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Abenomics' Welcome Mat Out for Foreign Entrepreneurs And Construction Workers

May 12 2014, 5:55am CDT | by

Like a hydra-headed monster, it is a terror that will not die, that, however often beaten back, inevitably and inexorably returns. It is Japan and the issue of immigration. Can the monster be...

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16 weeks ago

Abenomics' Welcome Mat Out for Foreign Entrepreneurs And Construction Workers

May 12 2014, 5:55am CDT | by

Like a hydra-headed monster, it is a terror that will not die, that, however often beaten back, inevitably and inexorably returns. It is Japan and the issue of immigration.

Can the monster be mollified, tamed, and adopted?  Should it be?  Can Japan live with it, without being consumed–or grievously weakened–by immigration?

Frankly, I have my doubts. Which is to say, I sympathize with the restrictive, conservative and cautious approach Japan has taken about admitting foreigners for long term residence, and support Japan’s summary deportation of short-term over-stayers.

People who know Japan know that new policies do not get adopted based upon soothing, high-minded rhetoric, throwing caution to the wind, i.e., without giving equal (or greater) weight to likely downsides.

And it has been the potential downsides of immigration (still speakable in Japan, as pro-‘diversity’ political correctness–the advent of which would itself be one of the downsides–has not yet banished truth-telling from the public square) that have kept a restrictive policies in place.

But the pro-immigration pressures continue to mount, as do stratagems at liberalization of narrow pro-immigration interests.

Item: The May 11 Nihon Keizai Shimbun carries an interview with Yamauchi Takashi, CEO of Taisei Construction, in which one of the main issues is how Japan’s construction industry is coping with a severe labor shortage. Yamauchi speaks of some specialties, like framing work in construction of apartment buildings, where the ratio of jobs to available people is 7:1.

The labor shortage is general throughout the industry and the country. It is particularly severe in the Tokyo metropolitan area, where companies like Taisei are having to delay project starts.

The outlook is even more alarming, with looming project and labor demands for earthquake/tsunami reconstruction in the Tohoko region and, particularly, infrastructure and special purpose construction relating to the 2020 Tokyo Olympics.

Taisei and other companies are raising base wages, paying higher bonuses, and intensifying coordination with sub-contractors to maximize labor productivity. Taisei is also encouraging sub-contractors to hire foreign workers.

Item:  The lead story in the May 12 Nihon Keizai Shimbun is the Abe government’s possible expansion of criteria for employing foreigners in the six “national strategic special zones” that are part of Abenomics’ “third arrow” growth strategy.

A new category of eligibility for extended residence is likely to be created for foreign entrepreneurs starting businesses in the zones. It may also become easier within the zones to hire foreign household and childcare service workers.

The hint is that these are “camel’s nose under the tent” initiatives that in due course will be generalized throughout the country.

The advisory committee on national strategic special zones (chaired by PM Abe himself) meeting on May 12 is considering “private sector” proposals like that above on immigration.  Proposals accepted by the government will be incorporated in the formal “Growth Strategy” to be unveiled next month.

New regulations relating to foreign resident eligibility could be ready for implementation by year end.

The main aim of loosening restrictions is to spur foreign enterpreneurship in the special zones, including in Tokyo and Osaka metropolitan regions and Fukuoka city./>/>

Current immigration regulations require that a foreign entrepreneur applying for residence already have an office in Japan. This requirement will be waived within the zones. Once a business is established and a business plan produced, application for multi-year residence permission could be made. Foreigners employed in start-ups by Japanese entrepreneurs will also enjoy lower barriers.

Until now, Japan has granted work permits to foreign researchers and professionals possessing “high level skills.” The door has been closed to “ordinary workers,” which has included household help.  Such foreign help will be permitted within the zones, a change likely to facilitate both spouses working.

Item:  At year end 2013, Japan’s Ministry of Justice counted some 2,060,000 foreigners working, studying, or just living in Japan. This is an increase of 1.6% from 2012, but a 3.6% decline from the peak seen in 2008.

Japanese law requires that foreigners residing in the country have a specified, approved purpose for doing so.  If the purpose is permitted, they will be granted residence permission. Typical approved categories are business “investor/manager” or university student.

Among permanent residents, the majority have obtained this status by marrying Japanese citizens, or by being multi-generational (read: Korean) special residents, rather than by qualifying through some specific employment category.

A breakdown of the 2,020,000 is:  permanent residents and “special permanent residents” (read: multi-generational Korean residents) 1,200,000; employees 360,000; students and researchers 320,000; other 180,000.

About two years ago the government, feeling pressure to follow other advanced countries, officially launched an initiative to facilitate “foreign talent” coming to Japan. Eligibility for permanent residence would be considered on such criteria as income and professional experience. In the 20 months or so since this initiative was launched only 900 persons have been deemed qualified, a pace of 50 per month, less than one-third of the volume anticipated.

Further to item one above, looking ahead to the 2020 Olympics construction labor crunch, policy could be changed to extend the period allowed for “technical training” of foreign construction workers from the current two years to five years, with the stipulation that the “trainee” return to his home country at the end of the “training period.”

Taiwan, like Japan, has struggled to deal with labor shortages, both in manufacturing and construction and in household services, especially nursing care. A system of hiring “wailao,” from Indonesia, Thailand, and Vietnam, through specialized and regulated agencies, normally for a period of three years, has been working well.

In Taiwan, no one expects that “wailao” will remain permanently in the country. It is a system of importing temporary labor on mutually-beneficial, and non-permanent, terms.

Japan has had trouble envisaging a system like Taiwan’s, and experimentation along these lines has had mixed results. Experimentation is continuing, but with a sharp eye on potential downsides. This is the right approach for Japan.

 
Update
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