FV think tank
Market Analysis of Foreign Talent Market in Japan Column No.3: Targeting Southeast and Southwest Asia
In the second column, we mentioned that economic advantages are the main reason for the migration of foreign talent.
So, which countries and regions should be targeted for economic advantages when acquiring foreign talent? In short, we believe that Southeast Asia and Southwest Asia are important target areas for Japan.
[45% of the foreign residents in Japan are from East Asia]
*East Asia: China, Korea, Taiwan
*Southeast Asia: Indonesia, Philippines, Vietnam, Thailand, Myanmar, Malaysia, Cambodia, Laos, Singapore, Brunei
*Southwest Asia: India, Pakistan, Sri Lanka, Nepal, Bangladesh, Bhutan
Currently, there are 2,933,137 foreigners living in Japan (as of December 2019).
As mentioned in the first column, the number of foreign workers in Japan is growing faster than any other country in the world (see column No.1 for details). The number of foreigners living in Japan is increasing every year.
Where do most of the foreigners living in Japan come from?
Looking at the number of foreign residents in East Asia, Southeast Asia, and Southwest Asia, those from East Asia account for the highest percentage at 45% of the total number of foreign residents. Southeast Asia and Southwest Asia account for 30% and 7% respectively.
<Graph 1: Number of foreign residents by area (as of December 2019)>
Source: Ministry of Justice, "Statistics on Resident Aliens" (as of December 2019)
By country, three countries accounted for 57 percent of the total, with about 810,000 Chinese, 440,000 South Koreans and 410,000 Vietnamese.
<Number of foreign residents (as of December 2019)>
Looking at the above figures alone, East Asia, which has the largest population, appears to be the most appropriate target area for foreign talent. However, we think it is better to target Southeast Asia and Southwest Asia.
Why is that? If you look at the number of foreigners living in Japan and expand the time frame, you'll find some interesting things.
[A shift from East Asia to Southeast and Southwest Asia is occurring]
If you look at Graph 3, which compares the number of foreign residents by area in East Asia, Southeast Asia, and Southwest Asia between 2010 and 2019, the number of foreign residents in East Asia has not changed much, with an increase of 1.05 times. However, the number of foreign residents in Southeast Asia and Southwest Asia increased by a factor of 2.57 and 2.86, respectively. This means that the nationalities of foreigners moving to Japan is shifting from East Asia to Southeast and Southwest Asia.
<Graph 3: Number of foreign residents by area (2010-2019)>
Source: Ministry of Justice, "Statistics on Resident Aliens"
This trend is expected to continue in the future and the number of foreigners from Southeast and Southwest Asia is expected to increase.
What is the reason behind this? The answer still lies in the economic benefits.
[Economic benefits are a factor in the shift to the south and west]
Take a look at Graph 4. It compares Japan's GDP per capita with the average GDP per capita of three areas in East Asia, Southeast Asia, and Southwest Asia.
This change in GDP is causing a shift in the migration of foreigners coming to Japan.
Looking at the average salary gap between the two countries for the top 15 source and destination countries (e.g., top 1 is about 12.7 million from Mexico to the U.S.), there is a salary gap of about 8 times. (See column No. 2 for more details.)
The difference in GDP per capita between East Asia and Japan was about 2.9 times in 2010, but by 2018, it has narrowed to about 1.7 times. On the other hand, the gap with Southeast Asia has shrunk from about 6.8 times to about 5.5 times, and the gap with Southwest Asia has shrunk from about 31 times to 17 times, but there is still a large difference between the two regions. So, from the point of view of the people of Southeast and Southwest Asia, there are still plenty of economic advantages to moving to Japan as an immigrant.
<Graph 4: Trends in GDP per capita (2010-2018)>
As the gap between East Asia and Japan's GDP per capita is expected to narrow, immigration from Southeast and Southwest Asia is expected to increase.
[Targeting Southeast and Southwest Asia]
As mentioned above, changes in the economic situation of each country have caused changes in the foreigners migrating to Japan.
The salary gap means that even if you have engineers with the same level of skills in China and India, for example, the pay scale is very different. As you can see from the data on foreign talent residing in Japan, more and more people are coming from countries with lower salary levels. On the other hand, the number of talent from countries that are approaching the developed world (East Asian countries), such as China, is about the same as it was 10 years ago.
The economic gap is an important factor that causes the migration of people.
Based on the above, we believe that in order to recruit foreign talent effectively, the target should be shifted from East Asia, where the economic benefits of coming to Japan are waning, to Southeast and Southwest Asia, where relatively large economic incentives can be expected, even in the long run.