What Role Do Low- Skilled Migrants Play in the Japanese Labor Markets?

ABS44178 5 ABS56810.1177/0002764212441785IguchiAmerican Behavioral Scientist Articles What Role Do Low- Skilled Migrants Play in the Japanese Labor Markets? American Behavioral Scientist 56(8) 1029 1057 2012 SAGE Publications Reprints and permission: http://www. sagepub.com/journalspermissions.nav DOI: 10.1177/0002764212441785 http://abs.sagepub.com Yasushi Iguchi 1 Abstract The author explores trends of low-skilled migrant labor in Japan before as well as after the global economic crisis, reviews the development of migration policies especially related to low-skilled migrants, and examines new empirical findings and draws some implications for migration policy reform in Japan. In the empirical analysis, the author stresses the effects of production fragmentation on low-skilled labor, the effects of the declining youth population on mismatches in the labor markets, and those of employment strategies by enterprises on the employment of nationals as well as foreigners at the local level. Finally, the author insists on the necessity for Japan to strengthen integration policy at the local level, in addition to immigration control policy at the national level, within the context of developing economic integration in the East Asian region. Keywords low-skilled migration, fertility declines, integration This article aims (a) to identify the trends of low-skilled migrant labor in Japan before as well as after the global economic crisis; (b) to review the development of migration policies, including both immigration policy and integration policy, related to lowskilled migrants; and (c) to examine new empirical findings and draw some implications for migration policy and labor market policy reform in Japan. 1 Kwansei Gakuin University, Nishinomiya, Japan Corresponding Author: Yasushi Iguchi, School of Economics, Kwansei Gakuin University, 1-155 Uegahara-Ichiban-cho, Nishinomiya, Hyogo-ken, 662-8501, Japan Email: iguchi@kwansei.ac.jp

1030 American Behavioral Scientist 56(8) In this discussion, I focus first on the effects of changing production fragmentation and agglomeration within East Asia on local economies and labor markets in Japan, especially after the global economic crisis. 1 There is a growing risk that local production and employment will lose their presence in Japan and move overseas under the pressure of the evaluation of the yen. The yen is evaluated not just vis-à-vis the U.S. dollar or the euro but against currencies in East Asian countries, which are promising emerging markets for Japan. Second, it is necessary to take into consideration difficulties arising from mismatches in local labor markets, especially as a result of the declining youth population and growing atypical employment, which is generally unstable, standardized, and low paid. 2 In the labor markets for high school graduates, young people try as much as possible to go to universities in large cities instead of getting low-paid jobs in their home cities. Third, because of growing difficulties in local production and employment, there is an increasing need for local economies and communities to realize sustainable development by assuring the availability of an increasing population of citizens as well as foreigners with their families. Japanese Brazilians seem to be filling such needs at the local level in cities with some industrial agglomeration because they are able to get better-paid jobs in manufacturing. It is foreign trainees and technical intern trainees who seem to be filling the low-paid jobs, especially in the textile, food, and agriculture sectors or in very small companies, because their workplace is fixed under the rotation principle of the foreign traineeship program. In addition, part-time workers, such as foreign students, who are learning the Japanese language or studying at universities and colleges, may be meeting the needs for atypical employment, especially in the service sector. However, the relationship between (a) production fragmentation in East Asia, (b) difficulties in local development as well as mismatches in local labor markets with declining youth population, and (c) the growth of different types of low-skilled migrant labor have not been clearly perceived by policy makers or clarified by theoretical consideration and empirical findings. To fill this gap, this article attempts to explore such mechanisms, to examine policy developments, and to formulate future tasks of public policies at the national and local levels in the context of regional economic integration. Global Economic Crisis and Labor Market Outcomes in Japan Since the global economic crisis began in the United States in September 2008, employment has been in crisis in many developed economies, including Japan. High unemployment rates persist in Europe as well as in the United States, even 3 years after the outbreak of the global economic crisis. Although Japan experienced positive growth for four consecutive quarters in 2010, Japan saw further evaluation of the yen against almost all other currencies, despite the great earthquake in East Japan and the disaster in the first Fukushima nuclear plant in March 2011.

Iguchi 1031 Table 1. Employment According to Employment Contract in Japan Since 2002 Category 2002 2003 2004 2005 2006 2007 2008 2009 January 2010 April 2010 Employee 5,337 5,343 5,372 5,407 5,481 5,561 5,539 5,478 5,450 5,453 Employee, excluding 4,940 4,948 4,975 5,007 5,088 5,174 5,159 5,102 5,071 5,083 executive Regular staff 3,489 3,444 3,410 3,374 3,411 3,441 3,399 3,380 3,363 3,339 Nonregular staff 1,451 1,504 1,564 1,633 1,677 1,732 1,760 1,721 1,708 1,743 Part-time worker, arbeit 1,053 1,089 1,096 1,120 1,125 1,164 1,152 1,153 1,150 1,184 (temporary worker) Part-time worker 718 748 763 780 792 822 821 814 819 837 Arbeit (temporary 336 342 333 340 333 342 331 339 331 347 worker) Dispatched worker from 43 50 85 106 128 133 140 108 98 90 temporary labor agency Contract employee or 230 236 255 278 283 298 320 321 324 332 entrusted employee Other 125 129 128 129 141 137 148 139 136 137 Regular staff (%) 70.6 69.6 68.6 67.4 67 66.5 65.9 66.3 66.3 65.7 Nonregular staff (%) 29.4 30.4 31.4 32.6 33 33.5 34.1 33.7 33.7 34.3 Source: Statistical Office, Labor Force Survey. Note: Units in 10,000s. It is noteworthy that there exist strong downward pressures on labor costs in Japan. As a result, wages are still in decline and regular employment does not grow, whereas atypical employment has started to recover. The growth of manufacturing production has been a contributing factor to the reactivation of the Japanese economy since 2002; employment in the manufacturing sector started to increase in 2006 but stopped in 2007 (see Table 1). In December 2008, as Japanese international trade declined dramatically, by almost 30%, export industries were the hardest hit, especially the automobile sector. Employment losses in the manufacturing sector were concentrated among atypical employees, such as dispatched and subcontracting workers, among whom foreign workers, especially Brazilian workers of Japanese descent, were highly represented (see Figure 1) (Iguchi, 2009). Atypical employees have been increasing in numbers in the manufacturing sector in particular since 2002 (see Table 2). Employment loss for dispatched or subcontracting workers was often accompanied by the loss of their accommodation, because many of them lived in accommodation provided by the dispatching or subcontracting company. These workers were often unprotected by safety nets, such as unemployment benefits or sickness insurance, because they were not eligible as a result of their fixed-term contracts, which last for only 2 months. The unemployment rate soared to 5.5% and the number of unemployed reached 3.4 million in April 2009 (Figures 2 and 3). The number of those unemployed as a result of dismissals has been rapidly growing over one million.

1032 American Behavioral Scientist 56(8) Figure 1. Employment in manufacturing sector Note: Units in 10,000s. Source: Statistical Office, Labor Force Survey (2011). Impacts of the Economic Crisis on Foreign Workers and Their Families in Japan The economic slowdown has been observable since the end of 2007. However, it was not until September 2008, after the collapse of Lehman Brothers shocked Japan, that the credit squeeze led to the dismissals of Indian information technology (IT) specialists in Tokyo. There have been several observations at the local level that the employment situation of migrants, as well as their social situation, has been severely damaged by the crisis. In several cities with a high density of foreign citizens, between 30% and 70% of foreign workers are estimated to have lost jobs by the end of April 2009. These workers were mainly Japanese Brazilians, whose registration at municipalities declined by almost 50,000 between the end of 2008 and the end of 2009. In the same cities, those foreigners who could find jobs at the Public Employment Office were as few as 5% of total foreign job seekers (Iguchi, 2011). The instability of the income of foreign households led to a decline in the school attendance of foreign children. The number of foreign pupils attending foreign schools declined an estimated 30% to 50% by March 2009. Some foreign schools went into bankruptcy, and some of them were reconstructed or restructured.

