October 31, 2003


Japan: the rising specter of unemployment (Hussain Khan, 10/31/03, Asia Times)

Higher labor costs, yen appreciation resulting in the outsourcing of production facilities and growing computerization all point to a long-term structural increase in Japan's jobless. Due to heavy losses in labor-intensive sectors, companies are planning further outsourcing of their production facilities to countries where labor costs are much lower.

It is difficult to describe how profound these changes are in Japanese society. [...]

The banks are not alone in their restructuring plans. Sanyo is emblematic of the new and unsettling Japan. In the electrical goods manufacturing sector, as a part of its effort to provide secure employment, Sanyo continued to produce white goods at its domestic plants. But with the white goods business unlikely to stop bleeding red ink in the immediate future, Sanyo has decided to downsize its operations in Hyogo Prefecture and another in Shiga prefecture. The Hyogo plant is to cease production of vacuum cleaners, massage chairs and all other products by year-end and focus on research and development. The Shiga plant is scheduled to stop making microwave ovens, washing machines and double-tub washing machines by the end of this fiscal year.

As a result, sales from domestic production are expected to account for about 20 percent of the firm's overall home appliance sales, down sharply from the current 60 percent. Sanyo intends to reduce employees at the two plants from the current 1,250 to around 900 by April 2004 through relocations to other divisions and transfers to subcontractors. The company plans to maintain its product lineup by outsourcing production at the two plants to outside firms and transferring it to overseas factories. [...]

The effect of computerization on employment cannot be neglected. On the second day of the Nikkei Global Management Forum, Scott McNealy, chairman and chief executive officer of US computer firm Sun Microsystems Inc, said information technology will bring about drastic changes in the corporate world. Since the spread of IT will render obsolete conventional ways of working, personnel ability and corporate activities, companies will have to adapt to the changes, for example, by reorganizing their employment structure, he said.

The Japanese economic miracle--built on the absurd notion that a developed nation could long endure as a mere assembly plant--has pretty much run its course. Now its core weaknesses--declining population, stifling of creative thinking and individuality, racism, centralized economic planning, lack of corporate transparency, etc.--come to the fore.

Posted by Orrin Judd at October 31, 2003 8:57 AM

A few years ago, I went to a lecture my McNealy in which he made about a jillion predictions about computers in business. It's a subject he ought to know something about. But every single one of his predictions was wrong.

Demographics is not so simple. If you have an aging population -- like the US or Japan -- then whatever your shortterm employment situation (down here and there), in the long run, you're short of labor.

In the US, 20 million people short by 2020, according to my labor adviser. I don't know what the figure would be for Japan, because its workforce mix is very different from ours and I haven't seen an analysis. But say, roughly, 10M.

Posted by: Harry Eagar at October 31, 2003 1:09 PM

Labor advisor? Is this the same guy as the steel advisor?

Seriously, while the demographics point towards a labor shortage, it will probably be most acute in terms of caring for the elderly. A frightening link, when one considers how the elderly are generally treated today (despite their wealth). What will it be like in 2025? If the choice becomes SS taxes at 10% (really 20%) and the "Logan's Run" solution at age 72-75, who among us doubts that it will be up for discussion.

Europe and Japan will face these decisions in the next 5-10 years, barring dramatic changes in their policies and economies.

Posted by: jim hamlen at October 31, 2003 2:22 PM


The point is we'll import any workers we need and they'll be Americans. Japan won't and any it does bring in will never be "Japanese". More importantly, as a people they're incapable of the kind of innovation that's transforming us into an information/entertainment type economy. When manufacturing is gone what's left to Japan?

Posted by: OJ at October 31, 2003 2:35 PM

The Japanese can change if they feel the need. They were able to make the decision to Westernise back in the 1860's fairly successfully and peacefully.

And anyone who's played a video game knows the Japanese can be pretty darned good at innovation and entertainment.

Posted by: M Ali Choudhury at November 1, 2003 6:59 AM