August 20, 2025 • 15 mins
Japan’s labor market is cracking under the weight of its own demographics. FY2024 saw over 10,000 bankruptcies, with over over 300 firms collapsing solely due to labor shortages and soaring personnel costs—the worst numbers in over a decade. The “2030 Problem” looms large, with the working-age population set to plunge, while traditional lifetime employment models and outdated seniority systems strangle mobility and innovation. Add in a deepening skills mismatch—millions in surplus clerical roles but a gaping deficit in AI, data, and bilingual talent—and the result is nothing less than a recruiting emergency.
In this episode of Executive Search in Japan, we break down the anatomy of Japan’s talent collapse and why executive recruiters are no longer just headhunters but lifelines:
- Bankruptcies rising like dominoes — why SMEs are falling first, and how recruiters can help stabilize the middle market.
- The skills chasm — surplus clerks vs. a 1.7 million deficit in IT, AI, and cyber specialists by 2030.
- Cultural breakdowns — how rigid systems (Shūshin-Koyō, Nenkō-Joretsu) are failing in the face of Gen Z’s demand for purpose-driven careers.
- Immigration as a shock absorber — the promise (and limitations) of Japan’s strategic turn toward foreign workers.
- Recruiters as strategic advisors — moving beyond placements to reskilling audits, DEI advocacy, cultural translation, and building resilient talent pipelines.
For executive recruiters, this is more than a market report—it’s a survival map. Japan’s chronic talent shortage is escalating into a national economic risk. Recruiters who step up as strategic partners will not just thrive; they’ll shape the future of Japan’s workforce.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Tessa Sourceley (00:00):
Imagine pouring your life into a business, only
to watch it crumble, notbecause of a bad product, not a
lack of customers, but becauseyou just cannot find enough
people.
That's not hypothetical forthousands of businesses in Japan
right now.
Corporate bankruptcies thereare surging, and it's directly
linked to a critical talentshortage.
We're talking hundreds of casesspecifically because of a
(00:21):
crippling lack of workers.
Today, we're embarking on adeep dive.
We've got a stack of sources,things like the executive search
imperative, navigating Japan'stalent shortage crisis and
Japan's labor crisis, arecruiter's opportunity.
We want to understand howJapan, you know, a major global
economy is grappling with thishuge system level challenge from
a shrinking workforce.
(00:42):
Our mission to really dissectthe causes, the surprising
ripple effects and the potentialsolutions will focus
particularly on the evolvingrole of executive fruiters.
It's quite strategic.
By the end, you should have aconcise but pretty thorough
understanding of what'shappening and frankly, why it
matters to all of us.
OK, so let's start with thatstartling connection.
You mentioned labor shortagesleading to business failures.
(01:04):
This isn't just a small trend,is it?
Chase Stratton (01:06):
No, not at all.
The immediate impact is trulystark.
In fiscal year 2024, the numberof corporate bankruptcies in
Japan actually climbed 12percent from the previous year.
That pushed it over 10,000 forthe first time in like 11 years.
Tessa Sourceley (01:19):
Wow.
10,000.
Chase Stratton (01:21):
Yeah.
But here's the critical detail.
The number of failures directlyattributed to a lack of workers
or rising personnel costs.
That's surged.
We're talking 1.6 times higher,hitting figures around 308,
maybe 309 cases, according toone source.
Another put it near 350.
That's the highest it's beensince fiscal 2013.
1.6
Tessa Sourceley (01:41):
times just from labor issues.
Chase Stratton (01:43):
Exactly.
And this burden is fallingalmost entirely on small and
midsize enterprises, you know,SMEs.
Firms with fewer than 10employees make up nearly 90
percent of all these laborrelated bankruptcies.
Tessa Sourceley (01:53):
90 percent.
Chase Stratton (01:54):
Almost 90.
Large firms, they generallyhave the resources, the brand
name.
They can mostly weather thestorm.
But SMEs, they're juststruggling to compete for the
talent that's available.
Tessa Sourceley (02:03):
So the backbone of the economy, the small
businesses are getting hithardest.
Chase Stratton (02:07):
Absolutely.
It shows this profoundvulnerability.
They're not feeling from lackof demand.
We're just a sheer absence ofavailable people.
Tessa Sourceley (02:13):
So, OK, we see the immediate impact
bankruptcies, especially forsmaller players.
But you hinted this isn't justa simple numbers game.
It feels like there's moregoing on underneath.
Chase Stratton (02:23):
Exactly right.
When you look at the biggerpicture, the fundamental issue
is an irreversible demographicdecline.
It's huge.
Japan faces what people arecalling the 2030 problem.
The working age populationthat's ages 15 to 64, it's
projected to shrink to about 92%of its 2020 level by 2030.
92%.