Iguchi 1033 Table 2. Employment According to Sector in Japan Since 2002 Sector 2002 2003 2004 2005 2006 2007 2008 2009 Total 6,330 6,316 6,329 6,356 6,382 6,412 6,385 6,282 Agriculture and forestry 268 266 264 259 250 251 245 242 Fisheries 28 27 22 23 22 21 23 20 Mining 5 5 4 3 3 4 3 3 Construction 618 604 584 568 559 552 537 517 Manufacturing 1,202 1,178 1,150 1,142 1,161 1,165 1,144 1,073 Electricity, gas, heat supply 34 32 31 35 36 33 32 34 and water Information and 158 163 171 175 180 192 189 193 communications Transport and postal 327 335 326 320 328 330 342 348 activities Wholesale and retail trade 1,108 1,095 1,085 1,084 1,075 1,077 1,067 1,055 Finance and insurance 169 161 159 157 155 155 164 165 Real estate and goods rental 101 97 98 101 107 113 111 110 and leasing Scientific research 204 203 205 207 204 198 200 195 professional and technical services Accommodations, eating and 396 388 385 381 374 380 373 380 drinking services Living-related and personal 243 240 239 238 242 233 236 241 services and amusement services Education, learning support 277 275 279 281 282 279 283 287 Medical, health care, and 474 502 531 553 571 579 598 621 welfare Compound services 76 79 81 76 75 71 56 52 Services 374 379 413 447 467 478 485 463 Source: Statistical Office, Labor Force Survey. Note: Units in 10,000s. According to the Foreigners Registration, the number of Brazilians peaked in November or December 2008 and started to decline thereafter. Some of them left Japan with reentry permits. In March 2009, a new subsidy for the airfares of returning foreign workers of Japanese descent and their families was instated. If they were dismissed in Japan and wanted to go back to their home countries, each worker received 300,000 yen and an additional 200,000 yen for each family member. However, this subsidy has met with several criticisms. Beneficiaries of the subsidy cannot return to Japan with the same status of residence for the time being. The Ministry of Health, Labor, and Welfare announced in May 2009 that this meant

1034 American Behavioral Scientist 56(8) Figure 2. Employment (rate) in comparison with the same month in previous year Note: Units in 10,000s. Source: Statistical Office, Labor Force Survey. Figure 3. Unemployment (rate) in comparison with the same month in the previous year Note: Units in 10,000s. Source: Statistical Office, Labor Force Survey. almost three years (Ministry of Health, Labor and Welfare, 2009). The number of foreign workers and their families who got this subsidy amounted to more than 20,000 by May 2010. The decline of registered Brazilians after the crisis was the biggest, according to the registration statistics. In some neighborhoods, community businesses run by Brazilians often suffered great losses, and some Brazilian communities were dissolving altogether. Nevertheless, the numbers of Chinese, Filipino, and Vietnamese have been steadily growing in several cities, which reflect the steady inflow of foreign trainees and technical intern trainees. Naturally, the global economic crisis affected the operation of foreign traineeship programs. By the end of April 2008, approximately 2,400 trainees had left Japan because of the interruption of their contracts. This has created additional problems because foreign trainees often owe much debt at home. In addition, approximately 410 cases of misconduct (i.e., violation of immigration laws or

Iguchi 1035 labor laws by accepting organizations as well as the infringement of human rights of trainees, etc.) were found in 2009. To prevent the abuse of this system and to protect trainees, labor laws have been applied to all trainees who have received on-the-job training since July 2010. Long-Term Trend of Foreign Inhabitants and Workers in Japan To discuss the long-term trend of migrants in Japan in comparison with U.S. immigration data, it is desirable to start with the distinction between temporary and permanent residents in Japan. There are two categories of permanent residents. One category is that of special permanent resident: individuals who had had Japanese nationality before the San Francisco Peace Treaty took effect. These individuals are mainly Koreans and Chinese as well as those who came from Taiwan. Another category is that of ordinary permanent resident: an individual who applied for and obtained permanent resident status on the basis of Article 22 of the Immigration Control and Refugees Recognition Act. Article 22 of the act stipulates general conditions for foreigners applying for permanent resident status. Detailed conditions are written in the guidelines to the article. In principle, application for permanent resident status is possible only when foreigners have been residing in Japan for at least 10 years; however, there are some privileged cases where foreigners can apply within 5 years. These cases include highly talented scientists, entrepreneurs, spouses of Japanese citizens, and so on. The statistics show the trends of the long-term stay of foreigners. Whereas special permanent residents are declining in number because of death or naturalization, ordinary permanent residents are growing in number, especially in the case of the Chinese, Brazilians, and Filipinos (see Table 3). It is remarkable that almost 43% of the foreigners legally residing in Japan already have permanent resident status, and their number has been constantly growing by 40,000 per year, even during the economic recession. However, there have been no systematic measures taken to integrate these permanent residents by giving them language lessons, civic education, or orientation, as has been the case in the traditional immigrant receiving countries, such as the United States and various European countries (Organization for Economic Cooperation and Development, 2010). At this point, it will be helpful to estimate the numbers of foreign workers in Japan. The Reporting System of Foreign Employees, based on the Employment Countermeasures Law of the Ministry of Health, Labor, and Welfare, obliges employers to report foreign workers when they hire and fire them. However, the system does not account for all the foreigners employed in Japan, because the obligation was introduced as late as October 2007. Therefore, the estimate of foreign workers comes from a combination of several statistics, excluding those who are special permanent residents. The result is presented in Table 4.

1036 American Behavioral Scientist 56(8) Table 3. Foreign Residents With Temporary or Permanent Status in Japan Status 2000 2002 2004 2006 2008 2009 Total 1,686,444 1,851,758 1,973,747 1,247,398 2,217,426 2,186,121 Temporary residents 1,028,839 1,137,983 1,195,162 2,084,919 1,305,065 1,243,084 Permanent residents 657,605 713775 778,585 837,521 912,361 943,037 Ordinary permanent 145,336 223,875 312,964 394,477 492,056 533,472 residents (newcomers) China 70,599 48,809 96,647 117,329 142,469 156,295 Brazil 37,121 31,955 52,581 78,523 110,267 116,228 Philippines 32,796 20,933 47,407 60,225 75,806 84,407 Korea 31,203 9,062 42,967 47,629 53,106 56,171 Peru 13,975 7,496 20,401 25,132 29,976 31,711 Others 38,181 27,082 52,968 65,589 80,432 90,660 Special permanent residents (not newcomers) a 512,269 489,900 465,619 443,044 420,305 409,565 Source: Statistical Yearbook on Foreigner s Registration. a Mainly Koreans as well as Chinese whose ancestors lost Japanese nationality after the San Francisco Peace Treaty in 1952. It is surprising that those foreigners who have the status of residents for the purpose of working represent only 20% of foreign workers in Japan. In addition, technical intern trainees, who possessed a status of designated activities, and students with permission for nondesignated activities together amounted to almost the same number as those who have a status of residence for the purpose of working. Japanese descendants have traditionally been the largest group in this table, but their numbers may have declined significantly since 2009 because of the employment crisis. Overstaying foreigners have substantially declined because of administrative efforts to reduce overstay by half from 2005 to 2009. This figure also reflects the issuance of a special permission to stay by the Minister of Justice, which may be issued in the process of deportation when there are humanitarian considerations, as indicated in the guidelines attached to Article 25 of the Immigration Control and Refugees Recognition Act. The estimate also reflects the fact that every day, there are new foreigners who obtain permanent resident status. Many of them come from the category of Japanese descendants. If foreigners would like to build a house in Japan and get loans from banks, they tend to think about applying for permanent resident status. This is a difficult number to estimate. Based on such estimates, however, the number of foreign workers without special permanent resident status amounted to 920,000 in 2009 (excluding trainees who were not covered by labor laws until July 2010). In the next section, I classify foreign workers according to skill categories and focus on lowskilled migrants.

