The latest Tankan survey of business sentiment showed that companies continue to fret about a significant shortage of labor. To put it bluntly, Japan's shrinking and ageing population leaves them without enough warm bodies to hire.
In the first-quarter report, released on Monday, the "diffusion index" on employment dropped four points from the previous quarter, to -25.
That means 25% of companies, both large and small, thought that the job market left them with "insufficient employment," even after deducting out any companies that thought the situation was good.
That was the worst reading since February 1992, just after Japan's bubble burst. That bearish indicator is only set to move lower, with companies outside the manufacturing sector most at risk.
Transportation is one sector that has been suffering. E-commerce has created a boom in the need for warehouses, truckers and courier companies. Yamato Holdings (YATRY) and its Yamoto Transport subsidiary are having to step up their rates to make meeting that demand worth their while with the workers they can recruit.
Japan's working population has been falling since it peaked in 1997 at 87.0 million. It's now at 76.2 million people -- meaning, as the Nikkei Asian Review notes, that the labor pool shrinks by roughly half a million people every single year.
That's dire, and it's beginning to show. The family restaurant chain Royal Host, a subsidiary of Royal Holdings T:8179 that some compare to Denny's (DENN) , in February stopped serving 24 hours a day.
Skylark T:3197, which operates a ton of cheap-eats outlets in just about every kind of cuisine imaginable, is moving toward a 2 a.m. close for around 70% of its restaurants that now run around the clock.
Yoshinoya Holdings T:9861 plans to offer scholarships to college students willing to work part-time in its restaurants. It serves beef-strip rice bowls so widely, there's one in my nearest public-housing estate down the road here in Hong Kong.
The government at the end of March announced plans to reform the labor market. One obvious way to immediately increase the number of workers would be to allow more in -- there are plenty of people around the world who would like a high-paying job in the world's third-largest economy, even if it's at the bottom of the job ladder.
But immigration is a highly contentious issue in a nation that once walled itself off from the outside world. The thought of letting in more foreigners, probably from places such as China and the Philippines if they're going to take low-paying service jobs, sends cold water through Japanese veins.
But who cares where they come from, if they're dressed as Winnie the Pooh or Sleeping Beauty? Theme-park operator Oriental Land (OLCLY) , which owns and runs Tokyo Disney under license from Walt Disney (DIS) , struggles to pull in enough people to fill its characters' suits. To make the prospect of wearing one more attractive, it is unionizing 20,000 part-time employees in a move that will raise wages.
In the long run, higher wages will help toward Prime Minister Shinzo Abe's plan to raise Japan out of deflation and to an inflation rate of 2%. But it doesn't help companies out of their short-term jam.
The shortfall of workers will force companies to boost capital expenditure in a bid to become more efficient and enhance productivity, Société Générale economists Takuji Aida and Arata Oto note.
Companies are predicting a 0.6% rise in spending in that direction this business year. That should be a trend throughout this fiscal year - and, I would wager, well beyond.