Japan to face 11 million worker shortage by 2040, study finds

Japan's worker supply is expected to shrink by about 12 per cent in 2040 from 2022, even as labour demand remains steady. PHOTO: AFP

TOKYO - Japan may face a shortfall 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. The worker supply is expected to shrink by about 12 per cent in 2040 from 2022, even as labour demand remains steady, the report said.

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 yen (S$10 billion) for training workers for more high-skilled jobs in the next five years.

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

Mr Kishida is already seeking ways to address a serious shortage of lorry drivers expected by 2024.

The study also warns shortfalls are likely to become acute in labour-intensive sectors such as transportation and construction, as well as healthcare due to growing demands from an ageing population.

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

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 per cent.

Japan’s rural-urban divide is likely to get worse over time as well, the study found, with all the nation’s prefectures except Tokyo facing a labour shortfall by 2040.

Kyoto prefecture would lack about 39 per cent of the workers it needs, while the northern island of Hokkaido will see an insufficiency rate of nearly 32 per cent.

The report also cautions that these 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.


Join ST's Telegram channel and get the latest breaking news delivered to you.