Iguchi 1037 Table 4. Revised Estimates of Foreign Workers From 1990 to 2009 Category 1990 1995 2000 2005 2007 2008 2009 Residence for working 67,983 125,726 154,748 180,465 193,785 211,535 212,896 purpose Highly skilled 43,823 64,672 89,552 128,977 156,791 172,600 172,900 With foreigner s 24,110 23,324 65,196 51,488 36,994 38,894 39,996 specific skill Designated activities 3,260 6,558 29,749 87,324 104,488 121,863 130,636 Part-time work of 10,935 32,366 59,435 96,959 104,671 99,485 106,588 students Workers of Japanese 71,803 193,748 220,458 239,259 241,325 229,569 202,101 descent Overstaying foreigners 106,497 284,744 233,187 193,745 149,785 113,072 91,778 Nondesignated Unknown Unknown Unknown Unknown Unknown Unknown Unknown activities Workers with 17,412 39,154 113,899 143,184 160,212 173,696 ordinary permanent resident status Foreign workers 260,000 + α 620,000 + α 750,000 + α 910,000 + α 930,000 + α 930,000 + α 920,000 + α without special permanent resident status Total employed foreign 1,075,317 1,362,371 1,686,444 2,048,919 2,159,973 2,217,426 2,186,121 residents % of total population 0.87 1.08 1.33 1.57 1.69 1.74 Source: Author. Note: Table excludes special permanent residents and trainees, who were not regarded as workers according to the Labor Standard Law until June 2010. Low-Skilled Foreigners in the Labor Markets: Descriptive and Historical Aspects Government Principle on So-Called Unskilled Labor The ministers of labor have repeatedly made statements in cabinet meetings and obtained cabinet consent on the ban on foreign labor since the late 1960s. In the middle of the 1960s, the Japanese labor market had allegedly reached the turning point of the labor market, according to A. W. Louis s two-sector theory. In this view, additional labor supply was not possible if higher wages were not paid. There were proposals to accept foreign workers, especially nurses, as trainees, although the government of Japan maintained the principle not to accept foreign (unskilled) labor. It can be argued that Japan could still expect a continuous increase in its labor force at that time, whereas some European countries, especially Germany, were already faced with a shrinking labor force. This state of affairs was brought about partly because elderly people were incapable of working as a result of injuries incurred during the Second World War.

1038 American Behavioral Scientist 56(8) The government revised the principle of accepting foreign workers around 1988 on the basis of the cabinet decision to instate the Economic Plan and the Basic Employment Measures Plan. It insisted that Japan should actively accept foreigners with technical skills (formerly worded as much as possible ), but the acceptance of so-called unskilled labor should be carefully examined. This principle created a dichotomy. Namely, there seemed to be only two categories of workers: foreigners with knowledge and technology and so-called unskilled labor. However, the distinction between the two is not always clear and is sometimes confusing. The rationale of Japan to close its labor market in principle to unskilled foreigners has been explained as follows: (a) Unskilled foreigners entry may be damaging to the labor market of seniors; (b) they may create a double structure in the labor market, hindering the improvement of working conditions and changes in industrial structure; (c) they may become easily unemployed during a recession; (d) they may entail more social costs (such as education, medical care, welfare, housing, etc.); and (e) they may bring about brain waste and stress for foreigners themselves (Iguchi, 1997). It is also important to remember that Japanese foreign direct investment directly created almost 2.7 million jobs in 2008, especially in developing countries in Asia. There seemed to be a policy model that assumed that unskilled foreigners should get jobs in developing countries by creating employment there rather than get jobs as migrant workers in a developed country. Recently, the legal basis of cabinet decisions has been altered from what it was in the era of the coalition government (the Liberal Democratic Party and the Komei Party) to that of a government mainly run by the Liberal Democratic Party and the New National Party since September 2009. The New Growth Strategy in December 2009 and June 2010 did not fully establish any principles on the acceptance of foreign labor or any concrete measures for foreigners in Japan, with the exception of the acceptance of highly skilled laborers and foreign students. In September 2010, the Cabinet Office created only a guideline on long-term resident foreigners of Japanese descent. In any case, the skill level of foreigners has been a key factor in discussing the acceptance of foreigners. Actual Composition of Foreign Labor According to Skill To clarify the actual composition of foreign workers according to skill, I should classify foreigners into several groups. According to the Immigration Control and Refugee Recognition Act, there are 17 categories of status of residence with the objective of working. Given these categories, I may say that status of residence does correspond with the skill of foreigners. University graduates or their equivalent: Highly skilled workers. Highly skilled foreigners with a status of residence fall into the following categories: professor, artist, journalist, investor or manager, legal or accountant service, medical service, researcher, instructor, engineer, specialist in humanities, and intracorporate transferees. Normally, a classification of high skill is determined by activities that necessitate high-level knowledge acquired through university education or practical knowledge of at least 10

Iguchi 1039 years after finishing a compulsory junior high school education. The definition of highly skilled was widened in the case of IT specialists, when national IT qualifications were mutually recognized in the late 1990s by several Asian countries, including Japan, India, Singapore, and Vietnam, as the result of global competition for highly skilled workers. Entertainer and skilled labor: Foreigners specific skills. It is important to note that entertainer and skilled labor are classified as foreigners with a skill specific to foreigners. The skills specific to foreigners are difficult to obtain from the domestic labor market, and it is considered impossible for native Japanese to acquire these skills. The skills specific to foreigners stem mainly from cultural differences between Japan and foreign countries, and it is more or less impossible to overcome them by technological development and diffusion. Historically speaking, the channel of accepting entertainers has been expanded mainly between Japan and the Philippines since the era of occupation by the Allied forces after World War II. Nowadays, the restrictions on entertainers have been tightened, and the permissible entry and stay of entertainers has been reduced radically. Foreign student part-timers: Low or unskilled labor. In addition, foreign students may be able to earn money for study or training when they have permission to undertake nondesignated activities for 28 hr per week during the school semester. Their part-time jobs can mostly be classified as low or unskilled jobs. Similar regulations have been in effect since the 1980s, when the government set the target of accepting 100,000 foreign students. Foreign workers of Japanese descent: Low or unskilled labor. Foreigners who are descendants (first, second, and third generation and their spouses) of ex-emigrants from Japan to foreign countries are entitled to the status of residence of spouse of Japanese or long-term resident and may work or study in Japan without limitations. Such treatment of ex-emigrants can be explained by the government policy that encouraged Japanese nationals to emigrate from Japan to foreign countries, especially to Brazil and other Latin American countries, in the 1950s. This is the reason they are able to come back to Japan and stay or work. In practice, many of them work for subcontracting companies or worker dispatch firms and perform simple jobs. Therefore, foreigners who are descendants of Japanese can be classified as foreign unskilled or low-skill labor. Trainees and technical intern trainees: Semiskilled labor. Japan has been developing its foreign traineeship programs since the 1960s, when Japanese textile companies invested in Thailand and other Asian countries to open up overseas production. This is known as acceptance through the single-company type, which realizes technology transfer from mother companies in Japan to affiliated companies in developing countries. In 1990, as the Immigration Control and Refugee Recognition Act was amended to allow highly skilled migrants to enter, there were strong appeals from associations of small and medium-sized companies to abolish the ban on unskilled labor. The background of the law was the strong demand for labor associated with the bubble

