Japanese Foreign Direct Investment, Employment and International Migration in East Asia

Abstract

Unlike other developed countries, Japan achieved high economic growth without relying on foreign workers to supplement domestic labor. The appreciation of the yen against the US dollar after the Plaza Agreement in 1985 triggered the inflows of foreign workers and outflows of Japanese foreign direct investment. The increase of Japanese foreign direct investment to East Asia played an important role in the region's economic development. In particular, the relocation of labor-intensive operations and the transfer of highly developed technology contributed to job creation, which might have helped reduce migration pressure from East Asia to Japan. The importation of foreign labor in Japan has stalled with recent high unemployment rates. The Japanese government should make a concrete and transparent national policy on foreign labor as the Japanese population continues to age and shrink.