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Japan sees steep population drop as pandemic keeps foreigners away

Entry restrictions slash foreign arrivals, leaving businesses short-handed

Japan's birth rate is expected to drop significantly this year, breaking 2019's record low. (Photo by Wataru Ito)

TOKYO -- Japan's population shrank by a record 420,000 people last year, government estimates show, as the coronavirus pandemic dealt a heavy blow to an influx of foreign workers that had helped offset the country's ongoing natural population decline.

The total fell for a 12th straight year, shattering the previous record of 329,000 set just a year earlier. The health ministry estimates Japan's population at 125.57 million as of Jan. 1, based on confirmed data through July and estimates based on births, deaths and foreign arrival and departure data.

The drop owes in large part to a 60% plunge in foreign arrivals that has kept the labor market tight even though the pandemic has slowed the economy and eliminated many jobs. 

The natural rate of decline -- or the difference between births and deaths -- was about on par with 2019 during the first seven months of the year. But net foreign arrivals to the country tumbled more than 40% over that period to 115,000 amid entry restrictions aimed at curbing the spread of the virus.

The influx of foreign workers in recent years had alleviated labor shortages in a range of industries, including restaurants, convenience stores, manufacturing and construction.

"If the inflow of foreigners continues to be disrupted, the labor shortage will quickly worsen," said Takuya Hoshino of the Dai-ichi Life Research Institute.

Data from the Bank of Japan shows that employers remain short-handed despite the pandemic.

In the December edition of the quarterly Tankan survey of business sentiment, the diffraction index of employment conditions came in at minus 10, indicating that more companies said employment is "insufficient" than "excessive." Readings were negative in all 12 nonmanufacturing industries, particularly construction, information services and retail.

Even the hard-hit restaurant and hotel industry reported a labor shortage, with a reading of minus 3, after spending June and September in surplus territory, though it may have swung back in the other direction during the current state of emergency.

The entry of foreign workers is expected to pick up again once vaccines and other measures quell the outbreak. But "wages are rising in China and elsewhere, so it's not clear if there will be as many [people] coming to Japan as before," Hoshino said.

This year is expected to see a significant drop in birth rates. Reported pregnancies fell 5.1% on the year to about 727,000 for the 10 months through October, according to the health ministry, with a particularly steep decline starting in May.

Dai-ichi Life Research and the Japan Research Institute both see births falling below 800,000, beyond 2019's record low of 865,000. The accelerated population decline may continue into next year.

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