[Japan] Persistent wage gap prompts young people to seek work abroad

A record number of Japan’s young people were granted working holiday visas in Australia last financial year, as part of a growing trend to seek higher wages overseas that the weakening yen has exacerbated, The Japan Times reports.

Similar visa programs in the UK, Canada and New Zealand have flourished post-pandemic and the outflow of talent could compound Japan’s acute labour shortage. 

The talent exodus is also reportedly a sign that many younger Japanese do not share in the nation’s economic optimism as it moves away from decades of deflation.

"Youth are questioning Japan’s economic outlook,” Yuya Kikkawa - an economist at Meiji Yasuda Research Institute - told The Japan Times. "Living conditions are far tougher than the headline inflation figure suggests.”

In March, the Bank of Japan finally scrapped the world’s last negative interest rate in the wake of indications that a cycle of wage gains is feeding demand-led inflation. Yet, despite the nation’s labour unions winning their biggest wage bump in more than 30 years last month, a notable gap in real wages with other advanced economies persists.

In 2022, average annual wages in Japan were reportedly $41,509, compared with $59,408 in Australia and $77,463 in the US, the latest data from the Organisation for Economic Cooperation and Development revealed.

"Japan’s wages hadn’t risen at all for 20 years while other countries were increasing theirs,” Atsushi Takeda - chief economist at Itochu Research Institute - said. "With the yen getting weaker, the gap has become even bigger.”

Around 14,398 Japanese people were granted working holiday visas in Australia in fiscal 2022-23, the highest number in Australian government data dating back to 2001. The visa reportedly permits 18- to 30-year-olds (or 35 for some countries) to have a 12-month holiday and work in roles ranging from farming to hospitality, nursing, construction or office work to fund their trip. In addition, there is an option to extend the stay for up to three years.

Australia has been a popular destination for Japanese workers due to its perceived safety, the similar time zone to Japan and recently relaxed rules allowing visa holders to work for more than six months for employers in certain industries.

“[Australia] always had a generous visa system but recent changes in lengthening the employment period made it even easier for Japanese to move there,” Kotaro Sanada - a spokesperson for the Japan Association for Working Holiday Makers - said.

According to host-country data, Canada issued 7,996 such visas in 2023 until October and the UK issued 898 in 2023. New Zealand approved 2,404 in fiscal 2022-23. 

Mr Sanada reportedly anticipates these numbers to rise further as rules are relaxed. He expects the UK to become the next popular destination following an increase in the annual visa quota for Japanese from 1,500 to 6,000.

The rise in working holiday visas reportedly forms part of a wider trend of Japanese choosing to live abroad. In 2023, the number of Japanese living as permanent residents overseas reached its highest rate since the survey began in 1989, the Ministry of Foreign Affairs said.

The trend could worsen chronic labour shortages in Japan’s aging society, as companies compete over increasingly scarce human resources.

According to a report by Teikoku Databank, more than two-thirds of small- and medium-sized businesses admitted to labour shortfalls in one recent survey and the number of bankruptcies attributed to manpower constraints reached a record high last year. 

In 2023, the government allowed a record number of foreign workers into Japan to alleviate its demographic struggles.

Speaking to The Japan Times, chief economist Takeda said that the economic outlook will influence the outflow of Japanese workers.

"If the conditions for faster growth do take hold in Japan, maybe young people will see a reason to return,” he said.

Source: The Japan Times

(Quotes via original reporting)

A record number of Japan’s young people were granted working holiday visas in Australia last financial year, as part of a growing trend to seek higher wages overseas that the weakening yen has exacerbated, The Japan Times reports.

Similar visa programs in the UK, Canada and New Zealand have flourished post-pandemic and the outflow of talent could compound Japan’s acute labour shortage. 

The talent exodus is also reportedly a sign that many younger Japanese do not share in the nation’s economic optimism as it moves away from decades of deflation.

"Youth are questioning Japan’s economic outlook,” Yuya Kikkawa - an economist at Meiji Yasuda Research Institute - told The Japan Times. "Living conditions are far tougher than the headline inflation figure suggests.”

In March, the Bank of Japan finally scrapped the world’s last negative interest rate in the wake of indications that a cycle of wage gains is feeding demand-led inflation. Yet, despite the nation’s labour unions winning their biggest wage bump in more than 30 years last month, a notable gap in real wages with other advanced economies persists.

In 2022, average annual wages in Japan were reportedly $41,509, compared with $59,408 in Australia and $77,463 in the US, the latest data from the Organisation for Economic Cooperation and Development revealed.

"Japan’s wages hadn’t risen at all for 20 years while other countries were increasing theirs,” Atsushi Takeda - chief economist at Itochu Research Institute - said. "With the yen getting weaker, the gap has become even bigger.”

Around 14,398 Japanese people were granted working holiday visas in Australia in fiscal 2022-23, the highest number in Australian government data dating back to 2001. The visa reportedly permits 18- to 30-year-olds (or 35 for some countries) to have a 12-month holiday and work in roles ranging from farming to hospitality, nursing, construction or office work to fund their trip. In addition, there is an option to extend the stay for up to three years.

Australia has been a popular destination for Japanese workers due to its perceived safety, the similar time zone to Japan and recently relaxed rules allowing visa holders to work for more than six months for employers in certain industries.

“[Australia] always had a generous visa system but recent changes in lengthening the employment period made it even easier for Japanese to move there,” Kotaro Sanada - a spokesperson for the Japan Association for Working Holiday Makers - said.

According to host-country data, Canada issued 7,996 such visas in 2023 until October and the UK issued 898 in 2023. New Zealand approved 2,404 in fiscal 2022-23. 

Mr Sanada reportedly anticipates these numbers to rise further as rules are relaxed. He expects the UK to become the next popular destination following an increase in the annual visa quota for Japanese from 1,500 to 6,000.

The rise in working holiday visas reportedly forms part of a wider trend of Japanese choosing to live abroad. In 2023, the number of Japanese living as permanent residents overseas reached its highest rate since the survey began in 1989, the Ministry of Foreign Affairs said.

The trend could worsen chronic labour shortages in Japan’s aging society, as companies compete over increasingly scarce human resources.

According to a report by Teikoku Databank, more than two-thirds of small- and medium-sized businesses admitted to labour shortfalls in one recent survey and the number of bankruptcies attributed to manpower constraints reached a record high last year. 

In 2023, the government allowed a record number of foreign workers into Japan to alleviate its demographic struggles.

Speaking to The Japan Times, chief economist Takeda said that the economic outlook will influence the outflow of Japanese workers.

"If the conditions for faster growth do take hold in Japan, maybe young people will see a reason to return,” he said.

Source: The Japan Times

(Quotes via original reporting)