ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Economy

Japan's manufacturing employment hits 7-year high

Jobs revival comes as producers reverse offshoring

TOKYO -- Japanese manufacturing-sector employment averaged more than 10 million workers from January to August, exceeding that mark for the first time since 2010 as companies bring more production home while exports recover on a mild global economic recovery.

The manufacturing sector employed 10.03 million people on average in the first eight months of 2017. The full-year average is also widely expected to top 10 million for the first time in seven years.

In August, when manufacturing employment totaled 10.02 million, the number of new manufacturing job openings climbed 11.7% on the year, compared with 6.3% in all sectors. Japan's jobs-to-applicants ratio reached 1.52, the same as in July and the highest since February 1974. Unemployment decreased 0.4 percentage point on the year to 2.8%, the Statistics Bureau said Friday. At a time when Japan is already near full employment -- that is, when all those with the will and ability to work are doing so -- expansion in manufacturing jobs serves as a primary force behind further reduction in the unemployment rate.

Returning home

Robust exports of such goods as autos and computer chips, a benefit of the global economic recovery, have led improvements in overall production. At the same time, more Japanese businesses are choosing to bring production back home rather than raise it overseas. Capital investment by foreign units of Japanese companies fell 10.2% on the year for the April-June quarter, according to the Ministry of Economy, Trade and Industry, continuing a slide that began in the April-June period of 2014.

Persistent yen depreciation has made exports from Japan more competitive in recent years. And labor costs in many Asian nations are on the rise as their economies develop, lessening the advantages to manufacturing in those countries. The per-unit cost of labor when making goods in China is now 30% higher than in Japan, according to SMBC Nikko Securities.

Such factors led JVC Kenwood to transfer production of certain vehicle navigation systems for the Japanese market from plants in China, Indonesia and elsewhere to a facilities in central Japan's Nagano Prefecture in late 2015. Until then, nearly all of its navigation systems were made abroad. Discount store operator Daiso Industries used to obtain nearly all its household goods and sundries from abroad but reports that those made in Japan will increase.

Full speed ahead

The worsening labor crunch is also pushing companies to take on more full-time workers rather than make do with part-timers. Full-time employees in Japan rose 560,000 on the year in August. The ranks of part-time and temporary workers grew only 180,000. This trend could drive up household incomes as part-timers secure higher-paying full-time positions and the total number of these jobs increases.

Total wages paid to workers in Japan are growing 3% annually in real terms, according to Tatsushi Shikano of Mitsubishi UFJ Morgan Stanley Securities. As this measure goes up, "households' sentiment is also improving, and consumption will continue to climb," Shikano predicted.

A mixed blessing

Yet Japanese manufacturing's resurgence could hinder other elements of an economic recovery, namely productivity growth. "When labor is limited, the rational thing to do is import tradeable commodities instead of producing them at home," said Ryutaro Kono of BNP Paribas Securities (Japan). "But drastic depreciation in the yen has brought about the reverse. Talent is not flowing into nonmanufacturing growth fields, which impedes the creation of new growth industries."

The manufacturing sector employed 16.7% of the Japanese workforce in 2015, according to the government-linked Japan Institute for Labor Policy and Training. The figure is the third-highest among advanced nations, behind Germany's 19.3% and Italy's 18.3%. The U.S., the U.K. and Canada have ratios of around 10%.

Thailand and Malaysia have figures in the 16s, comparable to Japan's. But in South Korea, only 12.2% of workers are in manufacturing, giving other industries more room to snap up talent.

Experts expect Japanese manufacturers to continue bringing production home for now as labor costs elsewhere in Asia climb. But significant appreciation in the yen, among other developments, could halt or shift that trend yet again.

(Nikkei)

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media