Japan stands at a pivotal point in the global economy, confronting significant challenges while seizing opportunities in education, human resources, digital transformation, global engagement, and bridging economic disparities between urban and rural regions. The country is striving to advance technology integration, promote STEM programs and technical education to address workforce shortages, and advance internationalization.

To sustain economic vitality in the coming decades, Japan must adopt new mindsets, embrace innovative approaches, and advance digital reforms—particularly in workforce strategy, education, digitization, sustainability, and global competitiveness. Achieving greater productivity and future success will require effective debt management and growth-friendly fiscal policies.
 

NEW MINDSETS: Addressing Workforce Shortages and Barriers for Foreign Talent

Japan’s aging population and declining birth rate are impacting productivity and economic output, creating an urgent need for skilled workers. Rising social welfare costs associated with an aging demographic compound this issue, placing fiscal strain on economic growth. With fewer working-age individuals to support retirees, Japan is investing in automation, robotics, and expanding workforce participation among women, older adults, and foreign workers.

The demographic shift has increased pressure on the government to embrace new perspectives on employment, education, immigration, and innovation. While the government has taken gradual steps to attract foreign professionals and international students, significant obstacles remain. Traditional attitudes toward immigration and language barriers in Japan limit employment opportunities for professionals who are not fluent in Japanese. High tax rates, gaps in bilingual services, housing discrimination, and limited access to affordable bilingual K-12 education make Japan a challenging destination for foreign talent.

To address these barriers and attract foreign professionals, private sector support and coordinated government action are essential. Increasing professional opportunities in English, developing comprehensive Japanese language programs, and improving access to housing and healthcare for foreigners would foster a more inclusive environment. Although some multinational corporations and tech companies may offer roles that eliminate language barriers, many foreign professionals (especially at the entry level) struggle to secure meaningful employment or advance within Japanese firms. Despite Japan’s global competitiveness goals, companies operating primarily in English are the exception. Many domestic employers require at least N2-level Japanese proficiency, which excludes otherwise qualified foreign applicants. Improvements in these sectors would significantly enhance Japan’s appeal as a destination for international talent.

INNOVATIVE APPROACHES: Global Human Resources and Educational Reform

To address its demographic challenges, Japan must embrace global engagement and excel in international education by fostering a culture of innovation, entrepreneurship, and collaboration.

Japan’s global positioning necessitates awareness, understanding, proactive cross-border strategies, and a globally competitive workforce.

A globally competitive workforce needs digital literacy, language proficiency, and cultural awareness—areas in which Japan often lags behind other developed nations. In response, Japan has launched initiatives and policies to develop global human resources with the mindset of fostering a workforce that can effectively excel across borders. These include measures to encourage Japanese citizens to study abroad, acquire English language skills, and develop cross-border competencies. There have been growing concerns about the relatively low number of Japanese students pursuing international opportunities either domestically or abroad.

To remain globally competitive, Japan must improve the quality and accessibility of international education from elementary school through higher education. English proficiency and global engagement broaden Japan’s economic potential and enhance its appeal to foreign talent, yet Japan’s education system has historically struggled to foster English fluency, limiting its integration into the global economy. Adopting bilingual and international curricula will better prepare students and professionals for a globalized workforce.

Japan can also maximize international educational opportunities within its borders. For instance, foreign university branch campuses highlight both innovative approaches and the challenges they face. In the 1980s and 1990s, nearly 40 foreign universities established branches in Japan to enhance international education and promote the public good. However, almost all withdrew due to high taxes, regulatory obstacles, restrictive policies, and recognition issues.

Only Temple University, a public American university based in Philadelphia, has remained since opening its Japan campus in 1982. Temple University Japan (TUJ) provides a globally oriented education in English, focused on cross-cultural proficiency and global perspectives. Currently, TUJ attracts over 2,700 students from 80 countries to pursue undergraduate and graduate degrees. It also offers English-language programs for children, academic English instruction to students at Japanese universities, dual degree and study-abroad partnerships, and initiatives that bring global education to rural areas through partnerships with Nagasaki, Ehime, and Yamanashi prefectures. By equipping students with cross-cultural skills and an international outlook, TUJ enables students to succeed locally and globally while enriching Japan’s workforce with accessible, high-quality international education—without requiring students to leave the country. Despite providing this invaluable public service, TUJ receives no government support and faces other barriers.

DIGITAL ADVANCEMENT: Progress and Overcoming Hurdles in Digital Transformation

Japan has made significant strides in digital transformation in recent years, guided by a government vision of a digitally inclusive society where citizens can conveniently access essential services—such as healthcare, transportation, disaster prevention, and remote work—regardless of their location. This human-centered approach aims to empower individuals by offering tailored services that enhance accessibility across diverse populations while streamlining operations and reducing the number of employees needed for administrative tasks.

Despite its advanced digital infrastructure, government agencies and many industries have traditionally lagged in adopting digital solutions. The COVID-19 pandemic highlighted this gap, particularly in government functions, where cumbersome procedures and slow processing exposed the urgent need for modernization. In response, Japan launched its Digital Agency in 2021 to achieve sector-wide digital integration, standardize systems, invest in infrastructure, and promote workforce reskilling. This agency’s mission aligns with Japan’s “Vision for a Digital Garden City Nation,” emphasizing digital transformation for all citizens, both rural and urban. The agency has introduced initiatives to modernize public administration, streamline services, and enhance accessibility through My Number cards, a unified ID for administrative tasks. However, significant challenges remain.

Japan’s digital transformation faces persistent obstacles, including rigid bureaucratic structures, limited interoperability across government systems, and an aging workforce that often relies on traditional processes. In the private sector, small and medium enterprises struggle to adopt digital tools due to a lack of understanding and cost concerns. Furthermore, the aging population complicates efforts to implement new technologies, as older generations may be hesitant to engage with digital platforms.

To fully realize its digital goals, Japan must invest in interconnected information systems across ministries and sectors, ensuring universal accessibility for all users. A comprehensive approach to fostering digital skills across age groups and adopting digital-friendly policies is essential. This includes moving away from paper-based transactions, hanko (stamps), and faxes in favor of digital alternatives, thereby creating a more inclusive, efficient, and globally integrated economy.

Japan’s digital and human resource strategies hold great potential to boost economic resilience and position the country as a global leader. To maximize this potential, Japan must tackle challenges in public service digitalization, increase global engagement in education, and foster an environment that welcomes foreign talent. As Japan progresses toward its vision of “diverse happiness,” comprehensive, human-centered strategies will be key to harnessing its technological infrastructure to improve lives, support economic growth, and attract global talent for a thriving, inclusive future.