Tessa Sourceley (02:42):
And
Chase Stratton (02:43):
then get this, down to 68% by 2050.
68.
Tessa Sourceley (02:46):
That's a massive drop.
Chase Stratton (02:48):
It's a demographic cliff.
And this leads to aninteresting paradox.
Japan has a remarkably lowunemployment rate, right?
It was 5.1% back in 2010, evenlower since then.
Tessa Sourceley (02:58):
Which sounds good on the surface.
Chase Stratton (02:59):
Exactly.
But it's not a good sign here.
It actually signals a criticallack of available labor to fill
job openings.
You see that reflected in thehigh jobs to applicant ratio
1.31 in 2023.
Basically, more jobs and peoplelooking.
And what's more, Japan'salready done a lot to boost
participation from women.
Now it's 76 percent and theelderly around 25 percent.
(03:20):
Those rates are already aboveOECD averages.
Tessa Sourceley (03:24):
So there's not much more room to grow the
workforce internally.
Chase Stratton (03:27):
Very little room left there.
The real shock, I think, isthat Japan's economic powerhouse
is facing a problem sofundamental It requires
rethinking the entire employeremployee contract, a contract
that's defined its success fordecades.
Tessa Sourceley (03:43):
And that contract you mentioned, the
traditional Japanese employmentsystem.
That sounds like a really bigpiece of this puzzle.
Chase Stratton (03:49):
Oh, it's absolutely crucial and often
overlooked, I think, by peopleoutside Japan.
It's built on this idea oflifetime employment,
shushinkoyu, and aseniority-based wage system,
ninjujuretsu.
Think of it like you join thecompany family right out of
university and your pay goes upwith years served.
Your role evolves.
New grads are often hired enmasse based on general
(04:09):
potential.
That's Shinso Tsumikatsu'sidea.
Specific skills, they'redeveloped through on-the-job
training, OJT.
Tessa Sourceley (04:15):
So loyalty is prized, but may Maybe not
flexibility.
Chase Stratton (04:18):
Exactly.
It fosters loyalty, but itcreates this inherent rigidity.
It doesn't really incentivizeworkers to get skills they could
easily take somewhere else.
So you have very low externallabor mobility.
People just don't switchcompanies much traditionally.
Tessa Sourceley (04:32):
But is that changing?
Chase Stratton (04:33):
That's what's striking.
The mindset, especially amongyounger workers, is really
pushing against this.
A 2023 survey found only about30 percent of new employees
actually aspire to stay with onecompany long term.
30%.
That's
Tessa Sourceley (04:46):
a huge shift.
Chase Stratton (04:47):
Massive.
Another survey, same year,found 37% of the entire working
population was considering orplanning a job change.
And over half of those under 34wanted to switch.
Tessa Sourceley (04:59):
So what are they looking for instead?
Chase Stratton (05:01):
It seems they're prioritizing things like
work-life balance,purpose-driven work over just
blind loyalty.
They're even looking morefavorably at startups.
You even see this reflected inthe rise of things like quiet
quitting.
The old ways just aren'tholding the same appeal.
Tessa Sourceley (05:15):
Okay, so So we have fewer people overall, a
system that's kind of stuck andworkers wanting different
things.
And then you mentioned theskills issue earlier.
Chase Stratton (05:22):
Right, the skills gap.
And this is really a problem ofmismatch, not just a lack of
bodies.
By 2030, projections show Japanmight have an excess of about
2.1 million people in jobs likeproduction and clerical work.
Tessa Sourceley (05:35):
An excess.
Chase Stratton (05:36):
Yes.
But at the same time, ashortage of about 1.7 million in
specialized technical roles.
Think IT, AI, data science,cyber security.
Those are critical areas.
Plus, you have acute shortagesin other key sectors like
construction, health care,nursing.
The list goes on.
Tessa Sourceley (05:53):
And language skills play a role too, right?
Chase Stratton (05:55):
Definitely.
That adds another layer to theparadox.
Japan has one of the lowestlevels of English proficiency
globally.
Yeah.
And there's also this culturaltendency perhaps for people to
underestimate their Englishskills, even if they have some.
That just narrows the pool evenfurther for roles needing
international communication.
Tessa Sourceley (06:11):
Wow.
So many factors.
Chase Stratton (06:12):
And one more of the broader economic pressures.
Yeah.
The Bank of Japan's beenrunning an easy monetary policy
that's tightened the job market,pushed wages up a bit.
Tessa Sourceley (06:19):
Which sounds good for workers.
Chase Stratton (06:21):
It is, in theory.
But combine higher wages withrising material costs and a weak
yen, and it creates asignificant financial burden.
Especially, again, for thosesmaller firms we talked about.
They get squeezed from allsides.
Tessa Sourceley (06:34):
This sounds like a really multi-layered,
almost intractable crisis.
