How to Recruit Top IT Engineers in Japan: Strategies for Navigating the Talent Shortage

October 25, 2024

IT engineers are at the heart of a company’s business growth and innovation, and engineers with skills in cutting-edge fields such as cloud computing, AI, and security are extremely valuable assets that greatly enhance a company’s competitiveness. However, securing such top talent in Japan is becoming increasingly difficult.

This article looks at the current state of the ICT industry in Japan and the tight labor market that is making life difficult for many companies. Then we will offer advice on specific channels and strategies that can be used in Japan by companies struggling to recruit high-skilled IT engineers.

The COVID-19 pandemic had an enormous impact on how we live and do business. To prevent the spread of infection, many companies shifted from traditional office work to remote work. With this came a surge in demand for digital infrastructure, such as cloud services, online meeting platforms, and security systems for remote access, and accelerated the shift to digitization, or what is referred here as Digital Transformation (DX).

According to GlobalData, the size of Japan’s ICT market in 2023 reached US$ 315.04 billion. This means it remains a key pillar of the Japanese economy, a close second to the automotive industry. With the ongoing adoption of remote work and the push for digital transformation, demand for IT engineers is expected to continue rising.

Unfortunately, many businesses are struggling to find and hire IT engineers with the skills they need to operate, develop and innovate their businesses effectively. There are a number of factors at play here.

One is Japan’s shrinking labor force caused by its falling birthrate and rapidly aging population. In 2025, the number of people of working age will be almost 20% less than it was 30 years ago. The number of high school graduates going into the workforce or university will be 35%.

This links to another closely related factor. Japan’s education system has struggled to keep up with advancements in technology and there has been slow adoption of ICT in schools as both a tool and a subject compared to other developed countries. While the situation is showing signs of improvement, computer literacy among high school graduates is still quite low. At further and higher education levels, there are insufficient domestic opportunities to train future talent in areas such as AI, cloud, and cybersecurity. This creates a lag in the emergence of young IT professionals which feeds into the talent shortage. In fact, in 2025, Japan is expected to hit what the government calls the “Digital Cliff”, where the shortage of IT engineers will reach a critical point and will start having a serious impact on the competitiveness of Japanese businesses.

Another factor is increased competition for Japanese engineers from overseas. Global companies are actively recruiting Japanese mid-career engineers for work both domestically and internationally, particularly in the fields mentioned earlier where their expertise is often advanced. The recent depreciation in the yen and relatively low salaries for Japanese engineers has positioned them as cost-effective talent and made them even more attractive to overseas employers. At the same time many Japanese engineers are attracted to these global opportunities, hoping to find better compensation and career advancement.

This movement of engineers to global enterprises is being exacerbated by the slow adoption of new technologies and workstyles by Japanese companies. In a country famous for its global tech giants, like Panasonic, Sony and Fujitsu, it may be surprising that many domestic businesses are unable or unwilling to keep up with technological innovations, an issue reflecting a combination of conservatism and risk aversion that has developed in its business culture. Similarly, the implementation of flexible work styles, such as remote work and flex-time, has also been slow and these are especially attractive to young engineers. As mentioned, the Covid 19 pandemic did manage to kick-start some changes but a perceived lack of progress and flexibility is pushing many homegrown engineers toward global companies that have actively embraced cutting edge tools and offer more adaptive work environments.

However this only represents part of the picture. The difficulty in hiring engineers is not just due to the overall shortage and fierce competition. There are several unique barriers, especially when foreign or international companies attempt to hire engineers in Japan.

• Low mobility of talent: Engineers with advanced skills are often already employed with compensation packages that are relatively high for Japan, making them less likely to appear on the job market. In Japan, the emphasis on job stability and the stigma around frequent job changes means that talent mobility is lower than in other countries.
• Challenges in assessing skills: Accurately evaluating an engineer’s technical abilities can be difficult. It’s not always easy for companies to gauge a candidate’s technical expertise and experience during the interview process. For global companies operating in multiple regions, technology expertise and development methods can differ significantly from country to country. For example, while one country may primarily use Java and AWS, another may focus on Python and Google Cloud. Understanding these differences and incorporating them into the evaluation process is essential. Without well-established evaluation criteria, companies struggle to identify the right talent and encounter mismatches during the hiring process.
• Language and cultural barriers: When international companies recruit engineers in Japan, language and cultural differences can become obstacles. Even highly-skilled candidates may struggle if they lack the Japanese language proficiency needed for daily work or cannot adapt to Japan’s unique business customs. Moreover, the differences between Japan’s employment practices (e.g., seniority-based promotions, lifetime employment, and consensus-based decision-making) and those of foreign firms can lead to cultural clashes. Companies must understand these differences and support employees in adapting to ensure smooth recruitment and retention of talent.

So, how bad is it? A study by Japan’s Ministry of Economy, Trade, and Industry shows that there was already a shortfall of around 170,000 IT professionals in 2015. By 2030, this number is projected to rise to around 590,000. A survey by the recruitment firm Robert Walters published in 2023, found that over 80% of IT businesses were concerned about the growing talent shortage. Approximately half said they were “very concerned” and many companies were reported as saying that for senior engineers, team leaders and managers the situation was acute.

Earlier, we discussed the reasons behind the challenges companies face in recruiting engineers. Here we will look at effective methods for recruiting mid-career engineers in order to address these issues.

