Aging Japan Wants Automation, Not Immigration

A labor shortage could fuel the nation’s next innovation boom.

Japan’s next boom may be at hand, driven by the very thing that is supposed to be bad for its economy.

Japan’s aging and shrinking population has been partly blamed for the on-again, off-again nature of growth and deflation the past three decades. Lately, it’s been driving a different and just as powerful idea: In the absence of large-scale immigration, the only viable solution for many domestic industries is to plow money into robots and information technology more generally.

Humans will still be needed, of course, and that’s behind a separate by-product of Japan’s demographic challenges that I wrote about during a visit there last month. With unemployment down to 2.8 percent, companies are increasingly realizing they need to pay up to attract and keep qualified personnel. The other option — increased immigration — is politically difficult.

Japanese tech innovation in yesteryear was about gadgets and games designed to give pleasure. Think Sony’s iconic Walkman and Nintendo games. Now the demand in Japan comes from an older demographic. A nursing home may well be the place to look for the next wave.

As my colleagues Henry Hoenig and Keiko Ujikane wrote this week, an owner of nursing homes in the Tokyo area plans to spend 300 million yen ($2.7 million) on software to make life easier for employees and residents.

Hoenig, Toru Fujioka and I heard anecdotes like that numerous times during a December trip to Kadoma, a city near Osaka. The area was once an industrial powerhouse that rode Japan’s post-1945 industrial surge with local employers like Panasonic Corp. Now, Mayor Kazutaka Miyamoto frets openly about whether there will simply be enough wage earners to pay the taxes to maintain hospitals, public transport and schools (for those few children who are born and actually stay).

By Daniel Moss for Bloomberg View
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