1040 American Behavioral Scientist 56(8) economy, when the entry of young people into the labor market was approaching 1 million per year. The Ministry of Justice acknowledged the need to expand the acceptance of trainees for small and medium enterprises. This system has been substantially expanded on the basis of a proposal by the Council of Administrative Reform to introduce technical intern trainees mainly by accepting the small and medium enterprises trainees for a maximum of 3 years. This program began in 1993 and has targeted the transfer of technology to developing countries on the basis of a rotation system principle that allows foreigners to stay for 3 years. Trainees should be accepted within the quota of 5% of the regular employees of a company, so as not to damage employment opportunities for Japanese workers. However, trainees are not counted as trainees when they become technical intern trainees in their 2nd year. Therefore, the number of accepted trainees and technical intern trainees in total may reach at least 15% of the regular employees. This channel expanded particularly in the 1990s between Japan, China, and Indonesia. Foreign workers in an irregular situation: Unskilled and low-skilled labor. Foreign workers in an irregular situation consist of (a) overstaying foreigners, (b) foreigners conducting nondesignated activities, and (c) foreigners undertaking illegal landings usually by boat and so on. In any case, they have to work without authorization to support themselves in Japan. The number of foreign workers in an irregular situation expanded enormously from 60,000 in the late 1980s to more than 100,000 at the beginning of the 1990s. The number reached a peak at 290,000 in the first half of the 1990s before gradually decreasing in the 2000s, thanks to stringent crackdowns by the authorities to reduce overstaying foreigners by half from 2005 to 2009. During the same period, the special permission to stay issued by the Minister of Justice to foreigners with specific humanitarian needs has grown substantially. These workers may be regarded as unskilled or low skilled, although there are some foreigners who have mastered the Japanese language and have acquired a high degree of skill in their jobs. Estimates of low- and unskilled labor. In 2008, the sum of low-, semi-, and unskilled foreign workers amounted to 621,756, which comprised 62.8% of total foreign workers (Table 5). This ratio has been in decline, and the skill composition of permanent residents is unknown. One may conclude that low- and semiskilled foreign workers always make up the largest percentage of the total. Moreover, since the majority of permanent residents enter the low-skilled job market, low- and unskilled workers made up almost 80% of foreign workers in 2008. The numbers from 2009 are strongly influenced by the global economic crisis. The most significant reduction can be observed in the number of overstaying foreigners and foreign workers of Japanese descent. If one intends to reduce dependency on low-skilled foreign workers, it seems intuitive to implement a selective immigration policy. At the same time, foreign residents should have opportunities to learn the Japanese language, to get the chance to receive higher education, and to acquire high occupational skills so that they can be highly integrated into the economy and society. Immigration policy alone cannot solve this

Iguchi 1041 Table 5. Skill Composition of Foreign Workers in Japan (Estimated) Status of residence 1990 1995 2000 2005 2008 2009 Mostly highly skilled (A) Professor Artist Religious activity Journalist Investor/manager Legal/accountant service Medical service Researcher Instructor Engineer Specialist in humanities Intracorporate transferee Highly skilled subtotal 1,824 560 5,476 382 7,334 76 365 975 7,569 3,398 14,426 1,488 43,823 4,149 230 5,264 442 4,649 67 152 1,711 7,155 9,882 25,070 5,901 64,672 6,744 363 4,976 349 5,694 95 95 2,934 8,375 16,531 34,739 8,657 89,552 8,406 448 4,558 280 6,743 126 146 2,494 9,449 29,044 55,276 11,977 180,465 8,333 461 4,601 281 8,895 154 199 2,285 10.070 52,232 67,291 17,798 172,600 8,295 490 4,448 271 9,840 161 220 2,372 10,120 50,493 69,395 16,786 164,106 Foreigner specific (B) Entertainer Skilled labor With specific skill subtotal 21,138 2,972 24,110 15,967 7,357 23,324 53,847 11,349 65,196 36,376 15,112 51,488 13,031 25,863 38,894 10,966 29,030 39,996 A + B Semiskilled/ Low skill (C) Low skill/ Unskilled (D) C + D Any skills (E) A + B + C + D + E Status for working purposes Designated activities (including technical intern, internship) Part-time work of students Worker of Japanese descent Overstaying foreigners Nondesignated activities Subtotal Low- and semiskilled subtotal Ordinary permanent residents Foreign workers other than those with special permanent residents status 67,933 87,996 154,748 180,465 211,535 204,102 3,260 6,558 29,749 87,324 121,863 130,636 10,935 32,366 71,803 193,748 106,497 59,435 96,959 99,485 106,588 220,458 239,259 229,569 202,101 284,744 233,187 219,418 113,072 91,778 Unknown Unknown Unknown Unknown Unknown Unknown 189,235 510,858 513,080 555,636 499,893 400,467 192,495 517,416 542,829 642,960 621,756 531,103 17,412 39,154 113,899 160,212 173,696 60,000 + α 620,000 + α 750,000 + α 930,000 + α 930,000 + α 920,000 + α Source: By the author on the basis of data from Ministry of Health, Labor, and Welfare

1042 American Behavioral Scientist 56(8) problem of unskilled or low-skilled labor; measures of integration policy are also indispensable. Composition of Foreign Labor According to Geographical Mobility Although skill composition is important in evaluating problems in the labor markets, the mobility of foreign workers is an essential factor explaining their location and their working and living conditions. According to the rotation principle, which places limitations on their stay in Japan, technical intern trainees are distributed all over Japan, because they are not mobile and they cannot change their jobs, even if their compensation and working conditions are extremely poor or they are violating laws and regulations. The location shows that the fishery and seafood sectors also employ technical intern trainees; this is also the case in agricultural areas (Figure 4). In comparison with dispatched and subcontracting workers, who are very mobile, technical intern trainees do not live or work in low-paid regions, and they are clustered in the areas with a high concentration of industries that offer higher wages or salaries (Figure 5). Foreigners with the status of residence for the purpose of working are able to change jobs, and their wages and working conditions should be in compliance with the laws and regulations. In other words, their skill levels are often high, and their mobility is dependent on factors at the workplace (Figure 6). Foreigners with the status of permanent residence or long-term stay are very mobile, but their skills are not always valued by employers, and they can change jobs very often. Their location is also similar to that of dispatched and subcontracting workers (Figure 7). Foreign students work part-time, and their working location is constrained not only by job offers from enterprises but also by the location of their university or college. Their mobility is limited by the time and space necessary for commuting (Figure 8). It is important to distinguish different groups of low-skilled labor because of the workers function in the labor market; also, problems are different for those who are mobile and those who are not mobile. This issue will be examined in the empirical analysis below. Composition of Foreign Labor (Including Trainees) According to Sector and Occupation Concerning the sectors where foreigners work, one has several ways of making estimates, such as using statistics from the Reporting System on Foreign Employment. However, the new system is in the early phases of implementation, and the situation is not evenly reported. Therefore, a better data set to use is the Population Census from 2005 (Ministry of Internal Affairs and Communication, 2005). It is striking that foreign workers are concentrated in the manufacturing sector (36.2%), followed by the other services (15.4%), restaurant and hotel (11.4%), and

