Japan’s Rising Informal Workforce Offers Hard Lessons for Indonesia, Says LDP Politician Fukuda

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JAKARTA, investortrust.id — The rise of informal employment in Japan—from 20% to 40% over the past 25 years—should serve as a critical lesson for Indonesia as both nations grapple with deindustrialization, demographic shifts, and global economic uncertainty.

Japanese lawmaker Tatsuo Fukuda, a member of the Liberal Democratic Party and representative of Gunma District 4, warned that policies like former U.S. President Donald Trump’s reciprocal tariffs could weaken Japan’s formal labor absorption capacity. He made the statement during a meeting with Rachmat Gobel, Vice Chair of the Indonesia–Japan Friendship Association and member of Indonesia’s House of Representatives, along with top Indonesian media leaders at the LDP headquarters in Tokyo on Friday, April 18, 2025.

Fukuda attributed the surge in informal workers to Japan’s declining industrial base, a trend worsened by the COVID-19 pandemic and exacerbated by inflation and geopolitical events like the Russia–Ukraine war. “Trump’s tariffs create more uncertainty. In such times, businesses prefer to hold onto cash, which stalls job creation,” he said.

He also highlighted Honda’s decision to shift 90% of its production to the United States as a direct consequence of U.S. tariffs, effectively transforming the iconic Japanese brand into an American manufacturer.

The tariffs come amid persistent inflation in Japan. In March 2025, the year-on-year inflation rate hit 3.2%, the third consecutive year that core inflation exceeded the Bank of Japan’s 2% target. Responding to the price surge, the Bank of Japan raised its benchmark interest rate to 0.5% in January—its highest in 17 years.

These developments pose deep challenges for Japan’s economic outlook. The central bank now projects GDP growth in 2025 at only 1.1%, down from previous estimates. With exports accounting for around 22% of GDP, any drop in trade with the U.S. could significantly affect overall performance.

Japan’s manufacturing sector, which contributed about 28% to GDP in 2024, remains vital not just for growth but also for employment. Fukuda pointed out that Japan added 20 million workers between 1990 and 2025 despite a shrinking population. With over 45% of its citizens now aged above 64, many older Japanese are returning to the workforce part-time, often in informal roles.

This aging society dynamic, he noted, further entrenches informal employment. "Seniors with specific skills are working again, but in conditions that qualify them as informal labor," he explained.

According to Fukuda, such structural shifts squeeze both micro-enterprises and low-income workers. “With rising prices for daily necessities, informal workers and small businesses are suffering,” he said. While Japan’s upper middle class can absorb shocks—such as a 25% rise in luxury car prices—those in the informal economy are not so fortunate.

“It’s not just GDP that matters. It’s the welfare of the people,” Fukuda stressed, emphasizing that revitalizing industry is critical to preserving household incomes and job security.

The economic challenges have also taken a toll on political support. Fukuda admitted that the Liberal Democratic Party and its coalition partner Komeito lost dominance in Japan’s Lower House during the October 2024 elections, dropping from 279 to 215 seats—well below the 233-seat majority threshold.

“There’s a sense of fatigue among the public. After 13 years of LDP-led governments since Shinzo Abe, voters are looking for fresh faces from other parties,” he said.

Fukuda concluded by underscoring the need for Asian countries to rediscover "Asian values" amid global uncertainties. Trump’s new tariffs—announced on April 9, 2025, raising levies on Japanese goods to 24% from previous levels of 0–5%—could push nations across Asia to build deeper regional cooperation and strengthen their competitive edge collectively.

“Facing a leader like that, all we can do is wait and see,” said Fukuda, acknowledging the unpredictability of U.S. trade policy.