised to fall by about 40% in the second half of the year, with exchange rates partly to blame.

To help take the edge off the yen’s 22% slump in the past two years against the Vietnamese currency, the company is offering perks including cash grants and scholarships for language courses in a bid to meet its target of recruiting around 200 engineers for Japan per year.

A similar trend is emerging among lessskilled workers. Nguyen Van Mong, 27, a recruiter for Hanoi-based placement company Lacoli Co, JSC, said they usually provide around 300 Vietnamese labourers a year for 40 Japanese firms in fields such as food processing and construction.

He’s seeing a 30% fall in applicants, with the yen’s woes “significantly affecting” people’s thinking.

Such declines are among the side effects of Japan’s ultra-loose monetary policy, which sent the yen to its lowest levels in decades and fueled a surge in energy and food costs.

A flight of foreign workers could make things worse for an economy beset with slow growth and stagnant wages, with nearby economies such as South Korea and Taiwan already expected to exceed Japan in per-capita gross domestic product within the next decade.

Falling birth rates in other Asian countries also mean Japan now needs to compete for workers, said Eriko Suzuki, a professor at Kokushikan University specialising in migration.

“In the past, people were happy to come here if they were allowed, but the debate over the past few years has been about how to be the country people choose,” she said.

A study published by the Development Bank of Japan and Value Management Institute, Inc in February, found the country would need to more than double its foreign workforce to 4.2 million by 2030, and hit 6.3 million by 2040 to achieve an economic growth rate of 1.24% a year.

The National Institute of Population and Social Security Research has estimated Japan’s own working-age population will slide to less than 60 million in 2040 from 74 million in 2020.

“Demand for foreign workers is expanding rapidly in Japan,” said Hideyuki Oshima, business development general manager at Osakabased Willtec, who recruits staff from Vietnam and Myanmar. “It’s across the board. Basically, it’s hard to find people, so we have to rely on foreign workers.”