In recent decades, Japan has remained recognized for its impressive ability to accomplish a great deal despite limited natural resources. This capacity became so firmly established in economic history that it even became a specific chapter, in contrast with countries privileged in this regard, such as Brazil itself.
However, even the strongest economies can face difficulties. Despite nominal growth of 1.9% last year, Japan fell from third to fourth place on the list of the world's largest economies. In addition, the country recorded two consecutive quarters of contraction in its output, which already characterize a recession according to macroeconomic theory.
To make matters worse, the Japanese currency suffered further depreciation against the US dollar, reaching 155 yen per dollar, its lowest level in 34 years.
But what could have led such an organized economy to face a recession after years of growth? In this article, we mention possible causes that brought Japan to this economic situation and discuss the new visas for immigrants.
What Factors Caused Japan to Enter a Recession?
One cause that certainly had an impact was the already mentioned decline in the yen's strength against the US dollar. This decline affected investments involving the Japanese currency, since the country is working to encourage consumption and banks have therefore introduced negative interest rates since 2016.
This measure was intended to induce the population to consume in the short term, reducing its marginal propensity to save, which has historically been very strong in Japan. However, with negative interest rates, the yen becomes highly unattractive to foreign investors. The result was a major depreciation of the currency against the dollar, which is enough to weaken Japan in the global market.
There is also a decline in demand and a rise in the cost of living. In Japan, more than half of economic activity is driven by private consumption. Recently, this consumption index recorded a 0.2% decline, contrary to expectations that predicted 0.1% growth. This is already the third consecutive quarter in which both private consumption and capital expenditure have contracted, contributing to the economic slowdown.
Population Aging
Alongside this recent economic situation is a recurring problem for the Japanese economy: population aging. For years, Japan's population has faced continuous decline and progressive aging.
In 2023, the country recorded for the first time that one in every ten people was over 80 years old. The data also revealed that around 29.1%, nearly one-third, of Japan's 125 million people were aged 65 or older.
Japan has one of the lowest birth rates in the world, causing the so-called "population pyramid" to become inverted. In other words, there are not enough people in the economically active population to supply goods to the older population. Basically, there is a labor shortage in certain areas within Japan.
Japanese Visas for Foreign Workers and "Digital Nomads"
Solving the labor shortage is important for improving Japan's economic landscape. In 2019, the Japanese government created a program to attract more foreign workers: immigrants could remain in the country for up to five years, with the possibility of renewing the visa if they met basic requirements.
This government move was very important in making companies more receptive to foreigners and facilitating the hiring process. But not stopping there, Japan announced another important measure this year, this time for "digital nomads": a new visa specifically for people who work directly on their computers.
This new visa allows remote workers to reside in the country for up to six months, provided that they have an annual income of at least 10 million yen (approximately US$68,000 or R$340,000). They must also be citizens of a country that has a visa-waiver partnership with Japan, as Brazil currently does, and have health insurance. The current tourist visa, which limits a stay to 90 days and prohibits paid work, will be replaced by this new status if the person qualifies. It also allows the entry of family members covered by the same insurance.
Record Immigration Could Revitalize the Japanese Market, but Obstacles Remain
Foreign immigration rates are currently the highest in Japan's history. In recent data released by Japan's Immigration Services Agency, the number of foreign workers reached a record 3.4 million, representing a considerable increase over 2023.
However, Japan's political strategy for attracting foreign workers is reaching an inflection point. Although there is a considerable number of foreigners working in industrial and related sectors, the general shortage of active labor persists.
Overall, the country is expected to reverse the current situation by boosting private consumption and expanding its capacity to attract investment. However, more short-term measures are expected to achieve rapid and effective stabilization.
In recent years, Japan was known for offering stability, having low inflation for decades, and a highly favorable cost of living. Without a doubt, we hope the country will once again be seen as the "land of the future," adapting to new challenges both at home and abroad.