Iguchi 1043 Figure 4. Technical intern trainees (October 2009) Source: Made by the author in reliance on the data of Reporting System Foreigner s Employment, Ministry of Health Labour and Welfare (2009). Note: The shadings from white to dark show number of persons: 0~999, 1000~2499, 2500~4999, 5000~7499, 7500~. Figure 5. Dispatching and subcontracting workers (October 2009) Source: Made by the author in reliance on the data of Reporting System Foreigner s Employment, Ministry of Health Labour and Welfare (2009). Note: The shadings from white to dark show number of persons: 0~999, 1000~2499, 2500~4999, 5000~7499, 7500~.

1044 American Behavioral Scientist 56(8) Figure 6. Foreigners with status of residence of working purposes (October 2009) Source: Made by the author in reliance on the data of Reporting System Foreigner s Employment, Ministry of Health Labour and Welfare (2009). Note: The shadings from white to dark show number of persons: 0~999, 1000~2499, 2500~4999, 5000~7499, 7500~. Figure 7. Foreigners with status of permanent resident, long-term stay, and so on (October 2009) Source: Made by the author in reliance on the data of Reporting System Foreigner s Employment, Ministry of Health Labour and Welfare (2009). Note: The shadings from white to dark show number of persons: 0~999, 1000~2499, 2500~4999, 5000~7499, 7500~.

Iguchi 1045 Figure 8. Foreign students with permission for nondesignated activities (October 2009) Source: Made by the author in reliance on the data of Reporting System Foreigner s Employment, Ministry of Health Labour and Welfare (2009). Note: The shadings from white to dark show number of persons: 0~999, 1000~2499, 2500~4999, 5000~7499, 7500~. retail and wholesale (10.1%). The concentration in manufacturing is especially high for the Vietnamese (70.4%), Peruvians (66.6%), Brazilians (63.8%), Indonesians (59.4%), and Chinese (44.9%). This concentration reflects mainly low-skilled foreign labor, especially dispatch or subcontracted workers (Brazilians and Peruvians) and technical intern trainees (Vietnamese, Indonesians, and Chinese). (See Table 6.) The distribution of foreign trainees by sector reveals textile, food and drink, and transport machinery as the three main sectors; construction and agriculture have also been attracting trainees since 2001. Trainees undergoing on-the-job training are now regarded as workers according to the Labor Standards Law, in force since July 2010; training allowances have been low and on the decline in the 2000s. (See Tables 7 and 8.) As far as occupation is concerned, production workers make up almost 50% of foreign workers, with some variations according to nationalities (Table 9). In regard to the distribution of foreign labor according to the size of the companies, almost 40% of foreign workers are in establishments with less than 50 employees. The average number of foreign workers is only 4 per establishment. From these statistics, one can see that foreigners remain the minority at the workplace (Ministry of Health, Labor, and Welfare, 2010).

Table 6. Foreign Workers According to Sector Country of origin n Agriculture Construction Manufacturing Information communication Transport Retail and wholesale Restaurant and hotel Medical care and welfare Education Other services Others Foreign workers n 772,375 10,732 44,421 18,156 19,521 19,521 77,763 87,797 18,148 43,724 117,879 54,960 % 100 1.4 5.8 36.2 2.4 2.5 10.1 11.4 2.3 5.7 15.3 7.1 Korea 225,888 0.4 11.3 13.8 2.5 5.1 16.2 15.3 5.4 2.8 17.1 10 a China 185,738 3.2 3.7 44.9 4.1 1.6 10.7 13.3 1.7 2.6 8.0 6.2 Philippines 64,185 1.9 5.0 36.5 0.5 1.5 7.4 24.5 0.8 1.3 15.3 5.2 Thailand 11,366 4.4 7.9 39.2 0.7 1.5 9.1 18.2 1.8 1.7 9.3 6.2 Indonesia 12,909 7.8 5.7 59.4 1.0 0.6 3.0 9.3 0.3 1.4 8.0 3.4 Vietnam 11,467 0.7 2.5 70.7 1.1 1.1 5.7 3.6 0.6 1.0 6.5 6.6 United 7,319 0.3 0.7 4.4 4.2 0.8 4.5 2.5 0.8 61.2 11.8 8.9 Kingdom United 22,348 0.2 1.1 4.5 4.4 1 4.9 1.9 1.1 51.7 20.8 8.4 States Brazil 140,830 0.3 2.0 63.8 0.2 1.4 2.5 0.9 0.6 0.7 23.8 3.8 Peru 22,552 0.3 3.4 66.6 0.3 2.0 4.0 1.5 0.3 0.6 14.5 6.6 Japanese workers 60,733,598 4.9 8.8 17.1 2.6 5.1 18.0 a 5.2 8.8 4.4 14.3 10.8 Source: Statistical Office, Ministry of Internal Affairs and Communication, Population Census (2005). Note: Values are percentages unless otherwise indicated. Note: China includes Hong Kong China, Chinese Taipei etc. 1046

Iguchi 1047 Table 7. Trainees Accepted by the Support of JITCO, According to Sector (2008) Sector Foreign trainees Percentage of total in 2008 Percentage of total in 2001 Total 68,150 (18,514) 100.0 100.0 Textile and garment 12,721 (3,690) 18.7 27.9 Food and drink 10,141 (2,250) 14.9 13.4 Transport machinery 6,353 (3,233) 9.3 8.3 Electric and electronic 6,145 (1,100) 9.0 8.1 Construction 5,292 (1,820) 7.8 6.0 Metal 4,813 (1,446) 7.1 5.5 Agriculture 4,473 (530) 6.6 4.8 Plastic 3,573 (821) 5.2 2.7 General machinery 2,020 (517) 3.0 2.2 Steel 1,521 (489) 2.2 1.8 Source: JITCO (2009). Note: JITCO = Japan International Training Cooperation Organization. Values in parentheses are the numbers of enterprises accepting trainees. Table 8. Factors Explaining re-industrialization in Japan (2001-2006) Dependent Variables Share of manufacturing in GDP Establishment Employees Independent Variables Coefficient T-Value Coefficient T-Value Coefficient T-Value Labor 0.011*** 8.651-4.032*** -4.117-50.646*** -2.238 productivity Average wage 0.001*** 4.049 0.042*** 6.088 0.997*** 6.223 Vacancyapplicant 11.958*** 7.734-0.220*** -4.419-17346.6*** -6.163 ratio Foreign -0.001* -1.961 2.005*** 4.622 44.577*** 4.449 trainees Brazilians 0.001*** 4.376 0.211*** 7.375 8.718*** 13.185 FDI to China -0.001*** -4.214 0.359* 1.793 11.798** 2.55 Land price for -0.001*** -10.313 0.038*** 7.178 0.542*** 4.383 factories Real effective -0.084* -1.670* 89.710*** 2.251 2573.769*** 2.798 exchange ratio Constant 9.092 1.312-18714.529-3.41-485605.4*** -3.83 Source: Iguchi (2011). Note: Pooled data with 47 prefectures for 6 years. In total 282 samples. *p <.10. **p <.05. ***p <.01.