4-1. Utilizing Job Posting Platforms and Matching Services

In Japan, job posting platforms such as Recruit’s Rikunabi NEXT, Doda, and Mynavi are widely used both by companies and job candidates, and are an excellent channel for telling people about vacancies in your organization. Companies use these platforms to post job openings and interact directly with applicants. There are two main payment models for these platforms:

• Advertisement-based fees: Fees are incurred when a job posting is published, regardless of whether the company receives applications or not. This method involves fixed costs, making it easier for hiring managers to manage recruitment expenses.
• Success-based fees: Fees are only charged when a candidate is successfully hired. Although this reduces the financial risk for companies, the recruitment cost is typically higher upon successful placement.

Employment matching services like BizReach and Green are also effective tools. These services use specialized agents who introduce candidates that meet their clients’ requirements, making them particularly useful for recruiting highly-specialized engineers. Success-based matching services typically charge a commission of between 20% and 35% of the candidate’s annual salary upon successful hiring. The general recruitment process for matching services involves the following steps:

1. Understanding the company’s needs: Agents hold close consultations with their clients to clearly and carefully define the skills, experience, and qualifications needed for the role they want to fill.
2. Candidate selection: Agents shortlist candidates from their database who meet the company’s requirements and introduce them to the company.
3. Interviews and evaluation: The company interviews the candidates to assess their technical skills and cultural fit. Agents also assist in coordinating and following up during this process.
4. Offer and negotiation: Based on the interview results, the company presents an offer, and the agent helps negotiate terms with the recruit.
5. Post-hiring follow-up: In some cases, agents provide ongoing support to ensure a smooth onboarding process.

4-2. Referral Hiring

Referral hiring involves recruiting new engineers based on recommendations from existing employees. This method has the advantage of reducing mismatches, as the referred candidate is usually someone already known and trusted by the employee recommending them. Additionally, engineers who are introduced to a company like this tend to adapt to the workplace more quickly and show lower turnover rates since they often already have a positive relationship with staff.

To maximize the effectiveness of referral hiring, it’s important to implement a clear internal referral system and provide incentives to employees for successful referrals. This encourages employees to actively recommend candidates. Particularly when hiring for positions that require advanced technical skills, referrals from trusted colleagues can do a lot to streamline the recruitment process.

4-3. Leveraging LinkedIn

LinkedIn is an essential tool for global recruitment, and it’s increasingly used in Japan, especially by foreign-owned businesses and IT companies. LinkedIn allows companies to proactively approach potential candidates, enabling swift recruitment. Furthermore, the platform displays certifications, qualifications, experience and project achievements, simplifying the process of verifying a candidate’s technical expertise and making it easier to match skills with job requirements.

For positions such as project managers or highly-skilled technical experts, LinkedIn is especially effective. It enables companies to evaluate candidates based on the skills and experience they make public, rather than relying solely on resumes.

4-4. Utilizing Alumni Networks

The goal of an alumni network is to stay in touch with people after they leave the company, in order to support business opportunities, share ideas and provide an easy route for ex-employees to return to the company. Companies can rehire talented individuals who are already familiar with the organization’s culture and business processes, reducing the burden from onboarding. This method is widely used in Western countries and is gaining traction in Japan, especially among foreign-owned companies and startups.

Building an alumni network requires maintaining regular communication with former employees. For example, companies can use dedicated social media groups or newsletters to stay connected, and implement referral programs to tap into the network for recruitment purposes.

The key advantage of hiring from an alumni network is that these individuals are already well-acquainted with the company’s culture and operations, making them valuable assets who can immediately contribute. Maintaining relationships with former employees also increases the likelihood of high retention rates upon rehiring.

Here are some essential points to consider when hiring engineers that fit your company:

1. Define your ideal candidate clearly: To hire the best, it’s crucial to first define the required skills and experience you are looking for. Consider not only technical expertise, but also the interpersonal skills and characteristics the candidate will need to fit into the company’s culture and team dynamics.
2. Evaluating communication skills: Engineers often work as part of a team, which means they have to communicate effectively with other technical staff and business departments. Prioritizing candidates who can collaborate well with other team members helps prevent problems in the future. Involving project members in the interview process can help evaluate the candidate’s compatibility with the team.
3. Focusing on long-term potential: Instead of focusing solely on current skills, it’s important to hire with future growth in mind. The IT industry evolves rapidly, and engineers are expected to continuously learn new technologies. Prioritizing candidates who demonstrate a desire for learning and flexibility will contribute to the company’s long-term growth. Identifying potential leaders during the hiring process also ensures that your company has the talent needed for future leadership roles.
4. Setting flexible hiring criteria: If your hiring standards are too strict, you may reduce the pool of potential candidates and miss out on a great engineer. Especially when experienced engineers are scarce, being flexible with hiring criteria can be a strategic choice. For example, even if a candidate lacks technical experience in a particular area, high motivation and a willingness to learn can make them a good fit for your company. Implementing training programs or mentorship systems can also help nurture future talent.

While the IT market continues to grow, the shortage of engineers—particularly high-skill engineers—remains a challenge. Companies must adopt flexible recruitment strategies by utilizing a variety of methods. Additionally, hiring with a focus on long-term growth and supporting employees’ development is crucial for retaining top talent.

For companies with limited time and resources for recruitment, or those struggling to find the right engineers, utilizing staffing agencies can be an effective solution. ISF NET specializes in IT infrastructure engineer supply and recruitment and has over 25 years of experience in the sector. We have partnered with more than 2,000 companies, including major domestic and international firms, and employ 2,200 highly skilled engineers, including those at the project manager level. If you’re facing challenges in recruiting engineers, contact us for a free, no obligation consultation.

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