How Japan’s trade partnership with India can benefit both of them

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Japan’s efforts to regain its technological expertise in IT industry is proving to be difficult with its current aging population and labor shortage. The difficulty to sustain is greatly felt especially in the IT companies that are located outside of Tokyo or any other metropolitan cities. Those companies are facing the crunch of worsening technical skills shortage that may hinder technological advancements.

According to thediplomat, if labor shortage is left unchecked, Japan could face deficit of more than half a million engineers by 2030. And, according to Asahi, the overall workforce estimate for 2040 is projected to drop by 12.60 million to 54.60 million from the current number of 67.20 million.

In order to get back on track with the current global leaders in IT industry and compete with them, human resources must be increased by several folds to alleviate labor shortage and work force must be diversified to loosen Japanese rigid corporate culture to gain flexibility and regain it’s technological edge.

Japanese Companies

Mercari, a Japanese e-commerce giant is already in works to fix labor shortage by diversifying its workforce. They want to focus on hiring quality engineers over quantity to kickstart significant changes to their corporate culture. The company’s main agenda is to hire foreigners directly from highly reputed universities across the globe. According to thediplomat, out of the 100 newest recruits in 2018, 44 were foreign nationals – with 32 people coming from India, 3 from Taiwan, 2 from the United States, and 2 from China.

While Mercari may be able to spend comfortably on hiring foreigners and support them with housing, work-visa, and language barriers, it is entirely a different case with smaller companies located in the countryside. Since majority of foreigners are concentrated in cities like Tokyo, until new visa regulation (thediplomat) comes in effect which encourages dissipation of foreigners working in Tokyo to other areas of Japan, these smaller companies could continue to face difficulties with labor shortage.

These companies are in immediate requirement of engineers who can sustain them and improve their corporate profile with a hope to expand from rural to countrywide, and eventually out of Japan. thediplomat also pointed out that an IT company in Matsue city, Shimane prefecture have began providing IT internships for Indians in 2016. A first for the company to hire foreigners to cope with aging demography.

METI

Ministry of Trade, Economics, and Industry (METI) can play a helpful role in fighting against labor shortage for such companies and also strengthen Japan’s relations with other Asian and non-Asian countries to increase its presence and project its influence through transfer of technology in exchange for reliable human resources.

For example, METI has made an agreement with India and expressed their interests by saying that “As global society enters an IoT era in which integration of the hardware and software represents a key direction for growth, Japan and India strengths in the digital field are mutually complementary and development of new partnerships from this viewpoint will be highly advantageous for the two sides”.

Some of the highlights of this partnership are as follows:

  • Japan-India Startup Initiative
  • Collaboration between SMEs and large companies
  • Human resources expertise in digital
  • Cooperation in research and development
  • Next-generation networks such as Cooperation in cybersecurity

Softbank’s Push

According to economictimes, Softbank has invested nearly $10 billion in Indian startups, one of which is Paytm. Not only Paytm reached unicorn stage, but it also co-developed one of the Japan’s most popular finance apps, PayPay.

The chart above shows that PayPay has already exceeded two million users and has a growing trend. PayPay, a solid example of Japan-India collaboration, is on its way to diversifying digitization and Japanese companies like Softbank are forcing their way out of increasingly deficit workforce by providing support to foreign startups while exchanging technology and human resources in Japan.

SoftBank is also backing India’s largest hotel chain rental OYO Rooms to make it synonymous with cheap and affordable hospitality option with greater flexibility and availability for everyone in Japan.

According to techcrunch, Softbank and OYO joint venture comes after Softbank led OYO’s $1 billion round in 2018 with its vision fund, resulting in OYO to be established in Japan.

tophotel

Tophotel also mentioned the roadmap of 85 hotel projects that are in the pipeline to be built in various locations across Japan.

The monthly active users of OYO in India has exceeded 10 million. Its popularity has risen as result of its presence in over 600 Indian cities. If this growth is any indication of popularity, OYO can be expected to become a popular tool for rentals for the masses in Japan as well. Considering OYO’s expertise in marketing and Softbank’s knowledge of Japan, this could turn out to be another successful collaboration between Japanese and Indian companies, adding hopes to further partnerships with stronger ties to improve trade.

Such collaborations allows Japan to reopen itself and appeal as an adaptable market for foreign companies and could well be the way to fight the aging issues.

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