Avatars, robots and AI: Japan turns to innovation to tackle labour crisis
Farmers, retailers and builders rethink business models as world’s fastest-ageing society runs out of workers
www.ft.com
Avatars, robots and AI: Japan turns to innovation to tackle labour crisis
Farmers, retailers and builders rethink business models as world’s fastest-ageing society runs out of workers
At some branches of Japanese convenience store Lawsons, an avatar greets customers © FT montage
Kana Inagaki, Leo Lewis and David Keohane in Tokyo
YESTERDAY
72
With 500 days to go before the spring 2025 opening of the Osaka World Expo, its secretary-general Hiroyuki Ishige reassured the public that the multibillion-dollar global showcase would be ready on time.
Ishige’s confidence may be genuine, but the fact that he had to address the question at all is the result of a crisis far beyond his control. The Expo — a dusty, barren site with little yet built — is the most high-profile victim of a national shortage of construction workers.
A shortfall of workers in the world’s fastest-ageing economy is profoundly affecting the way the government, companies and people operate now and think about the future.
Even the most iconic features of Japan’s famous service economy are in jeopardy. Central Japan Railway ended the beloved food trolley on the Tokyo-Osaka bullet train in October, while across the country vending machines are increasingly left unfilled for days.
“Japan’s labour shortage is occurring regardless of whether the economy is doing well or not,” said Shoto Furuya, chief researcher at the Recruit Works Institute. “We are beginning to fall short of essential services on which we rely on to maintain people’s lifestyles and social infrastructure.”
RWI estimates that the country will have a labour shortage of 11mn people by 2040, with the number of people above age 65 — who already account for nearly 30 per cent of the population — expected to hit its peak in 2042.
In the past decade, Japan has relied on female and elderly workers in the face of strict restrictions on hiring overseas workers. But Naruhisa Nakagawa, founder of hedge fund Caygan Capital, said from this year this would no longer be enough and the country’s labour force would start to dwindle.
How Asia’s largest advanced economy responds to this labour crisis will be closely watched, not least by its neighbour China, whose population has also begun to shrink.
One way Japan is tackling the demographic challenge is by introducing avatars, robots and artificial intelligence to the workforce in key sectors:
Japan’s construction industry has long struggled to hire workers despite attempts to attract more women and young workers by trying everything from raising wages and offering more fashionable work uniforms to installing portable female toilets at building sites.
Still, the number of people employed in the sector has declined 30 per cent to 4.8mn workers from its peak in 1997, according to the Ministry of Land, Infrastructure, Transport and Tourism.
The ministry data also shows that only 12 per cent of construction workers are aged under 29, while about 36 per cent are over the age of 55. So severe are the sector’s staffing problems that it was given five years to prepare for new labour rules coming into force in April that would curtail overtime for construction workers and truck drivers.
As the reality of these shortages have hit, the estimated cost of the Expo has doubled to more than $1.6bn, as contractors are forced to pay more to entice workers. Some countries, fearing soaring costs and delays, are scaling back their presence. Japan’s great national showcase could be directly harmed by its labour shortages, diplomats warned.
For Daniel Blank, the chief executive of start-up Toggle, the crisis presents a business opportunity.
Blank travelled from New York to Japan last year to promote the use of industrial robots to automate the most labour-intensive process for construction companies: the assembly of reinforcement bars. Last year, Toggle raised a combined $1.5mn investment from Tokyu Construction and Takemura, another Japanese construction group.
“Japanese companies are scouting for new technology all over the world,” Blank said. “It’s really all driven by the shortage issue. With labour becoming more expensive and harder to find, you need to find new ways to deliver construction projects.”
For decades, the giant confectionery maker Lotte has delivered its chocolate-filled, bear-shaped biscuits, Koala’s March, by lorry. Now, in preparation for an acute driver shortage as the change in overtime rules comes into effect, one of the nation’s favourite children’s snacks will be delivered by train.