So how is Japan actually tryingto tackle this?
The government must be doingsomething.
You mentioned shifts.
Chase Stratton (06:43):
They are making some significant shifts, yes.
A really crucial point here isthe fundamental policy reversal
on immigration.
Japan has started talking aboutforeign workers as a strategic
asset.
That's a huge departure frompast thinking.
Tessa Sourceley (06:58):
Strategic asset.
Interesting framing.
Chase Stratton (07:00):
Isn't it?
And the numbers show it.
The number of foreign workershas actually quadrupled since
2008.
It hit 2.3 million in 2024.
Tessa Sourceley (07:07):
Quadrupled.
Okay.
Chase Stratton (07:09):
A key part of this is the 2019 specified
skilled worker visa, the SSWvisa.
It offers mid-skilled foreignnationals a clearer path to
permanent residency if they workin shortage industries.
It's a much more pragmaticapproach than, say, the old
temporary trainee programs.
Tessa Sourceley (07:23):
And what about upskilling the domestic
workforce?
Chase Stratton (07:26):
Right.
The government has also pledgeda trillion yen, that's over
five years, to promoteReskilling and help people move
between jobs more easily.
Tessa Sourceley (07:35):
A trillion yen sounds like a lot.
Is it working?
Chase Stratton (07:38):
Well, that's where we see a bit of an
implementation gap, perhaps,when you look at the practical
side.
While these big macro-levelreforms are happening, the
support at the local level foractually integrating foreign
workers, it's still prettylimited in many places.
Okay.
And for reskilling.
There's a structural barrier.
Remember how Japanese firmstraditionally focus on
(07:58):
company-specific OJT skills?
Tessa Sourceley (08:01):
Yeah, skills that aren't easily transferable.
Chase Stratton (08:03):
Exactly.
So unless companies also reformtheir organizational structures
and their salary systems,moving away from just seniority
reskilling alone won'tnecessarily lead to higher wages
or more job switching.
Many firms still use age limitsin hiring.
They still promote based ontenure.
So employees can be prettyskeptical about whether these
reskilling programs willactually benefit their careers.
Tessa Sourceley (08:24):
It sounds like pouring water into a leaky
bucket if the underlying systemsdon't change.
Chase Stratton (08:29):
That's a good way to put it.
You need to fix the bucket, notjust keep pouring more water
in.
Tessa Sourceley (08:33):
So if government efforts have this
implementation gap, Where doesthat leave the actual search for
talent?
This seems to be whereexecutive recruiters are
stepping in, maybe playing adifferent role than they used
to.
Chase Stratton (08:45):
Absolutely.
That's a key part of the storynow.
The executive search market inJapan is significant valued at
about 1.24 billion U.S.
dollars in 2024 and projectedto hit over 2 billion by 2031.
That's
Tessa Sourceley (08:59):
substantial growth.
Chase Stratton (09:00):
It is.
And it's critical because thesefirms specialize in reaching
what we call passive candidates.
Tessa Sourceley (09:06):
People who aren't actively job hunting.
Chase Stratton (09:07):
Precisely, top-tier professionals who are
probably doing well where theyare, not looking at job boards.
Given Japan's low workforcemobility, this hidden talent
pool is often best accessedthrough confidential searches
using deep professionalnetworks.
For really high-stakes criticalroles, the retained search
model works best.
That requires a really deeppartnership between the
(09:29):
recruiter and the clientcompany.
Tessa Sourceley (09:31):
But you said their role is evolving.
So beyond just finding thesepassive candidates, what else
are they doing?
It sounds like much more thanjust headhunting.
Chase Stratton (09:38):
It really is.
It makes you wonder, right, howdo you bridge all these gaps
we've talked about?
Cultural skills expectations.
Recruiters are increasinglyacting as cultural translators.
They help foreign candidatesunderstand the nuances of
Japanese companies.
And they help Japanesecompanies understand how to
attract and integrate foreigntalent.
Tessa Sourceley (09:57):
So practical help, too.
Chase Stratton (09:58):
Oh, yes.
Tailored services like resumessupport, interview preps
specifically for Japanesecontexts, visa guidance, even
tips on workplace etiquette.
They also spend time educatingJapanese companies on what
motivates experience ofbilingual professionals.
It's often not just about usingEnglish.
It's about long-term growth,autonomy, better work-life
(10:19):
balance.
Tessa Sourceley (10:20):
And preparing the candidates, too.
Chase Stratton (10:21):
Yes, preparing foreign candidates for the
realities.
Things like the seniority-basedhierarchies in Paikoi and the
importance of consensus-buildingbefore decisions.
Nima Washi.
Managing expectations is key.
Tessa Sourceley (10:32):
That makes sense.
What else?
