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Japan’s Economic Future Depends on Embracing Foreign Labor

Tina TinaChouhanbyTina TinaChouhan
October 26, 2025
Japan's Economic Future Depends on Embracing Foreign Labor

Sanae Takaichi has made history as Japan’s first female Prime Minister, but her leadership is not a triumph for feminist or progressive values. Takaichi, a right-wing ultraconservative, bases her policies on traditional views regarding women’s roles and Japanese history and society overall. Her stances align with those of anti-immigrant conservatives and right-wing populists globally, as she defends ‘national identity and traditional values’ while underscoring the need for robust economic growth. However, immigration-restrictive policies may exacerbate Japan’s economic issues, leading to labor shortages and inflation. Japan is a warning sign for other developed nations facing demographic crises due to dwindling birth rates, having seen its population decrease for 16 consecutive years.

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Without a more pragmatic stance on immigration, Takaichi’s tenure could result in economic stagnation and decline. How did Takaichi ascend to the premiership? She was elected leader of the ruling Liberal Democratic Party (LDP) earlier this month, but her rise was momentarily stalled when the LDP’s junior coalition partner, the Komeito party, withdrew support amid a political funding scandal. The LDP holds minority status in both houses of Japan’s parliament and relies on coalition partners to govern. After lengthy negotiations, the right-wing Japan Innovation Party, known as Ishin, agreed to back Takaichi and her LDP-led government.

However, the coalition remains two seats short of a lower house majority, necessitating additional parliamentary support and making Takaichi’s minority government more vulnerable than its predecessors. Japan’s population peaked at roughly 128 million in 2008 and has declined to about 124 million today. Last year, the fertility rate hit a record low of 1.15, and projections suggest Japan’s population could fall to 87 million by 2070 and 63 million by 2100, with just half of the population of working age. The challenge is not just a shrinking population but also an ageing demographic, leading to increased pension and healthcare costs. Various professions, including teaching, healthcare, and caregiving, are already experiencing severe labor shortages.

Although past governments have recognized the declining population as a critical issue, little has been done to tackle it effectively. While some efforts have been made to bring in foreign workers, LDP governments have been reluctant to implement large-scale integration programs necessary for meaningful change. Consequently, these initiatives have seen only limited success. This year, Japan’s foreign-born population reached a record high of 3.6 million, about 3 percent of the total population, which is significantly lower than in many other developed nations. The rise in foreign residents has led to a record number of ‘foreign’ births in Japan, with mothers from China, the Philippines, and Brazil leading the statistics, somewhat balancing out the declining birth rates among Japanese parents.

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Japan’s tourism sector is thriving, having welcomed nearly 37 million visitors last year. However, the growing number of foreigners has triggered a rise in anti-immigrant sentiments and policies, such as those advocated by the far-right Sanseito party. In response, the LDP has shifted further to the right to retain votes from Sanseito and other populist factions, partly explaining Takaichi’s appeal to the conservative LDP base. While Takaichi does advocate for foreign workers in sectors experiencing labor shortages, her approach comes with stringent criteria, including proficiency in Japanese, training, and oversight. She is against the mass settlement of immigrants or the broad granting of political rights to foreign residents.

Although her policies lack detailed plans, she frames immigration as a potential threat to national unity that must be strictly managed. Globally, older populations are often more vulnerable to anti-immigrant narratives perpetuated by right-wing media and politicians, and Japan is no different. Politicians like Takaichi perceive electoral advantages in portraying immigration as a danger to social cohesion or cultural identity. Unfortunately, countries like Japan, which are in dire need of immigration, tend to resist it the most. Instead, many right-wing conservatives advocate for pro-natalist policies to encourage women from the dominant racial or ethnic groups to have more children, aiming to bolster population numbers and maintain cultural homogeneity.

Hungary serves as an example, where the nationalist government has implemented generous financial incentives for parents, although its birth rate has still declined since peaking above the European average in 2023. With Takaichi at the helm, Japan is unlikely to experience advancements in women’s rights, a significant increase in birth rates, or a rise in immigration. Thus, Japan’s demographic crisis is poised to continue and likely worsen in the foreseeable future.

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