JOB TRAINING IN JAPAN: AN INCENTIVE TO
INCREASE FOREIGN DIRECT INVESTMENT?

Prepared for the Japan Institute of Labour, Policy and Training(JILPT)
Charles Lundberg
Sacramento, California USA
December 22, 2006

Job Training in Japan: An Incentive to Increase Foreign Direct Investment?
December 22, 2006
INTRODUCTION
In the United States, there is severe competition between states for investment by both
domestic and foreign firms. This competition is most severe for the location of
manufacturing sites, research & development facilities, and high technology companies.
However, there is also competition for a variety of types of companies including callcenters and distribution facilities. In order to attract companies to locate in the state, thelocal or state governments offer many types of incentives to companies to convince themto invest in the state. Incentives are often related to taxes, land, energy and very
importantly, job training.
Most states have limited resources to use or create incentives for new companies to locate
in their states. One of the most common incentives used by states is providing job
training to the workers of companies locating in the state. This is the primary incentive
from the state government to encourage investment by new companies (attraction
projects), and also to keep companies from leaving the state (retention projects).
These incentives are very effective since for manufacturing firms, and other types of site
selections, the availability of a good workforce is the number one concern of executives.
Also, job training is one service that government can easily provide since the statesusually have very good job training and education systems.
For example, California is a “high cost” state where the expense and governmental
regulations make it a difficult place to do business. The only reason for investment in
California tends to be the high quality of the workforce as compared to other states. (Theexceptions are industries that need to be near the customer. Such companies include
retail, food service, and hospitality industries. These companies will naturally locate instates such as California since there is a large, wealthy population that will purchasegoods and services.)
California has a special workforce development program that can be used to attract
businesses to California and can be used as part of an incentive “package” that isprovided to companies and site selection consultants. The high level of the college anduniversity systems in California, as well as workforce development programs, is anothermajor factor that attracts companies to invest in California.
California is not the only state in America that uses workforce development funds andprograms to attract business investment. Almost all states have devoted some funding
into workforce training programs as an incentive for business attraction and retention.
Companies often cite the availability of workforce development funds and job training
programs as the reason they made a site selection. And, if a state does not have suchtraining available, then companies are not likely to locate in those states.
Some states have significantly more funds than others, and those states have been far
more successful at attracting investments than other states. Most of the funds are raised2

Job Training in Japan: An Incentive to Increase Foreign Direct Investment?
December 22, 2006
by the state through state taxes – they do not use Federal job training dollars to attract
investment. In fact, it is not legal to use Federal job training money to entice companies
to move locations between states.
These job training programs can also be used as an incentive for a company to expand
their businesses since they will have financial support in training new workers.
Companies use these job training programs not only to train their new workers, but also
to train current workers as they companies expand and grow. These incentives are very
attractive to young companies and small and medium sized enterprises (SMEs), as well ascompanies that have a limited cash flow. However, even large corporations takeadvantage of these programs. Job training is a major incentive for these companies toexpand in their current location.
Also, states use these funds to try to attract companies to parts of their states that havehigher than average unemployment and are in need of economic development. By
spending tax dollars, states can stimulate the economy in areas of their states that arelacking in business activity and need stimulation. For this reason, job training programs
are considered an economic development “tool” that states use to stimulate theireconomies.
Of course, location decisions are based on many factors such as land costs, transportation,energy costs, taxes and other factors. However, availability of an educated, trained
workforce continues to be the number one factor on the list of site selection consultants
when they are searching for a site location, and workforce development incentives arealways sought by these consultants.
Japan is currently making an attempt to increase Foreign Direct Investment into Japanand is conducting a campaign to attract businesses to Japan. The origin of this research
project came from the desire to discover if Japan is using job training and workforce
development incentives to attract companies to Japan, especially to prefectures that havehigher than average unemployment rates.
RESEARCH QUESTION AND GOAL OF STUDY
The research question is as follows:“Does Japan use job training programs as an incentive to attract Foreign Direct
Investment (FDI) into Japan? Furthermore, are job training programs used by prefecturesin Japan as an incentive to attract foreign companies to invest in those prefectures?
The goal of this research was to determine if Japan is using job training programs as an
economic development tool to attract foreign investment in the same manner that states in
the U.S. use job training programs to attract investment in their state.

