Foreign companies trying to expand in Japan have plenty of obstacles to contend with, from prying regulators to finicky consumers to a closed and often bewildering business culture.
But many say a more fundamental handicap is the lack of qualified workers to staff their Japanese operations.
“No matter what part of the cycle you’re in, you’ve always got a shortage,” says Kevin Gibson, managing director at Robert Walters Japan, a recruiting firm.
“Most companies have a strong Asian growth strategy and they’re very reluctant to jeopardise that with knee-jerk reactions,” he says. “Everyone is looking for the same kind of people.”
Those people, managers and recruiters say, are experienced, bilingual and have specialist skills in their fields – be it accounting, marketing or engineering. They are rare enough in any country but Japan is seen as particularly bad at producing them.
“China is newer to the global scene but it’s much easier to find a local manager there who has talent and an international outlook,” says Darryl Green, president of Asia-Pacific operations at Manpower, another recruiting firm.
In a recent Manpower survey of foreign and domestic companies in Japan, six in 10 employers said they had trouble filling positions, compared with a global average of four in 10. Foreign companies face the tightest conditions because of the additional skills they require, from languages to familiarity with international standards.
In accounting, for example, there are fewer than 18,000 Japanese certified public accountants compared with 250,000 in the US. Say 10 per cent of them speak English and half of those are in private practice. “That leaves a pool of 850 to 900 people for foreign companies,” says Mr Gibson.
In financial services, where there have been job cuts in areas linked to the US subprime mortgage mess, bankers and traders say the industry’s bias remains tilted towards hiring. One jokes that for every derivatives trader put out on the street at least two compliance officers are needed.
A number of reasons are put forward for the talent shortage. Japanese companies tend to train managers as generalists, swapping them among often unrelated divisions every few years. That makes them unsuited to foreign companies that place a premium on specialisation.
Experienced workers are anyway reluctant to switch companies. Job-swapping is less rare than it used to be but “there’s still an amazing amount of loyalty,” says Mr Green. Social pressure to stick with an employer is reinforced by a salary structure rewarding long service.
For companies hiring new graduates, Japan’s low birth rate means there are fewer to choose from every year, and some say basic skills are in decline. Japanese students are placed much further down the global rankings in maths and science than a generation ago.
Compounding these handicaps is the Japanese tin ear for foreign languages – an affliction rivalled perhaps only by native speakers of English. Just nine of 147 countries rank lower than Japan in average scores on the widely used Toefl English proficiency test.
Many foreign companies have responded to the skills drought by stepping up in-house training. Oracle and SAP, for example, have launched programmes to train engineers from Japanese technology companies to implement their business software platforms.
The crunch has also led to a boom in specialist recruitment. Robert Walters has increased its own staff in Japan to 160 from 100 last year while Manpower says it has doubled revenues in the country in seven years.
Headhunting in Japan is tough. Manpower successfully places a worker in only about 35 per cent of cases, about half its global “fill rate”. To lure a candidate away from his or her job at a Japanese company, foreign employers must offer a 10-15 per cent salary increase and reduce as many of the risks of moving as possible.
Recruiters are meanwhile targeting niche pools of labour. One is new retirees, a group expected to grow by about 1m over the next three or four years. Japanese companies often rehire pension-age workers as contractors but their wages can fall by as much as two thirds, making them open to offers from foreign companies.
Another source is the 100,000 or so young people who return to Japan each year after studying or “working holidays” abroad. They boast language skills and an international outlook and often fall though the cracks of Japan’s traditional recruiting system, which favours fresh graduates selected in annual examinations.
Many of the returnees are women – a third big pool for recruiters. “Twenty years ago women were …viewed simply as secretaries,” says Mr Green. “That’s changed, but it’s still a male-dominated society. You can get a comparatively better talent pool if you exploit that.”