He’s among a record number of young Japanese granted working holiday visas in Australia last financial year, lured by higher wages that are made even more attractive by the weakening yen.

“From a salary perspective, it’s so much better here,” said the 25-year-old, who earns around A$5,000 ($3,300) a month after tax and lives in Goulburn, south of Sydney. “If you want to save money, Australia is the place to be.” 

With similar visa programs in the UK, Canada and New Zealand recovering post pandemic, the outflow of talent risks exacerbating Japan’s acute labor shortage. It’s also a sign that many younger Japanese aren’t buying into the nation’s economic optimism as it exits from decades of deflation. 

“Youth are questioning Japan’s economic outlook,” said Yuya Kikkawa,an economist at Meiji Yasuda Research Institute. “Living conditions are far tougher than the headline inflation figure suggests.”

The Bank of Japan finally scrapped the world’s last negative interest rate last month amid signs a virtuous cycle of wage gains is feeding demand-led inflation. But even after Japanese labor unions won their biggest wage hike in more than 30 years last month, there remains a notable gap in real wages with other advanced economies. 

In 2022, average annual wages in Japan were $41,509, compared with Australia’s $59,408 and $77,463 in the US, according to the latest data from the Organisation for Economic Cooperation and Development.

A long-running trade off that put job security ahead of higher pay made more sense when prices were barely moving. Now with inflation at its strongest in decades, Japanese are starting to realize that years of static wages leave many of them budgeting each month before their next pay check.

“Japan’s wages hadn’t risen at all for 20 years while other countries were increasing theirs,” said Atsushi Takeda, chief economist at Itochu Research Institute. “With the yen getting weaker, the gap has become even bigger.”

Some 14,398 Japanese were granted working holiday visas in Australia in fiscal 2022-23, the highest number in Australian government data going back to 2001. It allows 18- to 30-year-olds (or 35 for some countries) to have a 12-month holiday and work in roles ranging from farming to hospitality, nursing, construction or office work to fund their trip. There’s also an option to extend as long as three years.

On top of the attractive wages, Australia has been a popular destination for Japanese due to its perceived safety, the similar time zone to Japan and recently relaxed rules that allow visa holders to work for more than six months for employers in certain industries.

Australia “always had a generous visa system but recent changes in lengthening the employment period made it even easier for Japanese to move there,” said Kotaro Sanada, a spokesman for the Japan Association for Working Holiday Makers. 

Aside from Australia, Canada issued 7,996 such visas in 2023 until October, while the UK issued 898 last year, according to host-country data. New Zealand approved 2,404 in fiscal 2022-23. Sanada anticipates numbers will rise further as rules are relaxed. He expects the UK to become the next popular destination after the annual visa quota for Japanese was raised to 6,000 from 1,500.

“More people are flying abroad with hopes of getting jobs,” said Harumi Taguchi, principal economist at S&P Global Market Intelligence. “If this trend continues, hiring younger workers in Japan could get even more difficult.”

Lili Takahashi, who flew to Australia this month shortly after graduating college, says she aims to spend two years on a working holiday and may apply for permanent residency and marry her girlfriend there. Australia, unlike Japan, allows same-sex marriages.

In the meantime, the higher wages in Australia — magnified by the yen at the weakest against the Australian dollar in almost a decade — will allow a better work-life balance.

“Japanese wages may be enough to survive,” said Takahashi, 22. “But it’s sad to think I wouldn’t have much money left for hobbies and hanging out with friends” if she stayed in Japan. 

The rise in working holiday visas is part of a broader trend of Japanese choosing to live abroad. Last year, the number of Japanese who were permanent residents overseas was the most since the survey started in 1989, according to the Ministry of Foreign Affairs. 

That could worsen chronic labor shortages in Japan’s aging and graying society, where companies compete for increasingly scarce human resources. 

More than two-thirds of small- and medium-sized businesses say they face labor shortfalls, one survey found, and the number of bankruptcies attributed to manpower constraints reached a record high last year, according to a report by Teikoku Databank. Last year, the government allowed a record number of foreign workers into the country to alleviate the demographic struggles.

Itochu’s Takeda says the outflow of Japanese workers depends on the economic outlook.

“If the conditions for faster growth do take hold in Japan, maybe young people will see a reason to return,” he said.

–With assistance from Akemi Terukina and Emily Cadman.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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Published: 13 Apr 2024, 05:04 AM IST