SINGAPORE – Going back and forth frequently between Japan and other Asian countries, particularly Southeast Asia and India, gives you a glimpse into the big opportunities out there. If I had spent my time either entirely in Asia or in Japan, I might have only been aware of the challenges for each and little hope for the future. But living alternately in Japan and the rest of Asia shows you only the opportunities.
In the first place, many of the challenges for Japan and other Asian nations are mutually complementary. They need each other to resolve those challenges, many of which can also be resolved simultaneously. And in that process, there is a good chance that assets that may not bring any value if they remain disconnected will be transformed into highly valuable assets if Japan and the Asian countries join hands. The following are some examples.
The first is Asia’s young labor force. Asian countries with populations of more than 100 million, such as India, Indonesia and the Philippines, are rich in young manpower. Their demographic pyramid is the opposite of Japan’s, meaning their challenges are complementary. People in Japan may feel envious of other nations’ large youth populations, but these populous Asian nations face the serious challenge of creating enough jobs for their young people.
On the other hand, Japan’s population has begun to decrease by roughly 400,000 people a year — and is forecast to shrink by 1 million annually at the peak of its population decline. Social applications of technologies such as artificial intelligence and robotics may be able to alleviate the impact of the falling population to some extent. Some industries, however, still require significant manpower, and it is also vital to increase the youth population in order to sustain the nation’s economy and fiscal health.
As the region’s major economic powerhouse, there is vast room for Japan to accept workers from Asia’s vibrant young labor force. It is not just Japan, however, that wants young Asian workers. China and South Korea, as well as European countries also want to attract talented workers in massive numbers. If Japan lags behind in developing a system to accept Asian workers, it will lose out to other nations.
The vast numbers of uninhabited houses in Japan — an estimated 10 million already — due to the aging and shrinking population could be valuable assets. Those vacant properties include traditional Japanese houses located in the nation’s beautiful natural countryside. Businesses have been launched to convert those properties into share houses, hotels or restaurants. They may also be redeveloped as vacation homes accessible to wealthy Asian people at reasonable prices.
Also promising will be projects to turn abandoned school buildings into international schools and share houses for foreigners who are expected to settle in this country in growing numbers. Shrines, temples and castles that become deserted due to a lack of people to inherit the properties or financial difficulties, could be converted into unique tourism venues. Asian businesses may view them as promising assets.
Then there is the presence of small and medium-sized enterprises. Many SMEs in Japan suffer from low productivity, a shrinking domestic market, and a shortage of successors for their businesses. Mergers and acquisitions brokers in Japan have extensive lists of SMEs for sale, but the owners of such businesses struggle to find good matches because they only look to domestic companies as potential buyers. Therefore, many SMEs end up closing down despite their excellent technologies and patents.
On the other hand, many Southeast Asian countries and India, even though they have flourishing information technology sectors, are slow in establishing manufacturing industries that can facilitate economic growth and stable job creation. Many Asian companies have great potential to grow with the transfer of Japanese technological knowledge and production processes.
The prospect of advancing into the wider Asian market might help Japanese SMEs attract young successors to carry on their businesses. Unless their relocation to Asia is expedited, more Japanese SMEs will end up shutting down, while the development of manufacturing industries in Asia will falter.
Here again, Japan has to compete with China and Europe. If Japan continues to sit idle, Chinese companies will support the manufacturing sectors of other Asian nations and possibly bring them into their sphere of influence.
European firms, especially the powerful SMEs in Germany, are also advancing in growing numbers in Asia. The likely result will be a Chinese and German domination of Asia’s manufacturing industries. Meanwhile, SMEs in Japan will go down a path of quiet decline.
In a sense, Japan is the world’s pioneer in tackling the problems it currently faces. If the nation can successfully resolve them, it could potentially export its solutions to the rest of the world.
Kotaro Tamura, a former Upper House member and parliamentary secretary in charge of economic and fiscal policy, is an Asia fellow at the Milken Institute and serves as an adjunct professor at National University of Singapore.