Japan: Land of Rising Costs?

Japan’s labour market hit a milestone last month. For the first time on record, there are now more permanent jobs available than applicants to fill them. Wages are also posting some of their highest rises in decades, according to reports.

Talent scarcity and higher wages could eventually impact prices in what is already Asia-Pacific’s most expensive destination for expatriate packages. How can employers therefore balance the financial impact of these trends to deliver both value and successful assignments?

Assignees returning

Despite Japan’s reputation for incredibly low inflation, rents in Tokyo have been increasing steadily over the past five years. In some of the more popular areas, rents have grown by as much as 30%. This makes accommodation one of the costlier elements of assignments to Tokyo.

Pressure on rents and expatriate housing in this famously densely-packed metropolis comes as foreign nationals travelling to and remaining in Japan is growing again after 2011’s devastating Honshu earthquake and tsunami.

Visitor numbers are highest among Japan’s regional neighbours, including China and South Korea, where numbers have risen by at least a quarter (1*). The country’s popularity is also on the up again with expatriates from Australia, the US, the UK and Germany, data suggests.

Simultaneously, Greater Tokyo is bucking nationwide population trends and growing. Residential areas traditionally popular with expatriates are now sought-after by local professionals, too, bidding up accommodation costs.

Accommodating and supporting moves

What can mobility managers and assignees do to respond to these trends? One straightforward solution for cost-focused, long-term moves is for assignees to consider living outside of these favoured neighbourhoods.

Some of Tokyo’s up-and-coming areas are close to current expat hotspots and commutable to central business areas. With authentic experiences and local living increasingly sought after by assignees, especially Millennials, these locations could make an assignment to this unique city even more attractive.

Attentive home and school searches by local specialists will help pinpoint the right home for individual assignees in this dynamic and fast-moving rental market. Cultural support becomes even more critical with this option, ensuring assignments offer the maximum benefit for everyone and assignees can fully appreciate all the many facets Tokyo and Japan have to offer.

Balancing affordability and assignment appeal

At a strategic level, inventive approaches to addressing Tokyo’s assignment cost challenges might include offering more flexible, menu-based (core-flex) packages. These can deliver better value by encouraging employees to select the relocation and destination services most helpful to the them. Could cultural support include learning a traditional Japanese musical instrument, for example?

For intra-regional moves, switching to other package types, like extended-business travel arrangements or short-term assignments, may be another option. Again, good advice and market insight are important here as Tokyo prepares to host the Olympic and Paralympic Games in 2020 and goes for gold with tourism. This could affect short and medium term corporate housing and travel.

In any case, a great starting point for untangling Tokyo’s challenges is to talk to assignees about their preferences. Could it be time to review your policy approach to align business and assignee objectives more closely?

At Sterling, we are always ready to listen to your assignees’ and your business’s needs. We can share our local knowledge and experience through the full range of policy consulting, cultural, home finding and education services. Please email Erika.Toomer@sterling.com to find out more.

 

1. www.stat.go.jp  Chapter 2: Population and Households: 2-24 Persons who entered or departed from Japan

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