Japanese Firms Suffer from Labour Shortage as Working Population Ages Rapidly

Japan currently has a rapidly aging population.REUTERS

Japanese firms are finding it difficult to hire enough workers due to its rapidly ageing population, according to a Reuters survey.

The survey, conducted from Aug 4-18 by Nikkei Research for Reuters, found that about 60% of companies, mostly from the retail and construction sectors, are facing labour shortage, prompting them to rethink expansion plans and close stores.

Further, some of the firms expect a significant decline in their profitability due to the development, according to the study based on responses from 270 firms capitalised at more than 1bn yen.

Due to shortage, labour costs are on the rise in the country and firms are struggling to attract qualified employees and retain them.

According to the survey, 80% of retail firms and 72% of companies in construction and real estate said they were finding it difficult to secure enough workers.

Among manufacturers, 70% of firms in the auto sector, including suppliers, said they are also struggling.

In the survey, 44% of firms expect a squeeze in corporate earnings this financial year in the range of 1% to 10%. The remaining 56% do not expect any impact, with some respondents saying they were able to absorb costs as profits were growing.

Japan has a rapidly ageing society, and its working age population is expected to shrink by 13 million people by 2030. Further, the country's existing laws limit immigration into it.

"From the perspective of 30 to 50 years, maybe there will be a chance to reverse this trend, just like France did, but in the next five to 10 years the trend may continue," said Shintaro Okuno, a partner at consultants Bain & Co Japan, who reviewed the results of the survey.

Japan's Prime Minister Shinzo Abe has been looking to shore up the ailing economy, which is suffering from deflation, huge public debt and slow rate of growth.

Japan's economy is expected to grow between 0.3% and 0.5% in 2015, down from an average 0.7% after the country raised sales tax. The country raised sales tax to 8% from 5% in April, and is looking to increase that further to 10% in 2015.

More than half of the respondents in the survey said the hike is unavoidable, while about one-fourth said the country should postpone or scrap it to avoid adverse impact on the economy.