Chase Stratton (10:34):
They're also advising companies on how to be
more flexible and realistic intheir hiring criteria to
actually get a competitive edge.
That might mean reevaluatingstrict age limits, which are
still quite common.
or considering candidatesoutside the big cities like
Tokyo, or adjusting salaryranges to actually meet market
expectations, not just whatthey've always paid.
Tessa Sourceley (10:55):
Helping them move from a wish list to a
realistic
Chase Stratton (10:58):
list.
Exactly.
Moving from a long list ofrigid must-haves to a more
practical, good-to-have list.
Tessa Sourceley (11:03):
And you mentioned DEI earlier,
diversity, equity, andinclusion.
How does that fit in?
Chase Stratton (11:08):
Well, what's really fascinating here is how
DEI is shifting from maybe anice-to-have to an absolute
economic imperative in Japan,purely because of the shrinking
workforce.
Tessa Sourceley (11:18):
Because they need all the talent they can
get.
Chase Stratton (11:20):
Precisely.
Recruiters are helpingcompanies reframe DEI as a
strategic competitive advantage.
They're proactively sourcingtalent from underutilized pools,
women, foreign professionals,people with disabilities, and
crucially, advising on how toimplement truly inclusive
cultures and flexible workarrangements.
Things like supporting paidchildcare leave for men or help
(11:41):
for employees caring for elderlyrelatives.
These are vital for attractingand retaining diverse talent
talent today.
Tessa Sourceley (11:47):
It sounds like they're almost becoming HR
consultants in a way.
Chase Stratton (11:51):
They're definitely moving into internal
talent consulting, too.
Companies are realizing thatreskilling existing employees is
often more cost effective andsustainable than constantly
trying to hire externally.
Tessa Sourceley (12:02):
Right.
You avoid recruitment costs andretain institutional knowledge.
Chase Stratton (12:05):
Exactly.
Studies show effectivereskilling can boost
productivity, maybe 6 to 12percent, and definitely improves
retention.
Replacing an employee, youremember, can cost up to 150
percent of their annual salary.
Right.
recruiters can help companiesconduct talent audits, identify
loyal employees with valuableknowledge who could be retrained
for those critical in-demandroles.
The key is ensuring reskillingis tied directly to real career
(12:30):
advancement opportunities.
They also leverage technology,of course, AI-powered research,
specialized databases to findcandidates efficiently and
provide data for realisticsalary benchmarks.
Tessa Sourceley (12:42):
So the real insight is they're not just
filling jobs.
They're becoming architects ofchange within these companies.
Chase Stratton (12:48):
That's a great way to put it.
They're bridging gaps,cultural, systemic, that
companies are really strugglingto bridge on their own in this
environment.
Tessa Sourceley (12:56):
Okay, this is a complex picture with some
innovative responses emerging.
So wrapping this up, what arethe most actionable
recommendations for both thecompanies struggling and the
recruiters trying to help?
What's the path forward?
Chase Stratton (13:07):
Well, for Japanese companies, I think the
big one is a fundamentalreevaluation of those
traditional labor practices.
They really need to think abouttransitioning from that
membership-based model we justDiscussed.
Tessa Sourceley (13:17):
Lifetime employment, seniority pay.
Chase Stratton (13:19):
Right.
Moving towards more of a jobbased system where compensation
is clearly linked to skills andperformance, not just how long
you've been there.
They also need to overhaultheir hiring processes.
Stop relying solely on hiringnew grads en masse.
They need to partner withrecruiters to access experienced
mid-career professionals, bothdomestic and foreign, and
(13:43):
embrace flexible work.
Tessa Sourceley (13:44):
And reskilling?
Chase Stratton (13:45):
Reskilling, yes, but with a clear purpose.
Dedicate real budget and timeto programs focused on those
in-demand skills and offer clearcareer paths linked to that
retraining.
Otherwise, employees won't buyin.
And finally, they need toprioritize building a strong
employer brand, one thatresonates with younger
generations looking for purposeand growth.
Tessa Sourceley (14:05):
Makes sense.
And for the executiverecruiters themselves.
Chase Stratton (14:07):
For recruiters, the mandate now is really to
embrace that consultativeretained model.
Focus on becoming strategicpartners, not just transactional
suppliers.
They absolutely have toleverage technology and data.
They need to be cultural andintegration partners, offering
support even after someone ishired to ensure it works out.
Tessa Sourceley (14:24):
So more long-term involvement.
Chase Stratton (14:26):
Definitely.
Championing DEI as an economicnecessity is vital, actively
sourcing diverse talent andeducating clients on the real
business benefits ofinclusivity.
And finally, expanding theirservices into internal mobility.
partnering with clients onthose talent audits, and helping
design effective reskillingprograms.
(14:46):
It's about holistic talentstrategy now.
