Japan's labor shortage is nearing crisis in some key industries as it spreads from construction to services, curbing companies' operations, pushing up wages and potentially crimping a tentative recovery in the world's third-largest economy.
Airlines, retailers, truckers and restaurant chains are being forced to rethink expansion plans and, in extreme cases, shut up shop because they cannot fill jobs at any wage.
Peach Aviation, a joint venture backed by Japan's largest airline, ANA Holdings, said last month it would cancel more than 2,000 flights this year, 16 percent of its planned total. Budget carriers Jetstar Japan and Vanilla Air have also cancelled hundreds of flights this summer, a government report on pilot shortages showed.
"There aren't enough captains and training one takes time and money," said Peach Aviation spokesman Hironori Sakagami.
"We wanted to increase the number of flights, but we had to delay that."
Peach's predicament underscores a broader problem facing the world's fastest-aging country. Jolted out of two decades of deflation by Prime Minister Shinzo Abe's reforms, many Japanese companies are struggling to secure workers due to minimal immigration, inflexible hiring laws and a working age population that is expected to shrink by 13 million people by 2030.
The problems facing companies in their bricks-and-mortar expansion come just as doubts arise about the prospect for business investment to drive the recovery. Machinery orders, a key gauge of plans for manufacturers' capital spending suffered a record plunge in May, data showed on Thursday, prompting the government to say the trend of rising orders was stalling.
"There's a high risk of labor shortages causing a growth bottleneck particularly if the labor market remains rigid," said Yasuo Yamamoto, senior economist at Mizuho Research Institute. "More efforts are needed to enhance liquidity in the labor market to shift more workers to growth sectors while increasing the number of workers, including immigrants."
Low-wage, low-margin businesses at risk
Japan's deepening labor shortage has led it into uncharted territory among its developed nation peers, but is little surprise given its rapidly aging and shrinking population. It has done itself few favors by so far resisting calls to open its doors wider to long-term immigration or dismantle strict employment laws.
A proposal floated among Abe's advisers to increase the number of immigrants to 200,000 a year by 2050 was recently rejected. Instead, in his growth strategy unveiled in June, Abe expanded a foreign trainee scheme which accounts for less than 0.3 percent of Japanese workers. He is also encouraging greater workforce participation by women and the elderly, but critics say these measures will never be enough.