Japan to Face 11 Million Worker Shortfall by 2040, Study Finds

Japan to Face 11 Million Worker Shortfall by 2040, Study Finds

Morning commuters in Tokyo, Japan.
Morning commuters in Tokyo, Japan.Photographer: Kiyoshi Ota/Bloomberg

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Japan may face a shortage of more than 11 million workers by 2040, a study has found, underscoring the economic challenges the nation faces as its population ages rapidly.

The working age population is expected to rapidly decline from 2027, according to the study by independent think-tank Recruit Works Institute, published Tuesday. The worker supply is expected to shrink by about 12% in 2040 from 2022, even as labor demand remains steady, the report said.

Labor Shortfall Set to Worsen in Japan

Manpower shortages are expected to accelerate in the coming decades

Source: Recruit Works InstituteNote: Based on difference between expected labor demand and supply

Prime Minister Fumio Kishida has made reversing Japan’s declining birthrate a priority for his government, as he warns of societal collapse as the number of babies born hits a new low. He has also pledged about ¥1 trillion ($7.6 billion) to training workers for more high-skilled jobs in the next five years.

Fears of Societal Collapse Prompt New Push for Babies in Japan

Still, the the nation of 126 million is already starting to feel the strain, with the working-age population expected to shrink by 20% from 2020 to 59.8 million by 2040, according to the report.

Kishida is already seeking ways to address a serious shortage of truck drivers expected by next year. The study also warns shortfalls are likely to become acute in labor-intensive sectors like transportation and construction, as well as health care due to growing demands from an aging population.

Japan’s relative decline in global economic standing and a similar aging crisis around the world means that boosting immigration is not the most viable solution over the long-term, the study led by chief researcher Shoto Furuya said.

Japan’s Aging Crisis

The country’s working-age population is shrinking quickly

Source: Statistics Bureau of Japan and Recruit Works Institute

An earlier research by the Value Management Institute said Japan needs 6.74 million foreign workers by 2040, or nearly four times the number it had in 2020, to achieve an average annual growth of about 1.24%.

Japan’s rural-urban divide is likely to get worse over time as well, the study finds, with all of the nation’s prefectures except Tokyo facing a labor shortfall by 2040. Kyoto prefecture would lack about 39% of the workers it needs, while the northern island of Hokkaido will see an insufficiency rate of nearly 32%.

The report also cautions that their estimates are relatively conservative, as the model assumes almost no economic growth. This means any significant increase in economic activity will make the shortage even more severe.

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