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What happens when the population declines and the workforce dwindles? The robots come. Production and imports to Japan are growing significantly.

By Benedict Jeske

Japan’s problem continues to grow on a daily basis: The age of the population continues to increase. The Asian country is not alone in suffering this problem, as other industrial nations, such as Germany, will also experience a shortage of specialist staff over the coming decades. But what is the solution? And how can technology help an economy?

Analysts from the International Monetary Fund also wanted to know the answer to this question. They have now summarized their findings in the article "Land of the Rising Robots". "Currently, deaths outnumber births by an average of 1,000 people a day. In Japan, the rapid decline in the labor force and the limited influx of immigrants create a powerful incentive for automation, which makes the country a particularly useful laboratory for the study of the future landscape of work." Their summary: The combination of artificial intelligence and robotics could solve the problem of the rapidly dwindling numbers of employees. Moreover, they believe that, in Japan, robots will be used in a much broader range of applications than was previously the case. The analysts write: "The coming wave of automation technology and artificial intelligence promises new possibilities for replacing or augmenting labor in the nonmanufacturing sector (for example, in transportation, communications, retail services, storage, and others). According to several government reports, even small and medium-sized firms are embracing new technology to compensate for scarce labor and stay competitive."

The experience gathered in Japan on this topic could also provide valuable information for other countries undergoing similar demographic development, say the authors.

Japan may have 126 million inhabitants, yet the decline in the number of employees will be drastic in the long term. Estimates show that there will be a shortfall of around 24 million people between the age of 15 and 64 by the year 2050, meaning only around 51 percent of Japanese people will be in employment. In comparison, this figure is set to decline to around 56 percent in Germany.

Robot technology and automation aims to quickly fill this labor shortage in Japan and increase economic performance. Currently, Japan’s robot density - i.e. the number of installed industrial robots per 10,000 employees - is 308. According to the International Federation of Robotics, the figure for Germany is 322. By way of comparison, the global average is currently 85.

Japanese production of industrial robots has almost doubled over the last five years, while the total production value in 2017 was around 4.7 billion euros with an export ratio of 70 percent. The high export value is not surprising, as Japan is the world’s leading manufacturer of industrial robots. Based purely on the produced units, the Asian country is responsible for 55 percent of global production.

And ever more industrial robots are being brought into the country, too, with the number of imports to Japan growing quicker than the total imports of mechanical engineering products. Imports from the EU grew by almost 50 percent in 2017 compared to 2016,
and the trend is set to continue in 2018. Between January and September 2018, exports of German robots to Japan grew by 29 percent compared to the same period of the previous year.

However, the figures should not deceive anyone: Japan only imported robots to the tune of 43 million euros in 2017, a fraction of what local manufacturers produce for the domestic market. The dominance of Japanese companies on the market in this and many other segments in the mechanical engineering industry clearly demonstrates just how difficult it is to gain a foothold in the Japanese market.

However, the JEFTA free trade agreement, recently passed between Japan and the EU, could provide further impetus for the European mechanical engineering industry. Thanks to Jefta, the technical requirements for market access are converging, which reduces costs for both sides. In addition, public procurement is opening up even further. For the first time, the free trade agreement also includes a separate chapter for the interests of small and medium-sized enterprises.

From the standpoint of VDMA, this could open the door for German mechanical engineering companies to increase their business in Japan.

Good times are ahead for the manufacturers of robots: Not just the demographic situation, but also the easier trade conditions are paving the way for new opportunities in the Land of the Rising Sun.

Further Information

VDMA Economics and Statistics   |   VDMA Japan Liaison Office   |   International Federation of Robotics

Benedict Jeske, VDMA Economics and Statistics.