1048 American Behavioral Scientist 56(8) Table 9. Foreign Workers According to Occupation Country of Transport and origin n Specialist Manager Clerical Sales Service Agriculture communication Production Other Foreign 772,375 97,721 15,886 58,734 66,234 91,086 104,452 12,740 384,142 35,380 workers n % 100 12.7 2.1 7.6 8.6 11.8 1.4 1.6 49.7 4.6 Korea 225,888 10.1 4.9 14.3 17.4 17.3 0.4 4.0 27.1 4.5 China 185,738 10.9 1.1 7.0 6.8 13.1 3.1 0.5 52.8 4.7 Philippines 64,185 10.2 0.2 3.1 4.0 20.3 1.7 0.5 55.2 4.8 Thailand 11,366 6.4 0.4 3.9 5.8 17.9 4.0 0.6 55.6 5.5 Indonesia 12,909 6.1 0.3 1.9 1.4 8.0 7.6 0.2 71.8 2.8 Vietnam 11,467 3.9 0.3 1.9 3.1 4.2 0.8 0.5 79.0 6.4 UK 7,319 75.3 2.3 8.6 5.0 2.7 0.3 0.2 3.4 2.2 USA 22,348 69.8 2.7 10.4 5.3 2.6 0.2 0.4 5.6 3.0 Brazil 140,830 2.0 0.2 1.8 1.3 2.1 0.3 1.0 87.8 3.5 Peru 22,552 1.4 0.1 1.4 1.9 2.8 0.3 1.1 84.7 6.3 Japanese workers 60,733,598 13.8 2.4 19.5 14.6 10.0 4.8 3.4 28.1 3.5 Source: Statistical Office, Ministry of Internal Affairs and Communication, Population Census (2005). Note: Values are percentages unless otherwise indicated. Employment Measures Especially for Low-Skilled Foreigners During the time of the global economic crisis, employment measures for foreign workers were rapidly developed. Many of them are based on the annual or supplementary budgets and not new laws and regulations. It is expected that some of the measures will be institutionalized when these emergency measures come to an end (Iguchi, 2009). Collaboration between Public Employment service and municipalities. In December 2008, with a growing number of foreign job seekers, the Public Employment Service set up one-stop centers in several municipalities. These centers, however, have functions only of counseling and interpretation for foreign job seekers and are not equipped to facilitate job placements or make applications for unemployment benefits, housing services, or public assistance (Iguchi & Hasegawa, 2010). Extended allowance for employment adjustment. With the first supplementary budget in 2008, the financial means for the allowance for employment adjustment (Koyo Chosei Josei Kin) was augmented. This enabled enterprises to postpone dismissals by introducing a shortening of working hours. With the second supplementary budget, the conditions for the allowance for employment adjustment was extended to compensate for the reduction of overtime work and to maintain the employment of both typical and atypical employees. New subsidy for foreigners to return to home country: Pros and cons. In March 2009, a new subsidy was introduced for airfares for foreign workers and their families, if they are dismissed in Japan, to go back to their home countries if they wish. It amounts to

Iguchi 1049 300,000 yen for the worker and 200,000 yen for each family member. However, this subsidy has sparked serious debate. According to the requirements, beneficiaries cannot return to Japan with the same status of residence for the time being. The Ministry of Health, Labor, and Welfare announced in May 2009 that this meant almost three years. In addition, there was no clarification by the Ministry of Justice as to whether foreigners who had once benefited from the subsidy can be refused reentry at the border on the basis of Articles 5 and/or 7 of the Immigration Control and Refugees Recognition Act. Language training for unemployed foreigners of Japanese descent. Measures of language training for unemployed foreigners started in May 2009 because of a widely held belief that their difficulty in finding jobs often comes from their low level of proficiency in the Japanese language. Unfortunately, the 3 months of training currently offered is not sufficient. In addition, the language necessary for business has not been defined. Therefore, this measure can, for the time being, be regarded as an experiment. It is expected that language training for unemployed foreigners will be institutionalized through the employment policy, although the standard of language proficiency in practical Japanese has not yet been established. Amendment of Immigration Control Act and Foreigners Register Act Basically, the Japanese immigration control system (applicable to temporary migrants only) can be regarded as an Anglo-Saxon type, because it was established on the basis of U.S. immigration laws during the period of occupation by the U.S. Army after World War II. The status of residence in the Japanese system is comparable with the visa status for nonimmigrants in the United States. The immigration control laws and regulations have been supplemented by the Foreigners Registration Law, which originally aimed to control, as permanent residents, those Koreans who had lost their Japanese nationality after the acceptance of the San Francisco Peace Treaty in 1952, which restored Japanese independence. The Council on Regulatory Reform recommended that municipalities, in cooperation with government agencies, strengthen policies for multicultural coexistence. To attain this goal, the Anglo-Saxon system of migration policy should be extended to incorporate functions found in the continental European system (as implemented in Germany, the Netherlands, and France), which enables municipalities to take effective measures for integration policy. This type of arrangement ensures that the rights of foreign citizens are guaranteed and their obligations are fulfilled, which is a prerequisite for the success of immigration policy (Iguchi, 2009). Therefore, the Immigration Control and Refugees Recognition Act and the Inhabitants Register Act were amended so as to integrate foreign inhabitants into the Inhabitants Register within a digitalized network. The Foreigners Registration Law will be abolished within 3 years. At the same time, trainees should be treated as workers as of July 2010, according to labor laws, when they are engaged in

1050 American Behavioral Scientist 56(8) on-the-job training under the new legislation. In any case, there should be more involvement of the municipalities, which is expected to be part of the reform package to be realized in the near future, especially in the field of language training for foreign inhabitants. This reform process of the migration policy can be regarded as establishing an institutional infrastructure for multicultural coexistence. New Empirical Findings on the Roles of Low-Skilled Foreigners: Analytical Perspectives In this section, I introduce new empirical findings on the roles of low-skilled foreigners in Japan by the Research Center on Economies with Low Fertility at Kwansei Gakuin University. The role of low-skilled foreigners in the de- (or re-)industrialization process is particularly important. This is discussed in the first section that follows. It relates to production fragmentation and agglomeration in the East Asian region. Second, I also discuss the relationship of foreigners with the demographic changes of the Japanese population in local areas. The declining population of youth, the aging population, and the labor market participation of the female population are of particular importance. Next, I examine the role of foreign workers in reducing or augmenting mismatches in local labor markets, because mismatches in the local labor markets are becoming a serious issue. Finally, I look at the relationship between Japanese and foreigners in the hiring behavior of enterprises whether the employment of foreigners might lead to the creation of employment for Japanese citizens, especially as regular staff. These questions have not been clearly answered in previous empirical research (Nakamura, Naito, Kanbayashi, Kawaguchi, & Machikita, 2009). Deindustrialization Versus Reindustrialization and Foreign Labor Since 2001, the Japanese economy has regained economic growth, especially from the expansion of exports to China. In this process, the share of the manufacturing industry in the GDP has been rising, and land prices for factories have been declining, when analyzed according to local areas. In addition, the real effective exchange rate of the yen has also been declining. Therefore, I would like to explore which factors together contributed to the reindustrialization process in Japan from 2001 to 2006. The main results are shown in Table 9. Brazilians, who have mobility to work for higher wages, made positive contributions in all cases. Foreign trainees, who are not permitted to change jobs and who must stay in low-paid jobs, do not always contribute to the reindustrialization process. It is also noteworthy that foreign direct investment in China has both positive and negative effects on this process.