Tessa Sourceley (14:49):
Right.
Well, this deep dive hascertainly shown us that Japan's
chronic talent shortage is farmore than just an HR issue.
It's a serious nationaleconomic risk already causing
significant business failures,especially for those smaller
companies.
It seems the path forwardreally requires a new kind of
collaboration between thegovernment, companies, and these
strategic partners likeexecutive recruiters.
Chase Stratton (15:11):
That's absolutely right.
Right.
Japan's ability to navigatethese demographic headwinds, to
turn them into maybe evenlong-term growth, it really
hinges on its willingness toleverage foreign talent, to
fundamentally reform thattraditional corporate culture,
and to invest strategically inits people.
The executive search industryfinds itself perhaps
unexpectedly right at theforefront of this vital
transformation.
Tessa Sourceley (15:41):
Something to think about.
Imagine pouring your life into a business, only
to watch it crumble, notbecause of a bad product, not a
lack of customers, but becauseyou just cannot find enough
people.
That's not hypothetical forthousands of businesses in Japan
right now.
Corporate bankruptcies thereare surging, and it's directly
linked to a critical talentshortage.
We're talking hundreds of casesspecifically because of a
(00:21):
crippling lack of workers.
Today, we're embarking on adeep dive.
We've got a stack of sources,things like the executive search
imperative, navigating Japan'stalent shortage crisis and
Japan's labor crisis, arecruiter's opportunity.
We want to understand howJapan, you know, a major global
economy is grappling with thishuge system level challenge from
a shrinking workforce.
(00:42):
Our mission to really dissectthe causes, the surprising
ripple effects and the potentialsolutions will focus
particularly on the evolvingrole of executive fruiters.
It's quite strategic.
By the end, you should have aconcise but pretty thorough
understanding of what'shappening and frankly, why it
matters to all of us.
OK, so let's start with thatstartling connection.
You mentioned labor shortagesleading to business failures.
(01:04):
This isn't just a small trend,is it?
Chase Stratton (01:06):
No, not at all.
The immediate impact is trulystark.
In fiscal year 2024, the numberof corporate bankruptcies in
Japan actually climbed 12percent from the previous year.
That pushed it over 10,000 forthe first time in like 11 years.
Tessa Sourceley (01:19):
Wow.
10,000.
Chase Stratton (01:21):
Yeah.
But here's the critical detail.
The number of failures directlyattributed to a lack of workers
or rising personnel costs.
That's surged.
We're talking 1.6 times higher,hitting figures around 308,
maybe 309 cases, according toone source.
Another put it near 350.
That's the highest it's beensince fiscal 2013.
1.6
Tessa Sourceley (01:41):
times just from labor issues.
Chase Stratton (01:43):
Exactly.
And this burden is fallingalmost entirely on small and
midsize enterprises, you know,SMEs.
Firms with fewer than 10employees make up nearly 90
percent of all these laborrelated bankruptcies.
Tessa Sourceley (01:53):
90 percent.
Chase Stratton (01:54):
Almost 90.
Large firms, they generallyhave the resources, the brand
name.
They can mostly weather thestorm.
But SMEs, they're juststruggling to compete for the
talent that's available.
Tessa Sourceley (02:03):
So the backbone of the economy, the small
businesses are getting hithardest.
Chase Stratton (02:07):
Absolutely.
It shows this profoundvulnerability.
They're not feeling from lackof demand.
We're just a sheer absence ofavailable people.
Tessa Sourceley (02:13):
So, OK, we see the immediate impact
bankruptcies, especially forsmaller players.
But you hinted this isn't justa simple numbers game.
It feels like there's moregoing on underneath.
Chase Stratton (02:23):
Exactly right.
When you look at the biggerpicture, the fundamental issue
is an irreversible demographicdecline.
It's huge.
Japan faces what people arecalling the 2030 problem.
The working age populationthat's ages 15 to 64, it's
projected to shrink to about 92%of its 2020 level by 2030.
92%.
Tessa Sourceley (02:42):
And
Chase Stratton (02:43):
then get this, down to 68% by 2050.
68.
Tessa Sourceley (02:46):
That's a massive drop.
Chase Stratton (02:48):
It's a demographic cliff.
And this leads to aninteresting paradox.
Japan has a remarkably lowunemployment rate, right?
It was 5.1% back in 2010, evenlower since then.
Tessa Sourceley (02:58):
Which sounds good on the surface.
Chase Stratton (02:59):
Exactly.
But it's not a good sign here.
It actually signals a criticallack of available labor to fill
job openings.
You see that reflected in thehigh jobs to applicant ratio
1.31 in 2023.
Basically, more jobs and peoplelooking.
And what's more, Japan'salready done a lot to boost
participation from women.
Now it's 76 percent and theelderly around 25 percent.
