Made in Japan, by whom is it made?

Why AI · Why Japan’s Manufacturing Industry Can’t Do Without Support From Foreign Workers?

【By The Observer Network, Pan Yuchen | Edited by Gao Xin】

To revitalize Japan’s manufacturing industry, Japan’s leading enterprises have begun planning new production capacity on home soil.

According to The Nikkei, Toyota Motor plans to build a new automobile factory in its hometown—Toyota City, Aichi Prefecture—sometime in the 2030s. Notably, this will be Toyota’s first new factory built in Japan since 2012.

However, this high-profile “Made in Japan” defense campaign comes with a highly ironic footnote: what supports it may be a group of people who are neither welcomed in Japan nor able to stay there.

April 1, Toyota held a new employee onboarding ceremony Oriental IC

“The Future Faces” of the “Future Factory”

About 5 kilometers north of the planned site of Toyota’s new factory, there is a large residential complex called “Homi Danchi.” Among its 6,200 residents, about 60% are foreigners. Most of these foreign residents work quietly within Toyota’s vast supply chain, supporting the daily operations of the world’s largest automaker.

Based on estimates using data from Japan’s Ministry of Health, Labour and Welfare, in Japan’s automobile industry—which has 1 million people employed—the share of foreign workers has already doubled from about 4% in 2008 to about 9% in 2023. However, to maintain the current domestic production scale of 8 million vehicles per year by 2040, the proportion of foreign workers needs to be raised to 27%, which is three times the current level.

Otherwise, future Japanese auto production will fall by one-quarter. And for every 10% drop in Japanese auto output, Japan’s gross domestic product (GDP) will decrease by nearly 1%, dragging the Japanese economy into negative growth and, in turn, affecting people’s livelihoods.

Therefore, when Toyota announced last year that it would build a new complete-vehicle plant, Toyota Chairman Akio Toyoda dropped a tough line: it would spare no cost to defend domestic production. Toyota also repeatedly mentions a red line of 3 million units for annual domestic production capacity.

April 2026, Toyota Chairman Akio Toyoda attended the 2026 F1 Japanese Grand Prix Oriental IC

Against this backdrop, Japanese manufacturers need to rebuild the “Made in Japan” system together with foreign labor. For example, companies such as Toyota Auto Looms, Denso, and Aisin—also part of Toyota’s supply chain—have for the first time introduced foreign technical trainees into their manufacturing processes.

According to The Asahi Shimbun, in Okazaki City, Aichi Prefecture, there is a plastic parts factory called Iwadukasei that has long supplied Toyota and Mitsubishi. Its president, Yoshinobu Uchida, said that because the working environment is harsh, few Japanese young people are willing to work in factories. Over the past 20 years, the Japanese employees he has hired have numbered only about 10.

Now, this factory has 18 Japanese employees and 9 technical trainees from Indonesia and Vietnam. “If we could choose, we’d rather hire Japanese people. But if we don’t rely on foreigners, we simply can’t maintain the current level of output,” Uchida admitted.

“A Quiet State of Emergency”

Why has Japan’s manufacturing industry reached this point? The answer lies in population data.

Data released by Japan’s Ministry of Health, Labour and Welfare this February shows that in 2025 the number of newborns in Japan will fall to 705,800. It has not only declined for ten consecutive years, but it has also reached the lowest level since statistics began in 1899. Earlier, the National Institute of Population and Social Security Research in Japan had predicted that the number of newborns would not drop to about 700,000 until 2042—meaning the decline in the birthrate is advancing by 17 years compared with expectations.

At the same time, in 2025 the number of deaths in Japan will reach more than 1,605,000 people, resulting in a natural decrease of nearly 900,000 people.

And as of January 1, 2025, excluding foreign residents, Japan’s total population is just over 120 million—down by about 908,000 from the previous year, with the decline rate reaching a new high since records began in 1968. Among them, the share of elderly people aged 65 and above is close to 30%.

It is foreseeable that in 2026, Japan’s population will fall below 120 million.

In February this year, Japanese Prime Minister Sanae Takahichi said in the Diet that the declining birthrate and population shrinkage are a “quiet national state of emergency,” gradually eroding Japan’s vitality as a nation. However, she also acknowledged that although successive governments have promised to boost fertility, the results have been minimal.

April 7, Japanese Prime Minister Sanae Takahichi (right) bowed after passing the FY2026 budget bill in the Diet Oriental IC

Japanese companies that are directly affected are even more worried.

According to The Nikkei, Masahiko Ishibashi, deputy factory manager of Toyota’s Motomachi Plant, warned that by 2040 Japan’s working-age population will drop from about 75 million in 2020 to 62 million. Labor shortages have already caused the number of corporate bankruptcies last year to rise by more than 30%.

Against the backdrop of a rapid decline in the domestic population, Japan’s economy is increasingly unable to do without an influx of foreign workers. Using Spain as an example, The Nikkei explains why it is necessary to supplement the labor force: Spain began actively accepting immigrants around 2020, and immigrants now account for 14% of its population. Measured by GDP, Spain’s economy grew by 2.9% in 2025, performing better than EU countries such as Germany and France, and its GDP per capita has also surpassed Japan.

Have your hands, not your people

As of the end of October 2025, the number of foreign workers in Japan reached a record 2.571 million, a new high for 13 consecutive years, accounting for one-third of Japan’s total workforce. Among them, manufacturing is the industry with the highest concentration of foreign workers, at nearly one-quarter.

However, ironically, Japanese policy is pushing them out.

After taking office last October, the Takahichi government immediately rolled out a series of policy measures limiting foreigners: for example, extending the residency years for naturalization from 5 years to 10 years; introducing compulsory Japanese language tests for permanent residency; sharply increasing visa fees; and even proposing that permanent residency be revoked due to administrative violations such as owing taxes. Even though the related systems may not be implemented until 2027 at the earliest, the Takahichi government has already made them a core “trump card” in the election campaign.

Meanwhile, the long-term living situation facing foreign workers in Japan is also worrying. According to The Mainichi Shimbun, the jobs carried out by foreign technical trainees in Japan are often regarded by Japanese people as “3K jobs”—dangerous (kiken), dirty (kitanai), and hard/tiring (kitsui). In 2022, the number of registered technical trainees in Japan who went missing exceeded 9,000, largely due to unfair treatment, excessive overtime, and restrictions on job transfers.

Employees from Vietnam working in a parts factory in Japan Asahi Shimbun

Although the Japanese government plans to abolish the old system in 2027 and replace it with a “training and employment” system, the inertia of a cheap labor system that has operated for more than 40 years cannot be changed overnight.

Atsushi Oguma, a professor of business management at Tokyo University of Industry, said that over the past decade, the number of foreign children attending Japan’s public elementary and middle schools has nearly doubled. As a result, the so-called “Alpha Generation” born after 2010 has a higher degree of acceptance of coexisting with foreigners. But it appears that Japanese society and policy makers still remain stuck in the previous era.

At present, Japan is trapped in an intractable contradiction: on the one hand, the government and companies repeatedly emphasize the harms of declining birthrates and the importance of foreign labor; on the other hand, they set up layers of thresholds in foreign labor policies and sell anxiety during election campaigns to win votes. The gap between the intention of the Takahichi government to put “Japanese people first” and the reality that Japan’s manufacturing cannot function without foreign workers remains, at all times, a chasm that cannot be bridged.

This article is an exclusive piece by The Observer Network. Unauthorized reproduction is prohibited.