Japan needs foreign workers, but will they come?

Mia Tahara-Stubbs special to CNBC
Yoshikazu Tsuno | AFP | Getty Images

Faced with a dwindling population and severe labor shortage, Japan aims to attract more foreign workers, but a rapidly depreciating yen and lack of rights stand in the way.

"Japan needs to compete for foreign workers against other developed Asian nations – the weakening yen won't make the country any more attractive" said Cesar V. Santoyo, a former priest who worked with migrants in Hong Kong before founding SOLS, a non-profit organization that retrains Filipino women living in Japan as English teaching assistants.

The yen has been in a downward spiral since Prime Minister Shinzo Abe introduced a series of fiscal and monetary stimulus measures to spur the economy in 2013. The U.S. dollar is near a seven-year high against the yen, up around 40 percent since Abe took office in December 2012.

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A weaker yen makes yen-based wages less attractive to workers that plan to make remittances to family members back home.

Only while we need them

Two large publicly-financed construction projects – the ongoing reconstruction of the northeast region hit by the 2011 earthquake and the construction of venues for the 2020 Tokyo Olympics – have brought the issue into focus. Japan's construction industry faces a shortfall of 230,000 workers in 2015, government statistics show.

Japan's ageing population and low birth rates further underscore the need for labor. The population shrank for the third straight year in 2013, according to the Internal Affairs Ministry, and is projected to shrink by a third by 2060, increasing the need to import caretakers for children and the elderly, especially if housewives – traditionally caretakers in Japan – are expected to join the workforce.

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But voters find immigration unpalatable. Just 12 percent of respondents in the most recent government survey feel there should be more foreign workers.

As a result, Abe's ruling party insists there is "no immigration policy," just a plan to "expand the utilization of foreign talent," in its manifesto for this Sunday's national elections.

Can Japan resolve its demographic disadvantage?

"The government and voters have a hard time accepting temporary foreign workers, let alone permanent immigrants," said Eriko Suzuki, associate professor at Kokushikan University.

"But the population decline cannot not be reversed without immigrants," he said.

Systematic abuse

To attract more workers, the government seeks to reform and expand the central pillar of its guest worker policy: the Technical Intern Training Program – an initiative that provides technical skills training to youth and adult workers from developing countries for a specific period.

But the system is so widely abused by Japanese employers that the U.S. Department of State condemned it as "forced labor" in its annual "Trafficking in Persons" report.

"It's a charade calling them interns – Japanese employers are just exploiting them as cheap labor," said Shoichi Ibusuki, a leading labor rights lawyer who has represented interns in court.

Still, the government is tightening oversight of the system and is taking tentative steps to introduce broader work permits, he said.

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Interns are paid around 100,000 yen, or around $838, more than half of which is deducted for living expenses, according to Ibusuki. They are often forced to work long hours, sometimes more than 100 hours of overtime, cannot change jobs and must leave Japan if they quit.

Many interns quit when they learn they're being paid half of what Japanese interns would earn.

In 2013, just over 50,000 "trainees", mostly from China and Vietnam, were working in Japan, 2,822 of which were reported missing to the government agency that oversees the program.

Will supply meet the demand?

While experts say there is a supply of migrants across Asia, the question is whether the kind of skilled workers Japan wants will choose the country over other equally developed nations, such as Singapore, Hong Kong and Taiwan.

Kiyoto Tanno, professor at Tokyo Metropolitan University, doesn't think so: "Japanese wages are no longer attractive for those with at least a high school education."

Still, Japan remains more attractive than some places.

"Unemployment remains high in the Philippines – and Japan is still a better place to work than the Middle East," said Rosario Hodoyama, a Filipina who's lived in Japan since 1986. Her niece works in Saudi Arabia.