Prime Minister Sanae Takaichi's plan to invest 370 trillion yen ($2.3 trillion) over the next 14 years aims to turbocharge growth and boost wages. Her full financial roadmap to 2040, due out later this month, targets doubling Japan's annual economic growth to 1% as early as possible. This ambitious goal for capital accumulation faces a severe labor problem, however, as the state simultaneously tightens immigration controls.
Projections from the Ministry of Health, Labour and Welfare indicate rapid aging will shrink the country's employed population of 68 million by 7% by the plan's end. To compensate, output per worker would need to expand at around 1.5% annually. This pace looks wildly optimistic, given the historical average of less than 0.2%.
Assuming a more feasible 0.5% expansion in productivity, Japan would still face a shortage of 10 million workers. This deficit could rise to 16 million if fewer migrants and women join the workforce. The demand for labor, essential for capital's expansion, is directly at odds with the state's current direction.
The State's Hand in Wage Suppression
The ruling Liberal Democratic Party (LDP) increasingly eschews promoting acceptance of foreigners in favor of strict policing. This undermines a work visa regime implemented by Takaichi's predecessor Shinzo Abe in the seventh year prior. That regime granted longer-term residence to foreign blue-collar workers in sectors strained by severe labor shortfalls.
Takaichi's own LDP leadership campaign was suffused with anti-foreign rhetoric. This rhetoric aimed to win over the party's right wing. She hasn't managed to see off the threat from upstart xenophobe parties like Sanseito, which nabbed over a dozen parliamentary seats in February's snap election same year.
Japanese politics in this regard resemble early populist swerves in other developed countries like Italy, the Netherlands, and Denmark. However, in those nations, migrants exceed 10% of the population, while Japan's migrant population is just 3%. Japan's old-age dependency ratio is over 50%, underscoring a far more pressing need for workforce replenishment.
Capital's Demand vs. State Policy
The urgency of the labor shortage is especially clear in elder care. Any growth boom requires employees in Japan's most productive sectors working at full steam. This means finding care homes for elderly parents. Despite hiring over 100,000 foreign care staff, a dearth of manpower forces many providers to turn away clients. Officials project the shortfall will more than double to 570,000 workers by 2040 in this critical sector.
No sector looks safe. The auto industry, where heavyweights like Toyota Motor and Honda Motor employ about 1 million people, must triple the foreign share of its workforce to 27% by 2040 to maintain production at its current level. The Mitsubishi Research Institute estimates Japan's rapidly shrinking pool of farmers will severely reduce agricultural output, with the value of production falling more than half to 4.3 trillion yen by 2050.
Nomura projects that in 2030, roughly a third of all domestic freight simply won't be shipped. This is due to an expected shortage of truck drivers and tighter regulation. This threatens to jack up prices for delivered goods nationwide, torpedoing the prime minister's vow to rein in inflation.
Investments in AI and robotics could help close some gaps, but the scope is limited, particularly in blue-collar work. At 446 robots per manufacturing employee, Japanese industry isn't as automatized as South Korea, which ranks as the world leader at 1,220 robots per worker, but it is still far above the global average of 132.
Japan Inc. has already voiced public support for speeding up acceptance of qualified foreign workers. In December, the country's largest business lobby, Keidanren, called for policy on foreign nationals to shift from “acceptance” to “strategic attraction.” That push partly reflects more competition for foreign workers from other aging economies like South Korea and Taiwan.
Prefectural governments also want change. One year ago, the National Governors' Association of Japan requested that Tokyo officially define foreign nationals as “residents and members of local communities.” They also asked for a national framework for recruitment, settlement, and social integration, including language education, to be developed and financed by the capital.
The State's Contradictory Actions
The government has moved in the opposite direction despite these calls. Takaichi's government stopped accepting overseas workers for food services in March same year. In April same year, it doubled the residency requirement for foreign nationals seeking citizenship to a decade. In May same year, it hiked the maximum fee for those seeking permanent residency by 2,900% to 300,000 yen, despite successful applications having dropped roughly 40% from their peak in 2007.
The administration also lumps policy on foreign workers and residents with fundamentally unrelated hot-button issues like overtourism and foreign real estate purchases. This approach ultimately plays to the more aggressively xenophobic agenda of Sanseito. Sanseito’s relentless criticism of Takaichi this year underscores how fringe groups operate to tilt public discourse in their favor, regardless of the ruling party’s policymaking.
The article suggests the less risky approach for the prime minister may be to listen instead to governors and local businesses. They call for a functional and well-funded immigration policy, arguing that handled well, this can enable faster growth for all in Japan rather than “immiseration in isolation.” This reveals the internal struggle within the ruling class over the most effective strategy for capital accumulation.