Iguchi 1051 Table 10. Correlation of Distribution Between Japanese and Foreign Inhabitants Share of Japanese inhabitants 15-24 Labor force 50 Employees 50 years old and older and older Female labor force 25 and older Employees 25 and older Foreign.301** (.040).619*** (.000).699*** (.000).021 (.887).321** (.028) inhabitants Special.340** (.019).100 (.504).360** (.013).364** (.012).094 (.532) permanent residents Japanese.054 (.718).686*** (.000).504*** (.000).410*** (.004).474*** (.001) Brazilians Technical.437***.217.040.396***.215 intern trainee (0.002) (0.142) (0.789) (0.006) (0.146) Source: Iguchi (2011) and Iguchi and Shiho (2007). Note: ( ) means significance value. *p <.10. **p <.05. ***p <.01. Demographic Changes and Location of Foreigners Since 2005, the Japanese population has entered a phase of depopulation. It is important to look at regional variation when only seven prefectures are experiencing population growth. The foreign population in the Tokyo metropolitan areas and Nagoya areas continues to be highly concentrated. In this process, it is important to ask whether the decrease in the younger generation is partly compensated by the inflow of foreigners and whether younger, older, and female workers are complementary to foreign labor. In data from the 2000 Population Census, it is clear that the declining rate of the youth population is partly compensated by the inflows of technical intern trainees but not by Japanese Brazilians. The declining youth population is positively related with the foreign population in general and with special permanent residents. (See Table 10.) The ratios of labor participation and employment of the elderly and women are strongly positively related with Japanese Brazilians. This means that where there are more Brazilians, the ratios of labor participation and employment of the elderly and women are also high. There is no negative correlation between the inflow of Brazilians and the employment of elderly or women; Brazilians, the elderly, and women benefit from each other s participation in the workforce. Mismatch in the Local Labor Markets and Foreign Labor Table 11 addressed the third question on the effects of foreign labor: whether it really reduces mismatches in local labor markets or whether it worsens them. Using pooled data from 1996 to 2000 and from 2001 to 2006, the research team made several

1052 American Behavioral Scientist 56(8) Table 11. Factors Explaining Mismatch (Unemployment/Inactivity Rate) in the Local Labor Markets Independent variable Unemployment rate Inactivity rate Late 1990s 2010s Late 1990s 2100s Coefficient T value Coefficient T value Coefficient T value Coefficient T value Employees 0.001*** 5.626 0.001*** 4.014 0.000*** 5.493 0.001*** 6.248 income per capita Ratio of 12.562*** 2.692 22.603*** 4.005 0.730*** 3.176 0.090 0.364 15-24 years old Ratio of 3.052*** 3.435 1.807*** 2.079 0.066 1.517 0.166*** 4.346 part-time Ratio of 10.352 3.536 5.562*** 5.812 0.265 1.839 0.23*** 5.474 tertiary sector Ratio of 5.641 1.832 2.168*** 2.151 0.148 0.976 0.133*** 3.144 secondary Brazilian 0.001 0.558-0.000*** 4.989 0.000*** 2.664 0.001 0.142 workers Ratio of 0.127*** 2.869 0.151*** 4.579 0.008*** 3.665 0.011*** 6.909 hired Rate of 2.128*** 12.639 1.61*** 7.979 0.067*** 8.077 0.038*** 4.238 divorce Constant 8.235*** 3.237 3.362*** 2.582 0.15 1.193 0.074 1.295 Adjusted R 2 0.785 0.758 0.623 0.617 Sample 235 262 235 262 Source: Hasegawa (2009). *p <.10. **p <.05. ***p <.01. estimates of mismatch in the local labor markets in Japan (Iguchi, 2011). With unemployment and inactivity as indicators of mismatch, contributing factors to a reduction in labor market mismatch include higher employee incomes, a higher ratio of the tertiary sector, and a higher ratio of the secondary sector. The effects, however, are different in different periods of economic development. In the late 1990s, when the Japanese economy was stagnant, Brazilians and part-time workers created greater mismatch; in the 2000s, as the Japanese economy regained economic growth, Brazilians and part-time workers made contributions to the reduction of mismatch. Therefore, given such findings, one may say that Brazilians, as lowskilled labor, make different contributions to mismatch in the labor market, depending on the phase of economic development.

Iguchi 1053 Hiring Behavior of Enterprises and Foreign Labor Recently, as the growth of the domestic market has weakened, Japanese enterprises have been targeting overseas markets. Therefore, the strategic use of foreign labor and diversity management have become important themes of discussion. In such discussions, it is assumed that the employment of foreigners also contributes to the creation of employment for Japanese. Therefore, one should empirically verify whether enterprises with experience in employing foreigners are also contributing to employment creation, especially of regular staff. In August 2010, when the employment situation in Japan was very serious, the research team did sample surveys in cooperation with the Hyogo Prefecture. Using such microdata, we attempted to identify factors explaining the hiring behavior of enterprises (see Table 12). As for popular independent variables, the size of establishment was expected to have a positive influence on the hiring of recent graduates, whereas the ratio of 45-year-olds and older workers in the establishment was expected to have a negative influence. Hiring part-timers was also expected to have a negative influence. The experience of employing low-skilled foreigners and the experience of employing specialists and engineers had a positive influence on hiring recent graduates as regular staff, however. The odds ratios mean that establishments that employ foreign lowskilled workers, as well as specialists and engineers, have a greater probability (2.62 or 2.99 times higher) of hiring recent graduates as regular employees as compared to establishments that do not employ foreigners. This stable relationship might mean that hiring recent graduates as regular staff and employing foreign unskilled labor or specialists and engineers are complementary practices. This encourages policy makers to facilitate the employment of foreigners with the condition that they are regular employees and enjoy equal treatment with Japanese employees. Concluding Remarks In East Asia, economic development in the past decade has mainly been led by high growth in the Chinese economy, together with the expansion of intraregional trade and foreign direct investment, whereas the U.S. and EU economies have simultaneously lost dynamism of growth since the global economic crisis in 2008. Regional economic integration in East Asia, possibly including India, is also of great importance for Japan in realizing sustainable economic growth and taking responsibility in East Asia. At the same time, security concerns in East Asia are still large because of nuclear problems in North Korea and military expansion in China. It is a puzzling fact that the old Cold War regimes are still in power in East Asia (Council of East Asian Community, 2010). In such complicated circumstances, international migration is dynamically growing within this region, led not only by tourists and businesspeople but also by students, highly skilled and low-skilled workers, and their family members.

