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October 2012, Volume 19, Number 4

Japan, Korea

The 2.2 million foreigners living in Japan are about 1.7 percent of the 127 million residents of Japan. About 1.2 million are considered to be temporary foreign residents and 950,000 permanent residents. Of the permanent residents, about 400,000 are Koreans and Chinese in Japan at the end of World War II and their descendants who have not naturalized. Of the 535,000 "ordinary" permanent foreign residents, about 155,000 are Chinese and 115,000 are Brazilians of Japanese descent.

The Japanese government would like more highly skilled foreign workers, especially science and engineering professionals. However, Japanese firms are reluctant to hire foreign professionals, including those who graduated from Japanese universities, citing potentially high turnover and difficulty assessing foreigners.

About two-thirds of the foreign workers in Japan are low-skilled, including ethnic Japanese from Brazil, technical trainees from southeast Asian countries, and up to 100,000 unauthorized foreigners. Foreign students at Japanese universities are allowed to work up to 28 hours a week, although many work more hours. Technical trainees are a fixed cost to their Japanese employers for the three years they are in Japan, since the employer must pay them whether there is work to be done or not.

Economy. Japan's economy has been affected by the 2008-09 recession and the March 2011 earthquake and tsunami. The global recession reduced the demand for Japanese exports, while the earthquake interrupted power supplies and supply chains when the value of the yen was high, encouraging Japanese firms to accelerate investment abroad.

Most economic forecasts focus on a series of D-challenges, from demography (the shrinking labor force) to government budget deficits that are the highest among industrial countries. There were about 50 million Japanese between 15 and 64 in 1950, 75 million in 1975, and a peak 87 million in 1995. The number of working-age Japanese is expected to fall to 67 million in 2030 and to 50 million in 2050.

Japan's government in July 2012 announced a new economic strategy to offset deflation and encourage the creation of almost five million new jobs in renewable energy and biosciences and medicine. The report acknowledged that Japan's aging and shrinking population is a major impediment to growth, but did not call for more immigration, encouraging only more skilled foreign workers. The report sets targets for more births to Japanese women and for more women with children to work, but does not deal with the paucity of day-care centers.

In August 2012, the government won a doubling of the sales tax to raise money to reduce the country's public debt, which is over 200 percent of GDP, the highest among industrial countries.

Japan is experiencing deflation, which means prices fall as the high value of the yen reduces the cost of imports. One reason the Japanese government tolerates a high yen that reduces exports and encourages its firms to invest abroad is that a quarter of Japanese are retirees, and they benefit when their often fixed pensions go further in a deflationary environment (pensions have not been reduced as prices fall). Japan had its first trade deficit in decades in 2011.

Japanese firms are investing more abroad. Overseas mergers and acquisitions topped $84 billion in 2011, up ten-fold from $8.5 billion in 2001. Japanese firms, which have a reputation for careful and methodical reviews of foreign acquisitions, have taken steps to speed up their decision-making processes.

Some Japanese firms are losing engineers to their Chinese and Korean rivals, who sometimes pay more and offer faster promotion opportunities. In some cases, Japanese engineers take industrial secrets with them, prompting calls for Japanese firms to do more to protect intellectual property and to fast-track promising engineers so that they do not leave.

Japan first elected a non-Liberal Democratic party government in 2009. The governing Democratic Party has been unable to reverse two decades of economic stagnation, opening the door for the Japan Restoration Association headed by Osaka mayor Toru Hashimoto, a young ex-TV commentator who challenged unions of public sector workers to reduce the city's deficits.

Many Japanese believe that a relatively tight-knit political elite continues to make important decisions in the country, and that outsiders such as Hashimoto are needed to get Japan moving again. Hashimoto wants to replace Japan's centralized government and all-powerful bureaucracy with a more decentralized American-style government and elect the prime minister directly. Hashimoto appeals to youth who have found it very hard since the bubble economy collapsed in the early 1990s to gain a foothold in the labor market.

Korea. Korea employs foreign workers under the Employment Permit System, which admits foreigners who pass a Korean language test in their country of origin and are selected by Korean employers. Some 57,000 of these E-9 visas are available to foreign workers in 2012, up from 48,000 in 2011.

After four years and 10 months in Korea, foreign workers must return to their country of origin for at least six months before they can return to Korea as E-9 workers. If they are "exemplary" workers who have not left the employer to whom they were assigned, they can return to Korea after three months at home.

In August 2012, the Korean Labor Ministry announced that three-fourths of the foreign workers who reached their maximum time in Korea were "exemplary."

The Ministry of Employment and Labor in July 2012 announced that firms with 50 to 300 workers will not be allowed to hire more foreign workers with E-9 visas if they have laid off Korean workers. The number of E-9 visa holders rose from 52,000 in 2005 to 194,000 in 2011, and some jobless Koreans complained that employers preferred migrants. Employers are supposed to try to recruit Korean workers for at least 14 days before receiving permission to hire E-9 migrants.

The National Human Rights Commission of Korea commissioned a study released in October 2012 that found that 90 percent of foreign workers on Korean deep-sea fishing boats were verbally abused by their employers, and 40 percent were physically abused. Foreign crew members reported on average 14-hour days and half said they worked seven days a week for wages that averaged $1,000 a month. A sixth of foreign crew members reported having a contract in their language.

The study reported very high recruitment debts in migrant countries of origin. The maximum recruitment fee for Vietnamese migrants is supposed to be $2,700, but the average actual payment was $11,400. High recruitment debts and interest on them make foreign crew members reluctant to complain for fear of being fired.

There were 250,000 multi-ethnic families in Korea at the end of 2011, reflecting the tendency of rural Korean men to marry women from the Philippines and Vietnam. The government in August 2012 announced measures aimed at increasing multicultural understanding among Koreans and reducing prejudice against foreigners.

Some Korean college graduates complain that they cannot find jobs despite degrees from the three so-called SKY universities, Seoul National University, Korea University and Yonsei. Over 70 percent of Korean high-school graduates went to college in 2011, down from the record of almost 85 percent in 2008.

Hypermarkets, department stores that include supermarkets, are spreading in South Korea, as the country's multinationals known as chaebol seek growth. The five largest chaebol, Samsung, Hyundai Motor, SK, LG and Lotte, had sales equivalent to 55 percent of Korea's GDP in 2010. As hypermarkets expand, some small family-owned markets are pushing back against the almost 450 hypermarkets in mid-2012, accusing them of lowering prices to drive them out of business.