(03:20):
Those rates are already aboveOECD averages.
Tessa Sourceley (03:24):
So there's not much more room to grow the
workforce internally.
Chase Stratton (03:27):
Very little room left there.
The real shock, I think, isthat Japan's economic powerhouse
is facing a problem sofundamental It requires
rethinking the entire employeremployee contract, a contract
that's defined its success fordecades.
Tessa Sourceley (03:43):
And that contract you mentioned, the
traditional Japanese employmentsystem.
That sounds like a really bigpiece of this puzzle.
Chase Stratton (03:49):
Oh, it's absolutely crucial and often
overlooked, I think, by peopleoutside Japan.
It's built on this idea oflifetime employment,
shushinkoyu, and aseniority-based wage system,
ninjujuretsu.
Think of it like you join thecompany family right out of
university and your pay goes upwith years served.
Your role evolves.
New grads are often hired enmasse based on general
(04:09):
potential.
That's Shinso Tsumikatsu'sidea.
Specific skills, they'redeveloped through on-the-job
training, OJT.
Tessa Sourceley (04:15):
So loyalty is prized, but may Maybe not
flexibility.
Chase Stratton (04:18):
Exactly.
It fosters loyalty, but itcreates this inherent rigidity.
It doesn't really incentivizeworkers to get skills they could
easily take somewhere else.
So you have very low externallabor mobility.
People just don't switchcompanies much traditionally.
Tessa Sourceley (04:32):
But is that changing?
Chase Stratton (04:33):
That's what's striking.
The mindset, especially amongyounger workers, is really
pushing against this.
A 2023 survey found only about30 percent of new employees
actually aspire to stay with onecompany long term.
30%.
That's
Tessa Sourceley (04:46):
a huge shift.
Chase Stratton (04:47):
Massive.
Another survey, same year,found 37% of the entire working
population was considering orplanning a job change.
And over half of those under 34wanted to switch.
Tessa Sourceley (04:59):
So what are they looking for instead?
Chase Stratton (05:01):
It seems they're prioritizing things like
work-life balance,purpose-driven work over just
blind loyalty.
They're even looking morefavorably at startups.
You even see this reflected inthe rise of things like quiet
quitting.
The old ways just aren'tholding the same appeal.
Tessa Sourceley (05:15):
Okay, so So we have fewer people overall, a
system that's kind of stuck andworkers wanting different
things.
And then you mentioned theskills issue earlier.
Chase Stratton (05:22):
Right, the skills gap.
And this is really a problem ofmismatch, not just a lack of
bodies.
By 2030, projections show Japanmight have an excess of about
2.1 million people in jobs likeproduction and clerical work.
Tessa Sourceley (05:35):
An excess.
Chase Stratton (05:36):
Yes.
But at the same time, ashortage of about 1.7 million in
specialized technical roles.
Think IT, AI, data science,cyber security.
Those are critical areas.
Plus, you have acute shortagesin other key sectors like
construction, health care,nursing.
The list goes on.
Tessa Sourceley (05:53):
And language skills play a role too, right?
Chase Stratton (05:55):
Definitely.
That adds another layer to theparadox.
Japan has one of the lowestlevels of English proficiency
globally.
Yeah.
And there's also this culturaltendency perhaps for people to
underestimate their Englishskills, even if they have some.
That just narrows the pool evenfurther for roles needing
international communication.
Tessa Sourceley (06:11):
Wow.
So many factors.
Chase Stratton (06:12):
And one more of the broader economic pressures.
Yeah.
The Bank of Japan's beenrunning an easy monetary policy
that's tightened the job market,pushed wages up a bit.
Tessa Sourceley (06:19):
Which sounds good for workers.
Chase Stratton (06:21):
It is, in theory.
But combine higher wages withrising material costs and a weak
yen, and it creates asignificant financial burden.
Especially, again, for thosesmaller firms we talked about.
They get squeezed from allsides.
Tessa Sourceley (06:34):
This sounds like a really multi-layered,
almost intractable crisis.
So how is Japan actually tryingto tackle this?
The government must be doingsomething.
You mentioned shifts.
Chase Stratton (06:43):
They are making some significant shifts, yes.
A really crucial point here isthe fundamental policy reversal
on immigration.
Japan has started talking aboutforeign workers as a strategic
asset.
That's a huge departure frompast thinking.
Tessa Sourceley (06:58):
Strategic asset.
Interesting framing.
Chase Stratton (07:00):
Isn't it?
And the numbers show it.
The number of foreign workershas actually quadrupled since
2008.
It hit 2.3 million in 2024.
Tessa Sourceley (07:07):
Quadrupled.
Okay.
Chase Stratton (07:09):
A key part of this is the 2019 specified
skilled worker visa, the SSWvisa.
