The first sectors to feel the pinch of worker shortages were nursing and elderly care. The problem soon spread to construction and delivery businesses, followed by taxi firms, forestry companies and train operators.  

Now, Japan's acute shortage of labor has spread to the government sector, with the Education Ministry in late January asking local authorities to estimate how many teachers they will be short of when the new academic year starts in April.

Early indications are not positive, with a survey conducted last year suggesting that 29 of the nation's 68 prefectures were already feeling the effects of teacher shortages.

The ministry launched a 500-million-yen (€3.1-million, $3.3-million) project last year to attract more university graduates to the teaching profession, but analysts say local governments, like the private sector, will struggle to fill vacancies when young people can shop around for better paying positions in the most popular cities.

And given that Japan's population is both aging and contracting, with fewer children being born and elderly people living longer thanks to modern medicine, the longer-term outlook would appear to be bleak.

Medical, nursing care, transport

Analysts say that there is little that can be done to stop the gradual decline in the number of Japanese, but they are pinning their faith on a sector in which the nation excels: technology.

"The medical and nursing care sectors have been most seriously affected by the shortages because demand is high as the population continues to age," said Hiroshi Yoshida, a professor in the Research Center for Aged Economy and Society at Tohoku University.

"After that, shortages are impacting the transport sector — truck and taxi drivers, public buses and trains — because the supply of young labor is very limited," he told DW.

"Wages are also not so high, while the trucking sector is also going to be affected by new laws that come into effect in 2024 and limit the amount of hours that drivers can work."

Referred to as the "2024 problem," a study by NK Logistics Research Institute and Consulting Inc estimates that driver shortages will mean that total transportation capacity will plummet by 34% by 2030, meaning that some 940 million tons of goods will not be delivered every year, The Asahi newspaper reported.

It is a similar story elsewhere, with a report by the Transport Ministry in 2021 indicating that the number of taxi drivers across the country had shrunk 40% from a peak in 2009.

Martin Schulz, chief policy economist for Fujitsu's Global Market Intelligence Unit, said successive governments have known about the looming labor crisis, but policies to encourage people to have more children and prop up the workforce have failed to have an impact.

"It has been a long-standing issue, of course, with governments pushing it down the line as other problems came up, most recently the coronavirus pandemic," he said.

Women, older staff in the workplace

"For some time, the country was able to manage because more women were coming into the labor market and old people were encouraged to stay longer on lower wages, but there was no way to avoid the fact that the core labor market, of people aged between 20 and 65, was shrinking," he said.

That situation was not unpopular with companies, however, as they were able to pad out their workforces with low-paid part-timers or older members of staff on less generous one-year rolling contracts, Schulz noted.

Now, however, there are too few additional women to take on, and the oldest employees are finally retiring.

And as a result, companies are short of staff, and their employees are demanding higher wages because they know they'll find other job if they leave their present company.

One solution that the Japanese government has attempted — albeit tentatively — has been to introduce easier immigration rules to enable foreign laborers to fill some of the gaps. In 2019, a system was introduced to allow limited numbers of skilled workers in sectors that were most acutely short of staff to enter for five years, while those classified as being "highly skilled" were given the chance to settle permanently in Japan.

Tokyo anticipated a rush of applicants and 345,000 arrivals in the first five years.

Disappointingly, the figure hovered around 3,000 arrivals a month for the first year, at which point entering the country became even more difficult because of the pandemic.

Undeterred, the government announced on Monday that it will add another four categories to the list of skilled workers, with more visas available to anyone with a background as bus or taxi driver, train operator or in the forestry and timber industries.

Yoshida is not convinced that immigration is the answer, however.

"Japan does not have a mature culture that is welcoming to foreign workers, and the language is also a problem," he said. "In addition, it may no longer be easy to attract foreign workers from other East Asian countries because those nations are also experiencing declining fertility rates."

Advanced technologies

The solution appears to be a greater uptake of advanced technologies, an area in which Japan remains a world leader, including automation, robotics and, most promisingly, AI, he said, which will both reduce the need for workers and cut companies' wage costs.

Schulz agrees, pointing out that generative AI is already bridging the language divide and evolving and improving all the time.

"Japan's population is shrinking at a rate equivalent to losing a city the size of Frankfurt every year," he said. "Filling positions has become an acute problem, but we are seeing tremendous changes here now. Robots are serving in many restaurants now, and there are no signs of any resistance to that technology being adopted," the economist pointed out.

"Generative AI is similarly becoming understood and accepted and is arguably exactly what an aging society requires."

Edited by: Srinivas Mazumdaru