Other companies across Japan, including carmaker Toyota and ecommerce group Rakuten, are making similar preparations, with the development of robots and self-driving vehicles as well as consolidations with smaller rivals.
Japan’s roughly 4mn vending machines require an army of truck drivers to keep them filled. Increasingly, the gaps between refills are widening, especially in rural areas and even in large cities. The industry is rushing to adapt. JR East Cross Station, a food and drink supplier, started using trains in November to transport cans of drinks to refill some vending machines.
At its Motomachi plant in Aichi prefecture in central Japan, Toyota has started using a fleet of “vehicle logistics robots” to pick up and move cars to the loading area. Eventually, the carmaker hopes to replace 22 human workers at the yard with 10 robots.
“The shortage of truck drivers is not just a 2024 issue but a problem we have faced from a very long time ago,” a Toyota manager said. “These efforts alone will not make up for the number of drivers we need.”
In the farmlands of Miyazaki prefecture in southern Japan last summer, a robot duck called Raicho 1 — by Kyoto-based robot maker Tmsuk — took to the rice paddies to churn up weeds. The solar-powered robot was just one of a suite of drones and robots designed to sow, nurture and harvest a standard rice crop without the use of humans. A high-pressure water cannon was used to scare off the wild boar and deer that now roam more freely as the human population in the area has declined.
The experiment that ended with the October rice harvest produced a potentially exciting result for both the company and Japan: the overall number of human hours involved in the process fell from 529 to 29, a 95 per cent reduction in manpower with only a 20 per cent reduction in total rice yield.
As the Japanese population has shrunk and aged, its agricultural labour shortages have become dire. Government data shows that in calorie terms the country was self-sufficient for 38 per cent of its needs in 2022, against a government target of 45 per cent by 2030.
That target increasingly looks impossible to hit, with the national average rate of abandoned farmlands now exceeding 10 per cent. As prime arable land has gone to pasture, analysts warn that some of Japan’s most famous agricultural products, including regional sakes and other speciality foods, could be lost.
With 43 per cent of Japanese farmers aged over 75 and the average age of all farmers at almost 68, Tmsuk’s chief executive and founder Yoichi Takamoto said Japan had little choice but to embrace a robot labour force.
In a small convenience store in central Tokyo that sells everything from toothpaste to egg sandwiches and socks, a smiling member of staff welcomes customers at the door. Amiable and animated, it offers greetings and advice from a 4ft screen.
The newly installed avatar is controlled remotely by an employee at retail chain Lawsons and is part of a trial with Avita, the company behind the technology.
“We started to think about this during the Covid-19 pandemic as a way to protect workers and it’s now a way to allow people to work who would otherwise struggle to be physically present in stores,” said Kazuki Tsukiuda, a senior Lawson executive.
Going forward, the plan is for each operator — be it a working parent, an older person returning to the workforce or someone with a disability who prefers to work from home — to control three or four avatars, enabling the retail chain to staff night shifts and rural locations.
Recommended
The Top Line Kana Inagaki
Japan’s acute labour shortages fuel a long-awaited domestic consolidation
Labour shortages have forced Japanese retailers and convenience stores, known as combini, to cut back hours and services. According to the Japan Franchise Association, the country’s convenience stores were short of 172,000 workers in 2020 and the trade body forecasts a gap of 101,000 workers by 2025. As a result, the association says 87 per cent of combini are now open 24 hours, compared with 92 per cent at the end of August 2019.
Hiring foreign students, who are able to work despite the country’s tight restrictions on immigration, is another option. But some need weeks of training to meet customer expectations. “There are only a few who understand the Japanese way of polite and genuine customer service and can deliver that in Japanese,” said Tsukiuda.
While just eight Lawsons have avatars currently, Shogo Nishiguchi, chief operating officer at Avita, said the “mission” was to have 100,000 avatar operators working across Japan by 2030. “In rural areas, avatars can keep stores open,” said Tsukiuda. “Even if we doubled wages, there just isn’t anyone to hire.”