It offers mid-skilled foreignnationals a clearer path to
permanent residency if they workin shortage industries.
It's a much more pragmaticapproach than, say, the old
temporary trainee programs.
Tessa Sourceley (07:23):
And what about upskilling the domestic
workforce?
Chase Stratton (07:26):
Right.
The government has also pledgeda trillion yen, that's over
five years, to promoteReskilling and help people move
between jobs more easily.
Tessa Sourceley (07:35):
A trillion yen sounds like a lot.
Is it working?
Chase Stratton (07:38):
Well, that's where we see a bit of an
implementation gap, perhaps,when you look at the practical
side.
While these big macro-levelreforms are happening, the
support at the local level foractually integrating foreign
workers, it's still prettylimited in many places.
Okay.
And for reskilling.
There's a structural barrier.
Remember how Japanese firmstraditionally focus on
(07:58):
company-specific OJT skills?
Tessa Sourceley (08:01):
Yeah, skills that aren't easily transferable.
Chase Stratton (08:03):
Exactly.
So unless companies also reformtheir organizational structures
and their salary systems,moving away from just seniority
reskilling alone won'tnecessarily lead to higher wages
or more job switching.
Many firms still use age limitsin hiring.
They still promote based ontenure.
So employees can be prettyskeptical about whether these
reskilling programs willactually benefit their careers.
Tessa Sourceley (08:24):
It sounds like pouring water into a leaky
bucket if the underlying systemsdon't change.
Chase Stratton (08:29):
That's a good way to put it.
You need to fix the bucket, notjust keep pouring more water
in.
Tessa Sourceley (08:33):
So if government efforts have this
implementation gap, Where doesthat leave the actual search for
talent?
This seems to be whereexecutive recruiters are
stepping in, maybe playing adifferent role than they used
to.
Chase Stratton (08:45):
Absolutely.
That's a key part of the storynow.
The executive search market inJapan is significant valued at
about 1.24 billion U.S.
dollars in 2024 and projectedto hit over 2 billion by 2031.
That's
Tessa Sourceley (08:59):
substantial growth.
Chase Stratton (09:00):
It is.
And it's critical because thesefirms specialize in reaching
what we call passive candidates.
Tessa Sourceley (09:06):
People who aren't actively job hunting.
Chase Stratton (09:07):
Precisely, top-tier professionals who are
probably doing well where theyare, not looking at job boards.
Given Japan's low workforcemobility, this hidden talent
pool is often best accessedthrough confidential searches
using deep professionalnetworks.
For really high-stakes criticalroles, the retained search
model works best.
That requires a really deeppartnership between the
(09:29):
recruiter and the clientcompany.
Tessa Sourceley (09:31):
But you said their role is evolving.
So beyond just finding thesepassive candidates, what else
are they doing?
It sounds like much more thanjust headhunting.
Chase Stratton (09:38):
It really is.
It makes you wonder, right, howdo you bridge all these gaps
we've talked about?
Cultural skills expectations.
Recruiters are increasinglyacting as cultural translators.
They help foreign candidatesunderstand the nuances of
Japanese companies.
And they help Japanesecompanies understand how to
attract and integrate foreigntalent.
Tessa Sourceley (09:57):
So practical help, too.
Chase Stratton (09:58):
Oh, yes.
Tailored services like resumessupport, interview preps
specifically for Japanesecontexts, visa guidance, even
tips on workplace etiquette.
They also spend time educatingJapanese companies on what
motivates experience ofbilingual professionals.
It's often not just about usingEnglish.
It's about long-term growth,autonomy, better work-life
(10:19):
balance.
Tessa Sourceley (10:20):
And preparing the candidates, too.
Chase Stratton (10:21):
Yes, preparing foreign candidates for the
realities.
Things like the seniority-basedhierarchies in Paikoi and the
importance of consensus-buildingbefore decisions.
Nima Washi.
Managing expectations is key.
Tessa Sourceley (10:32):
That makes sense.
What else?
Chase Stratton (10:34):
They're also advising companies on how to be
more flexible and realistic intheir hiring criteria to
actually get a competitive edge.
That might mean reevaluatingstrict age limits, which are
still quite common.
or considering candidatesoutside the big cities like
Tokyo, or adjusting salaryranges to actually meet market
expectations, not just whatthey've always paid.
Tessa Sourceley (10:55):
Helping them move from a wish list to a
realistic
Chase Stratton (10:58):
list.
Exactly.
Moving from a long list ofrigid must-haves to a more
practical, good-to-have list.
Tessa Sourceley (11:03):
And you mentioned DEI earlier,
diversity, equity, andinclusion.
How does that fit in?
Chase Stratton (11:08):
Well, what's really fascinating here is how
DEI is shifting from maybe anice-to-have to an absolute
economic imperative in Japan,purely because of the shrinking
workforce.
