Japan’s Labour System Reset: Why the World’s Oldest Economy Is Rewriting Its Foreign Worker Rules

Japan is running out of workers and patience. Facing a shrinking population and mounting labour shortages, Japan has announced a sweeping reset of how it recruits and manages foreign labour. From 2027, the country will scrap its controversial trainee system and replace it with a tightly capped, skill-focused programme. The move is bold, risky, and politically fraught. Here’s what’s changing, and why it matters.

What exactly has Japan announced?

Japan will introduce a new Employment for Skill Development (ESD) programme from fiscal 2027, replacing the decades-old Technical Intern Training Program (TITP).

Under the new system, the number of foreign trainees will be capped at about 426,000 for the first two years, according to reports by Kyodo News. This marks a fundamental shift from open-ended intake to controlled, outcome-driven migration.

Why is Japan overhauling its labour system now?

Two pressures are colliding.

First, Japan is running out of workers. With one of the world’s fastest-ageing populations, the country will need nearly 6.9 million foreign workers by 2040 to sustain economic activity, according to estimates by Japan International Cooperation Agency.

Second, the existing trainee system has been widely criticised for labour exploitation, unpaid wages, and poor working conditions, turning what was meant to be “skill transfer” into a source of reputational damage.

The new system is an attempt to fix both problems at once.

What happens to the current Technical Intern Training Program?

It will be fully phased out by 2027.

Launched in 1993, the TITP had around 360,000 trainees as of mid-2024, mainly from Southeast Asia. But the cracks were glaring: nearly 10,000 trainees went missing from workplaces in 2023 alone, according to government data. The ESD programme is meant to close these loopholes.

How is the new system different?

The biggest change is intent. Instead of short-term labour disguised as training, the ESD programme is designed as a three-year, structured skill pathway. Workers will enter as trainees and then transition to Specified Skilled Worker (SSW) Type 1 status.

Those who upgrade to SSW Type 2 can renew visas indefinitely, bring family members, and eventually apply for permanent residency. In short, Japan is quietly admitting it needs migrants and not just stopgaps.

How many foreign workers will Japan allow overall?

By March 2029, Japan plans to accept around 1.23 million foreign workers across all schemes, according to the Japan Times. This includes 805,700 workers under SSW Type 1 (slightly reduced from earlier targets), and 426,200 trainees under the new ESD programme. The government argues that higher productivity and automation will offset the lower headcount.

Which sectors are desperate for workers?

Seventeen industries are on the priority list. The worst-hit include construction, nursing care, and agriculture, manufacturing, food services, and healthcare. More than 60% of small and medium enterprises report acute labour shortages, and most firms hiring foreign workers employ fewer than 100 people, making them especially vulnerable.

What new requirements will foreign workers face?

The rules are getting stricter. Language proficiency is now mandatory. Workers must clear Japanese tests to qualify for SSW visas. From April 2025, even language-school students must prove 150 hours of study or JLPT N5-level proficiency. The message is clear: integration is no longer optional.

How is public opinion shaping this reform?

Cautiously, and often reluctantly. Surveys show only 23% of Japanese voters support higher immigration, forcing the government to tread carefully. Prime Minister Sanae Takaichi has paired labour reforms with tougher enforcement against visa overstays to reassure sceptical voters. The caps are political as much as economic.

What happens in 2026?

2026 will be the make-or-break year. Detailed sector-wise rules are expected by mid-2025, with full policy frameworks locked in before year-end. Through 2026, companies, recruiters, and foreign workers will prepare for the transition as the old system winds down. If the groundwork falters, the 2027 launch could stumble.

Why does this matter beyond Japan?

Because Japan is testing a model many ageing economies may soon need. If the ESD programme succeeds, it could show how to balance labour shortages, worker protections, and political resistance to immigration. If it fails, it will expose the limits of half-open doors in a shrinking world.

(yMedia is the content partner for this story)