Commentary: Japan’s cheap curry lunch faces an impossible trinity

Japan can preserve only two of three things: cheap everyday services, rising wages and minimal immigration, says Gearoid Reidy for Bloomberg Opinion.

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TOKYO: The “Indian curry” lunch is a Japanese salaryman’s treat. Two or three mildly spiced dishes, paired with unlimited quantities of slightly sweet and extra fluffy naan, typically with a small salad and drink - a steal at only 1,000 yen (US$6.40) or so. 

This isn’t Japanese curry rice but another variation, one that, like its British equivalent, has been entirely adapted to the local market. Indeed, most “Indian” places - thought to be north of 4,000, more than the number of McDonald’s - are actually run by Nepalese.

But concerns are rising that the curry lunch might be under threat, along with 24-hour izakaya pubs and other food service businesses increasingly dependent on foreign labour. With the sector already facing the strain of inflation, migrant workers and owners are now being squeezed by limitations on visas.

WHY IS THERE A THREAT?

There are two separate issues hitting simultaneously. The first is a tightening on rules for business-owner visas, with stricter conditions that include hiking capital requirements from 5 million yen to 30 million yen, beyond the reach of many of those Nepalese owners.

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Intended to crack down on wealthy outsiders creating paper companies with no actual business, fears are rising that it’s also hitting family-owned foreign restaurants. Bankruptcies in the category reached a 30-year high last year, with surveys finding one in 20 are thinking of closing down.

At the same time, it’s becoming harder for eateries to hire foreign staff. The Specified Skilled Worker system, set up in 2019, brings overseas labour across multiple sectors. But food services has hit its cap of 50,000 workers, forcing authorities to suspend new issuance.

The industry, already extremely sensitive to prices, has grown increasingly dependent on foreigners in recent years, particularly in the biggest cities, and not just in Nepalese restaurants.

While you might think this is the doing of Sanae Takaichi’s administration, which has made tightening immigration rules one of its signature policies, both issues can be traced to her predecessors. The question is how the prime minister chooses to respond, as some businesses want the government to expand the visa cap and revoke the higher capital requirement.

Any move will need to be carefully considered. Observe the reaction to comments from the head of one of the country’s largest low-cost food chains, ramen and Chinese-food purveyor Hiday Hidaka Corp.

If it can’t recruit foreigners, President Hiroshige Aono said on a TV show, outlets will be forced to turn to local high-school or university graduates. The company issued an apology after users on social media accused him of looking down on local workers.

REALITY OF THE SITUATION

But in reality, there aren’t enough domestic staff for these jobs - at least not at what they pay. The cost of increasing wages is going to be reflected in the product, meaning costlier lunches. Something has to give.

The issue reflects a kind of “impossible trinity.” With its population declining, Japan can preserve only two of three things: cheap everyday services, rising wages and minimal immigration. It can’t have all three at once.

For most of the Lost Decades, it opted for low prices and little immigration. Wages didn’t rise, but that was okay as long as the curry stayed cheap. Indeed, a good chunk of its social stability was down to the fact that life can be quite comfortable, even if pay was stagnant.

But as the economy recovers, the price of inputs rises, and the population declines, things are changing - and Japan must make a new decision. Automation can boost productivity. But how much work in a labour-heavy Indian shop can be done by a machine? 

Complicating things is the fact that Japan’s labour market structurally makes it more difficult for local workers to move up the ladder into higher-paying jobs, even if more low-paid roles are occupied by foreigners. Things are changing, but the market is still far less liquid than similar countries, and people are less likely to change positions.

If wages are to rise, the country must accept either price increases (and probably worse service), or more immigration. But Japan’s version doesn’t have to look like the failed programs of some Western economies - and almost certainly won’t.

This is why I have welcomed Takaichi’s policies, such as eliminating visa overstayers. Revising a piecemeal strategy sets Japan up to import the labour it needs and shifts focus to integrating those immigrants who choose to stay.

The issues worrying the food sector are a warning, but not yet a disaster. That applications for business manager visas have reportedly fallen 95 per cent indicates that far more than just those abusing the system with shell companies are being affected by the onerous rules. There’s still time to tweak them to avoid cracking down on hardworking entrepreneurs and needlessly closing restaurants. 

Japan can still have its cheap curry lunch. But only if it accepts that someone - diners, employers, workers or voters - will have to pay more for it.

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