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Japan: Shipbuilders rejecting orders amid labor shortage

The depreciation of the yen is boosting demand in industries like shipbuilding, where companies are scrambling to hire enough workers, especially in areas where the number of working-age individuals is declining.

The number of people in Japan aged 15 to 64 has steadily declined since the mid-1990s, falling below 80 million, or about 62 percent of the total population, as of October 2013.

Should the trend continue, the ratio could drop to just over 50 percent by 2060 — a level where economic growth can no longer be expected, experts say.

Sanwa Dock Co., a ship repair company with a workforce of around 350 on Innoshima Island in Onomichi, Hiroshima Prefecture, is now busy meeting orders it won — as well as orders other dockyards could not accept due to a labor shortage.

“We began to hear at the end of last year about delays in work at shipyards unable to secure enough workers,” said Isamu Teranishi, the company’s president.

Until a few years ago, many Japanese shipbuilders were facing financial difficulties because the strong yen hurt their competitiveness against Chinese and South Korean rivals.

But the situation has changed drastically due to the aggressive monetary easing pursued since April 2013 by the Bank of Japan. The weaker yen, which has since dropped by about a third in value against the U.S. dollar, has contributed to a sharp increase in orders from Japanese shipbuilders and other companies exposed to global competition.

Yet many companies are struggling to take advantage of the turnaround because they cut personnel when times were bad. Companies short of full-time employees in particular are finding it hard to accept orders.

And the problem isn’t limited to companies exposed to currency exchange rates.

Domestic construction companies, too, are scrambling for workers, given the increased orders ahead of the 2020 Summer Olympic Games in Tokyo and ongoing reconstruction work in Tohoku.

“Skilled workers go to Tohoku and Tokyo for higher wages,” said one shipbuilding industry official.

In the center of Kochi city, Shikoku, a library is under construction on the grounds of an elementary school that closed due to a lack of pupils. The work was delayed by about six months due to a shortage of laborers and higher material prices, which boosted the project cost by ¥1.6 billion from the initially budgeted ¥14.2 billion.

After raising the estimated labor costs, the Kochi Prefectural Government had to hold another round of bidding because the initial tender in November last year received no acceptable bid.

Kochi Prefecture is home to an aging population. The number of people in the productive 15-64 age bracket has plummeted nearly 20 percent over the past decade. Job opportunities in the area have increased lately, but that is because “job seekers have been decreasing rather than offers increasing,” said a prefectural government labor official.

Labor shortages have become noticeable nationwide, affecting companies in an expanding range of industries.

In the first nine months of this year, 227 companies went bankrupt as a result of labor shortages, according to credit research agency Tokyo Shoko Research.

And such business failures are spreading from the construction industry to retailers and restaurants, it said.

Local governments and businesses are trying to cope.

For example, the Kochi Prefectural Government has launched a campaign to attract people from other prefectures. In 2013, the number of people who relocated to Kochi from other prefectures doubled from the previous year to 468, a trend attributed to seminars held by the local government around Japan.

Shipbuilders in Hiroshima Prefecture operate a job training school jointly with local governments, while Sanwa Dock decided to hire Vietnamese engineers. The central government also encourages shipbuilders to hire foreign workers.

But it is unclear whether these and other programs will prove effective in alleviating the worsening labor shortage.
Source: Japan Times

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