The Journal The Authority on Global Business in Japan

Here is a collection of indicators that should send a shiver down the spine of all employers in Japan. The average job securement rate of graduating university students in April 2015 was 97 percent. Keep in mind that this is already a relatively small pool of higher education talent from which we want to recruit.

In 2013, only 50 percent of high school graduates went to university compared with the Organization of Economic Co-operation and Development average of 62 percent.

There is no major change in the offing though, because currently 99 percent of high school graduates found a job upon graduation. Official numbers also tell us that over the last 20 years, the number of 15 to 24 year olds has halved.

Moreover, the number of Japanese turning 20 was 2.76 million in 1976; in 2015 it is 1.26 million. So youth recruitment demand is likely to outstrip supply, for the foreseeable future!

The required birthrate for stopping population decline is 2.1, but currently Japan is only at 1.43. Much more effort is needed here, obviously, but the prospects for a baby boom do not look promising.

A recent Japan Family Planning Association survey stated that 20 percent of men aged between 25 and 29 had no interest in sex. Forty nine percent of married couples had had no sex in the month prior to the survey, and these numbers are climbing higher each year.

Couples are marrying later, having fewer children, having less sex, and there are few prospects for resolution in sight. Japan, to put it simply, is not producing enough future workers.

Meanwhile, in 2014 the country accepted 14 refugees out of 5,000 applicants, and the debate about immigration into Japan hasn’t even begun yet.

There will be little talent recruitment competition though from young people becoming self-employed entrepreneurs instead of joining companies. In terms of ease of starting a business, the World Bank noted Japan was ranked 120th globally. This is good and bad news for bosses, however, because Japan needs more innovation and risk taking.

The female participation rate in the workforce is at 62 percent—the figure for men is 81 percent, so that gap is closing. It will continue to improve, but how long will this process take? Support for working mothers is still underdeveloped in Japan, so these changes won’t happen soon.

In a bleak portent of our future hiring quandary, the latest job openings-to-job-seeker ratio for Tokyo is 1.65. The combination of fewer young people coming into the workforce is naturally going to make hiring youth talent so much harder.

If we also take into consideration the large decline in young Japanese studying overseas, down over 30 percent since 2004, then the future talent pool of fluent English speakers also shrinks.

A recent survey of high school seniors found 58 percent don’t like studying English. In 2013, Fast Retailing Co., Ltd. boss Tadashi Yanai picked up on this trend early when he commented that, “young people are comfortable with life in Japan. We promote things they despise—going global and studying English.” The pool of the most attractive educated talent in Japan is drying up.

Foreign companies here tell us that even getting job applications from graduating students is proving more and more difficult. The students are getting multiple offers, and—even at the “job offer made” stage—the competition to actually get them on board is fierce.

Our troubles don’t end there, though. We also know that 40 percent of new entrants are ditching their employer after three or four years and heading for greener pastures. So getting them and keeping them is only going to grow in importance.

When surveyed by the Sanno Institute of Management, young entrants into the world of work showed that they want to develop their skills (68 percent) and gain job security (52 percent). The survey also showed that more than half (76 percent) want to stay with their company until retirement.

Conversely, in the Japan Productivity Center survey, 30 percent said they would switch jobs for better working conditions. In that survey, the ratio of those who prefer a salary which is not tied to achievement and performance rose from 28 percent to 44 percent between 2013 and 2014. Uh oh!

Companies that invest in continually training these young people and their middle managers will do better in this talent war. The young demand it and their supervisors need it. How is your succession planning coming along? If you haven’t confronted this issue yet, you soon will.