METI warns that Japan faces a "digital cliff" by 2025 due to a growing shortfall in professionals in Information and Communications Technology (ICT). Currently, the shortfall amounts to 300,000, but will grow to somewhere between 450,000 and 800,000 by 2030. It could cost the economy as much as ¥12 trillion per year, says METI, an amount equal to more than 2% of 2022 GDP.

 

              On the one hand, Japan scores 2^nd to Korea in the share of top global performers in international tests for high schoolers in math and science. Yet it ranks last in many digital skills among these high schoolers and their teachers, and far below average in having science majors in universities, and STEM (Science, Technology, Engineering, and Math) majors as a share of all employees.

 

              Despite laments about the shortfall and the plethora of buzzwords like DX (for digital transformation) and Society 5.0, the government is doing very little to address the problem. The new Digital Agency is mostly concerned with digitizing communications within the government and between the government and citizens, but has no mandate to address either the labor shortage or the fact that most Japanese companies rank last among 63 countries in how well they use digital technology. Among the few positive measures are a proposal to improve scholarships for STEM majors and a directive to include questions on digital matters in university exams by 2025.

 

            There are some positive changes in the private sector that is helping to remedy the main problem: low wages for ICT professionals and therefore little attractiveness. The process begins with a generational shift in attitudes, whereby a growing fraction of Japan's most talented workers feel far more secure than their parents in switching jobs in search of more interesting careers and higher incomes. In response, more than two-thirds of companies, large and small, now engage in mid-career hiring, double the rate of two decades ago. Finally, 27% of workers who do switch now get a pay hike of more than 10%, double the rate back in 2009. But whether will be enough remains in question. The positive trends need amplification by government policy.

 

              For details, see a three-part series on my free blog at:

 

https://richardkatz.substack.com/p/2025-digital-cliff-part-i

 

https://richardkatz.substack.com/p/metis-2025-digital-cliff-part-ii

 

https://richardkatz.substack.com/p/metis-2025-digital-cliff-part-iii

 

Richard Katz

Japan Economy Watch