Adjusting to Globalization: Japan and the Mobility of Asian Technical Talent - Abridged Version

Anthony P. D'Costa (Professor, University of Washington, and National University of Singapore)

This is an abridged version of Prof. D'Costa's paper, Working Paper Series No. 97 (October, 2007), at Asia Research Institute of the National University of Singapore.
(The full paper is available in PDF Form.)

Japan is the second largest ICT (information and communications technology) market in the world. Since ICT services such as software development is labor intensive, under unfavorable demographic developments, Japan is likely to confront shortages of talent and thus competitive challenges. It is widely perceived that this shortage problem, resulting from the demographic crisis, cannot be tackled by internal sources of labor as the population is ageing rapidly and the fertility rate has declined. Furthermore, a reduced number of students and decreasing enrollment in Japanese science and engineering programs suggest that Japan must secure talent internationally.

Although introduction of foreign talent itself is challenging for Japan because of the immigration implications it generates, allowing foreign professionals is a better medium-term solution to Japan's intractable labor market problems. For the long haul other strategies will have to be combined with such a policy. At any rate, Japan must adjust to the new global realities of intense competition and cross-border flows of good, services, technology, and capital. The flow of talent is a particularly important dimension to this set of flows, the absence of which could hurt the Japanese economy.

But as the Japanese data revealed it is difficult practically to keep out highly skilled workers when there are shortages. In fact, the presence of foreigners as a whole in Japan has nearly doubled since 1990 to about 2 million. The bulk of foreigners come from Asia with China and the Koreas being the top two sources of foreigners in Japan. In recent years Brazil and Peru have also increased their presence in Japan, although, unlike China and other Asian countries, they fill low-end industrial jobs in Japan. Of these registrations, Asian countries, especially China, tend to have a high proportion of skilled professionals. India was clearly an anomaly, given its size and its reputation in technical talent. It sends few professionals to Japan but the numbers have increased rapidly since 1990. On the student front, although foreign student enrollments in Japan have increased nearly two and half times since 1990 the number is still quite small. Most students come from China followed by Korea. Here too India's presence is negligible.

Given this picture of increasing flows of talent and students, albeit small, from the world at large and the concentration of Chinese, Koreans, and smaller Asian countries in the vicinity, the question is not whether Japan needs foreign workers but whether it will be able to attract enough professionals and students. The magnitude of flows themselves suggest that Japan is not receptive to foreign presence although at the individual firm level businesses are selectively seeking out opportunities by recruiting foreign labor either in Japan or abroad. As long as other dominant economies such as the US or Western Europe continue to attract professionals and students and reform their immigration policies for making it more hospitable to foreigners, Japan will find the competition for talent rough.

While Indians will continue to prefer the Anglo-phone countries especially the US, the Chinese will also continue to seek opportunities in the US. Their presence in Japan may be a second-best choice for many of them. There are advantages in working with Chinese professionals because of geographical proximity, some cultural affinities, and the larger student presence in Japan, who become familiar with Japan and later contribute to Japan's talent pool. The paradox is that both China and India are growing very rapidly and the demand for technical talent is growing rapidly at home and abroad. So unless Japanese companies and the government adopt more aggressive policies their ability to meet labor shortages in critical industries will fail. While the mobility of Chinese professionals and students has been well-established, Japan will have to go much further and try much harder to attract professionals and students from India and other countries, as the high rate of growth in both China and India and the continued demand for ICT professionals worldwide are likely to constrain foreign talent availability for Japan in the foreseeable future.