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The "Opening up to Foreign Workers" Policy as a Growth Strategy
— A growth scenario based on exchange between human domestic and foreign human resources in Japanese corporate headquarters, universities and cities —

October 25, 2010

Overview

With the domestic workforce in decline and the importance of overseas business growing rapidly, opening Japan up to make it possible to draw on the skills of foreign workers is essential for the sustained growth of both the Japanese economy and individual Japanese companies, and is one of the most important themes in Japan's growth strategy. This report analyzes the reasons why progress in the globalization of Japan's workforce has been so slow and proposes how Japan should go about opening up to foreign workers as a strategy for growth.

At the micro level, in the wake of the 2008 global economic crisis, Japanese companies need to change their way of thinking from one that takes the Japanese market as a starting point and focuses on how to develop overseas business to one that considers how the Japanese market should be positioned within the global market as a whole. However, Japanese companies still have a strong tendency to regard overseas subsidiaries as "outposts".
This is one of the reasons why the globalization of manpower within Japan has been so slow. Resolving this issue will require corporate headquarters in Japan to establish globally acceptable business procedures and rules and open up the way to foreign nationals becoming members of the headquarters management team. Japanese companies need to change their self-image from one of Japanese companies whose primary focus is on the domestic market to one of global companies that treat the domestic and overseas markets as part of the same global market, through "internal internationalization".

At the macro level, Japan's current immigration policy on foreign workers is to admit specialist and technical workers wherever possible and to take a cautious stance on admitting "unskilled" manual workers. In practice, however, the numbers of specialist and technical workers allowed into Japan have seen very little growth while the numbers of unskilled manual workers have risen sharply.
However, Japan's slowness in attracting highly skilled foreign workers is due less to problems with the immigration control system than to slowness in (i) globalizing domestic corporate headquarters, (ii) internationalizing universities and (iii) creating urban environments suitable for foreign workers.

Given the anticipated trend of market conditions, globalization of human resources at both macro and micro levels — in the Japanese economy as a whole and in Japanese companies — will be essential. However, since the Japanese people lack experience of internationalization (contact with other cultures) in absolute terms, there is a risk that superficial or hurried measures may have negative repercussions, and it is therefore essential that Japan's approach to opening up to foreign workers should be sustained and down-to-earth.
The first step should be for Japanese companies to take steps to increase the number of Japanese people with experience of foreign cultures, by sending more employees to work overseas and recruiting more young people who have experience of studying overseas. Simultaneously, efforts to promote the exchange among human resources in the three areas of corporate headquarters, universities and cities — through the globalization of domestic corporate headquarters staff, the internationalization of universities and the creation of cities attractive to foreigner workers — are the keystone of the policy of opening up to foreign workers.

The globalization of corporate activities has made it essential for companies to have highly developed corporate headquarters functions capable of integrating business operations that are scattered all over the globe, and recent years have seen the emergence of "global cities" capable of supporting those functions through a concentration of financial services and professional business services. Behind these developments lies the emergence of "global interregional competition", where the importance of the national economy as an economic unit declines and the degree of globalization in a particular region comes to determine the standard of living of people living in that region.
Under these conditions, the number of global cities that a country is able to create is set to become a determining factor of a country's growth potential. Pursuing exchange between human domestic and foreign human resources in Japanese corporate headquarters, universities and cities, is a policy that should be positioned at the core of Japan's growth strategy because it leads to the construction of global cities.

For more information on the content of this report, please contact Hisashi Yamada, the Japan Research Institute, Limited.

E-mail:report@jri.co.jp

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