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| Outbound 'r' Us. |
China is famously in dire economic straits, but how's Japan really doing to solve its longstanding problems like a dearth of working-age citizens? Here's a wrinkle in what is effectively Japan's attempt to devalue its way to prosperity: Just as the yen has fallen to a 34-year low of 153-something to the dollar, the resulting peanuts wages in Japan vis-a-vis those in other developed countries are making younger folks depart in search of higher pay.
With similar visa programs [to Australia's] in the U.K., Canada and New Zealand recovering post pandemic, the outflow of talent risks exacerbating Japan’s acute labor shortage. It’s also a sign that many younger Japanese aren’t buying into the nation’s economic optimism as it exits from decades of deflation. "Youth are questioning Japan’s economic outlook,” said Yuya Kikkawa, an economist at Meiji Yasuda Research Institute. "Living conditions are far tougher than the headline inflation figure suggests.”
The Bank of Japan finally scrapped the world’s last negative interest rate last month amid signs a virtuous cycle of wage gains is feeding demand-led inflation. But even after Japanese labor unions won their biggest wage hike in more than 30 years last month, there remains a notable gap in real wages with other advanced economies. In 2022, average annual wages in Japan were $41,509, compared with Australia’s $59,408 and $77,463 in the U.S., according to the latest data from the Organisation for Economic Cooperation and Development.
You see, the old (pre-inflation) deal was for Japanese workers to accept lower wages in exchange for job security during uncertain economic times. However, that deal no longer works as the cost of living has risen:
A long-running trade off that put job security ahead of higher pay made more sense when prices were barely moving. Now with inflation at its strongest in decades, Japanese are starting to realize that years of static wages leave many of them budgeting each month before their next pay check.
"Japan’s wages hadn’t risen at all for 20 years while other countries were increasing theirs,” said Atsushi Takeda, chief economist at Itochu Research Institute. "With the yen getting weaker, the gap has become even bigger.”
Some 14,398 Japanese were granted working holiday visas in Australia in fiscal 2022-23, the highest number in Australian government data going back to 2001. It allows 18- to 30-year-olds (or 35 for some countries) to have a 12-month holiday and work in roles ranging from farming to hospitality, nursing, construction or office work to fund their trip. There’s also an option to extend as long as three years.
So, not only is Japan lacking working-age people to take up the nation's workload, but they are also leaving in ever-larger numbers since the pay at home is comparatively low by OECD standards. Even in Japan as its stock market hits record highs, the "main street" reality is rather grimmer.