Tessa Sourceley (11:18):
Because they need all the talent they can
get.
Chase Stratton (11:20):
Precisely.
Recruiters are helpingcompanies reframe DEI as a
strategic competitive advantage.
They're proactively sourcingtalent from underutilized pools,
women, foreign professionals,people with disabilities, and
crucially, advising on how toimplement truly inclusive
cultures and flexible workarrangements.
Things like supporting paidchildcare leave for men or help
(11:41):
for employees caring for elderlyrelatives.
These are vital for attractingand retaining diverse talent
talent today.
Tessa Sourceley (11:47):
It sounds like they're almost becoming HR
consultants in a way.
Chase Stratton (11:51):
They're definitely moving into internal
talent consulting, too.
Companies are realizing thatreskilling existing employees is
often more cost effective andsustainable than constantly
trying to hire externally.
Tessa Sourceley (12:02):
Right.
You avoid recruitment costs andretain institutional knowledge.
Chase Stratton (12:05):
Exactly.
Studies show effectivereskilling can boost
productivity, maybe 6 to 12percent, and definitely improves
retention.
Replacing an employee, youremember, can cost up to 150
percent of their annual salary.
Right.
recruiters can help companiesconduct talent audits, identify
loyal employees with valuableknowledge who could be retrained
for those critical in-demandroles.
The key is ensuring reskillingis tied directly to real career
(12:30):
advancement opportunities.
They also leverage technology,of course, AI-powered research,
specialized databases to findcandidates efficiently and
provide data for realisticsalary benchmarks.
Tessa Sourceley (12:42):
So the real insight is they're not just
filling jobs.
They're becoming architects ofchange within these companies.
Chase Stratton (12:48):
That's a great way to put it.
They're bridging gaps,cultural, systemic, that
companies are really strugglingto bridge on their own in this
environment.
Tessa Sourceley (12:56):
Okay, this is a complex picture with some
innovative responses emerging.
So wrapping this up, what arethe most actionable
recommendations for both thecompanies struggling and the
recruiters trying to help?
What's the path forward?
Chase Stratton (13:07):
Well, for Japanese companies, I think the
big one is a fundamentalreevaluation of those
traditional labor practices.
They really need to think abouttransitioning from that
membership-based model we justDiscussed.
Tessa Sourceley (13:17):
Lifetime employment, seniority pay.
Chase Stratton (13:19):
Right.
Moving towards more of a jobbased system where compensation
is clearly linked to skills andperformance, not just how long
you've been there.
They also need to overhaultheir hiring processes.
Stop relying solely on hiringnew grads en masse.
They need to partner withrecruiters to access experienced
mid-career professionals, bothdomestic and foreign, and
(13:43):
embrace flexible work.
Tessa Sourceley (13:44):
And reskilling?
Chase Stratton (13:45):
Reskilling, yes, but with a clear purpose.
Dedicate real budget and timeto programs focused on those
in-demand skills and offer clearcareer paths linked to that
retraining.
Otherwise, employees won't buyin.
And finally, they need toprioritize building a strong
employer brand, one thatresonates with younger
generations looking for purposeand growth.
Tessa Sourceley (14:05):
Makes sense.
And for the executiverecruiters themselves.
Chase Stratton (14:07):
For recruiters, the mandate now is really to
embrace that consultativeretained model.
Focus on becoming strategicpartners, not just transactional
suppliers.
They absolutely have toleverage technology and data.
They need to be cultural andintegration partners, offering
support even after someone ishired to ensure it works out.
Tessa Sourceley (14:24):
So more long-term involvement.
Chase Stratton (14:26):
Definitely.
Championing DEI as an economicnecessity is vital, actively
sourcing diverse talent andeducating clients on the real
business benefits ofinclusivity.
And finally, expanding theirservices into internal mobility.
partnering with clients onthose talent audits, and helping
design effective reskillingprograms.
(14:46):
It's about holistic talentstrategy now.
Tessa Sourceley (14:49):
Right.
Well, this deep dive hascertainly shown us that Japan's
chronic talent shortage is farmore than just an HR issue.
It's a serious nationaleconomic risk already causing
significant business failures,especially for those smaller
companies.
It seems the path forwardreally requires a new kind of
collaboration between thegovernment, companies, and these
strategic partners likeexecutive recruiters.
Chase Stratton (15:11):
That's absolutely right.
Right.
Japan's ability to navigatethese demographic headwinds, to
turn them into maybe evenlong-term growth, it really
hinges on its willingness toleverage foreign talent, to
fundamentally reform thattraditional corporate culture,
and to invest strategically inits people.
The executive search industryfinds itself perhaps
unexpectedly right at theforefront of this vital
transformation.
Tessa Sourceley (15:41):
Something to think about.
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