1054 American Behavioral Scientist 56(8) Table 12. Factors Explaining Hiring Behavior of Enterprises (Multinomial Logistic Model) Hiring graduates as regular staff Independent variable Coefficient Wald Significance Odds ratio Size of establishment 1.044*** 39.208.000 2.842 Ratio of 45 years old 1.787*** 5.151.023 0.167 and older Experience of employing 1.095*** 4.218.040 2.990 foreign specialists Experience of employing 0.963*** 6.165.013 2.620 low-skilled foreigners Shortage of specialists 0.186* 3.747.053 1.205 and engineers Shortage of service 0.272*** 6.187.013 1.312 workers Shortage of technical 0.737*** 35.068.000 2.090 workers Hiring regular employees 0.062 0.059.808 0.940 other than school graduates Hiring part-time 0.010*** 5.726.017 0.990 workers Hiring dispatched 0.001 0.353.553 0.999 workers With subsidiary 0.125 0.062.803 1.133 overseas Constant 2.465*** 36.126.000 0.085 Sample 611 ( 2) likelihood 440.151 Nagelkerke R 2 0.476 Cox-Snell R 2 0.357 χ 2 5.52 Hosmer and Lemeshow test 0.701 Source: Created by the author in Iguchi (2011). *p <.10. **p <.05. ***p <.01. It is important for Japan to maintain a selective immigration policy with such circumstances in East Asia, while actively coping with further economic integration in this region and carefully dealing with irregular migration, trafficking, and international terrorism (Iguchi, 2006). At the same time, as discussed in this article, it is of great importance to grasp the relationship between (a) production fragmentation in East Asia, (b) the growing numbers of different types of low-skilled migrant labor, and (c) difficulties in local development and mismatches in local labor markets.

Iguchi 1055 The acceptance of low-skilled labor is not permitted, according to the long-standing principle of the government of Japan, but 70% of the foreigners actually employed are low-, semi-, or unskilled workers. Thirty-six percent of foreign workers work in manufacturing, 60% of whom are production workers. This contradiction mainly comes from the fact that immigration control policy has no collaboration with integration policy. On one hand, immigration policy in Japan has had the aim of curbing the acceptance of low-skilled foreigners; on the other hand, local economies and societies are losing the younger population who might have engaged in low-skilled jobs. With growing mismatch in the local labor markets, local economies and communities are becoming more dependent on the foreign population. However, until recently, government policy did not take into account the integration of foreigners at the local level. Therefore, the institutional infrastructure for multicultural coexistence is still underdeveloped. As the recommendation of the G8 expert meeting in Bonn, Germany, encouraged, it is important to create consistency and collaboration between immigration policy and integration policy (Federal Ministry of Interior, 2008). This recommendation is also applicable and indispensable for Japan. Therefore, in concrete terms, the following may have high priority in policy formulation. 3 First, as for the so-called unskilled labor that has been banned in accordance with the government s decision, it should, in a strict sense, be continuously banned. The rationale for such a decision is that there are growing numbers of unemployed and inactive youth and elderly people who should be reintegrated into the labor market. This means that unskilled jobs in a strict sense should not be opened to foreign labor. However, in the case of many low-skilled jobs, which are suffering from chronic shortages of domestic manpower, it is recommended that social partners and the government investigate and build consensus for a labor shortage list. In such cases, they should carry out human resource development of foreigners and permit them to work with some occupational qualification with a numerical quota or a labor market test. Second, with growing numbers of permanent residents and of those who are staying for the long term, it is important to create an infrastructure that guarantees opportunities for foreigners to learn practical Japanese language skills. Naturally, a guideline of language proficiency should be established at the national level as soon as possible. Third, for low-skilled foreign labor, especially in fixed-term contracts with dispatching or subcontracting enterprises, legal protection measures and safety nets in the case of unemployment, sickness, or injury should be effectively provided. It is also desirable that the employment of foreigners without such protections should be forbidden by means of the Immigration Control and Refugees Recognition Act. Fourth, from a long-term perspective, the education of the children of migrants and the guarantee of opportunities for migrants to learn the Japanese language function as an investment. This will not only reduce risks that those individuals will become unskilled laborers in Japan in the future; they will also acquire more advanced skills and language proficiency.

1056 American Behavioral Scientist 56(8) These efforts could lead to a certain community forming in East Asia without the presence of strong mistrust and antagonism. There is the potential to create a common space with mutual understanding, reconciliation, and collaboration in East Asia. Declaration of Conflicting Interests The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article. Funding The author(s) received no financial support for the research, authorship, and/or publication of this article. Notes 1. The concept of production fragmentation and its effects on economies are discussed, for example, in Cheng and Kirerzkowski (1999) and Kimura (2006). 2. The concept of labor market mismatches traditionally meant the coexistence of unemployment and job vacancies. Here I expand the concept so as to include (a) inactive people who are not searching for jobs, although they wish to work, and (b) employees who are unwillingly working as they could not but accept the job, and so on. Extending the concept was already discussed in Iguchi (2007). 3. The second G8 Expert Meeting Roundtable was held on October 8 and 9, 2008, in Bonn, Germany. Professor Nana Oishi and I participated in that meeting. References Cheng, L. K., & Kirerzkowski, H. (1999). Global production and trade in East Asia. Boston, MA: Kluwer Academic. Council of East Asian Community. (2010). White Book on East Asian Community. Tokyo, Japan: Author. Federal Ministry of Interior. (2008). Final report of G8 roundtable on diversity and integration. Retrieved from http://international.metropolis.net/index_e.html Hasegawa, R. (2009). Determinants of mismatches in local labor markets in Japan. Quarterly Journal of Economic Studies (Kwansei Gakuin University), 40, 163-180. Iguchi, Y. (1997). International migration and labor market. Tokyo: Japan Institute of Labor. Iguchi, Y. (2006, June). For realizing the human resources development and circulation strategy in East Asia. Report by Japan Center for Economic Research, pp. 71-89. Iguchi, Y. (2007, May). Labor shortage and policy responses in Japan: Challenges for labor market policy and migration policy. Paper presented to the International Symposium on Managing Labor Migration in East Asia: Policies and Outcomes, Singapore. Iguchi, Y. (2009). Prospects on migration policy reform from the standpoint of economic integration in East Asia. Migration Policy Review, 1, 18-35. Iguchi, Y. (2011). Economics of intergenerational conflicts. Tokyo, Japan: Yachiyo Shuppan.

Iguchi 1057 Iguchi, Y., & Hasegawa, R. (2010). New trends of labor market policy reform and the global economic crisis. Quarterly Journal of Economic Studies (Kwansei Gakuin University), 64(2), 30-69. JITCO. (2009). Annual report of Japan international training cooperation organization. Japan: Author. Kimura, F. (2006). International production and distribution networks in East Asia. Asian Economic Policy Review, 1(2), 326-344. Louis,W. A. (1954). Economic development with unlimited supply of labour. The Manchester School, 22(2), 139-199. Ministry of Internal Affairs and Communication. (2005). POPULATION OF JAPAN (Final Report of the 2005 Population Census). Tokyo, Japan: Population Census. Ministry of Health, Labor and Welfare. (2009). Answer to the question by the Diet Member Mr. Nobuo Matsuno on the subsidy for foreigners of Japanese descent to return to their home countries May 2009. Tokyo, Japan: Author. Ministry of Health, Labor, and Welfare. (2010). The results of reporting system on foreign workers. Tokyo, Japan: Author. Nakamura, J., Naito, H., Kanbayashi, R., Kawaguchi, D., & Machikita, T. (2009). Foreign labor in Japan. Tokyo, Japan: Toyo Keizai Shinpo Sha. Organization for Economic Cooperation and Development. (2010). International migration outlook. Paris, France: Author. Bio Yasushi Iguchi is a professor at the School of Economics and the director of the Research Institute for Economies With Low Fertility at Kwansei Gakuin University, Japan. He has been a guest professor at the University of Lille 1 (France) and a guest researcher at Max-Planck Institute (Germany). From 2005 to 2010, he was a special member of the Council of Regulatory Reform, Cabinet Office. From 2003 to present, he has been advisor of the Alliance of Cities With High Density of Foreign Citizens. His recent books in Japanese include Economics of Intergenerational Conflicts and The New Era of Migrant Workers.