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BACKGROUND
Japan is a highly developed industrialized country that has a very low rate of foreign
direct investment in comparison with other industrialized countries. According toresearch presented by the American Chamber of Commerce in Japan, as well as theAmerican Embassy and other researchers, the amount of FDI in Japan amounts to only
about 2.5% of the economy. This is very low compared to the U.S. and European
countries where the rate of FDI ranges from 20-40% of their economies. There are avariety of reasons for this low rate of investment which are beyond the scope of thisresearch paper.
Regardless of the reasons for the low level of investment, the Japanese government has
decided that there are benefits of having foreign direct investment and has therefore
launched a campaign to double the FDI from its current level of about 2.5 % to at least
5% by the year 2010. This is a public policy decision by the Prime Minister of Japan andhis government to increase FDI. This commitment to double the FDI was made by the
Koizumi government and presumably will continue with future administrations.
One of the reasons for this desire to increase FDI is to create new jobs in areas of Japanthat are experiencing higher than average levels of unemployment, or to stimulate thelocal economies in prefectures where workers are leaving the prefectures to find jobs inlarge urban cities such as Tokyo or Osaka. Therefore, FDI is seen as an economic
development initiative to improve the economies of prefectures that are suffering
economically.
Since Japan has made a public policy decision to increase FDI, Japan is taking many
concrete steps to increase FDI and is investing a considerable amount of public funds tosupport this initiative. One of its main efforts has been through the Japan External Trade
Organization (JETRO). This organization has been directed to help foreign companies
invest in Japan. JETRO has “re-invented” its organization from an export promotion
agency to an economic development organization that is seeking to attract foreign direct
investment into Japan.
JETRO has been very aggressive in attempting to attract foreign companies to Japan. For
example, it maintains an excellent investment website in English (and other languages)
with information for foreign companies on “how to” establish their businesses in Japan.
The information contained on the website includes information about each prefecture andalso includes information about human resources and the labor market including thenumber of graduates from colleges and universities in each prefecture, especially in areasof engineering and science. JETRO devotes some space on its website to showing thehigh levels of the workforce in each prefecture.
JETRO also conducts trade missions to Japan with foreign companies to introduce thesefirms to potential Japanese business partners. Part of the process includes anintroduction to officials of local city governments as well as staff of prefectural
governments. These officials are able to describe to foreign companies the process of job

4Job Training in Japan: An Incentive to Increase Foreign Direct Investment?
December 22, 2006
recruitment as one of the services the local governments can provide to foreigncompanies should they locate an office or factory in that prefecture.
JETRO also periodically conducts surveys of foreign companies in Japan to determine if
there are any significant barriers to investment into Japan. A JETRO survey in April 21,
2006 found that almost 60% of foreign companies in Japan who responded to their survey
were having trouble finding appropriate personnel for their operations. This is a problem
since 50% of those firms were planning to expand their operations and hire more staff. In
1995, only 47% of foreign firms stated that they had trouble finding staff. Thus foreigncompanies in Japan in 2006 were having more trouble in recruiting qualified than inprevious years. This fact alone would make it more difficult for Japan to increase FDI
since foreign firms would have trouble finding workers.
Also in 2006, 40% of the responding firms were having trouble finding staff with suitablelanguage skills. The figure was only 25% in 1995. According to JETRO, the reason is
because of the current labor shortage which means foreign firms are competing withJapanese firms for labor. This fact also would make expansion of FDI more difficult.1
Therefore, if Japan is going to double FDI by 2010, it will need to address the workforce
issues of a shortage of qualified staff for foreign companies. One answer to this problem
might be an increase in workforce training in the skills needed by foreign firms. Job
training programs specifically developed for foreign owned firms might be necessary to
attract foreign firms to invest in Japan, especially in areas that traditionally do not receive
much investment. Areas such as Tokyo and Osaka normally receive most of the foreign
investment. To attract investment in other areas of Japan, job training programs might beneeded to develop an adequate number of workers for the new investment.
RESEARCH METHODS
To conduct this research, I started with some preliminary research in the U.S., followed
by a 14 day visit to Japan in October 2006.
The first step was to conduct research by the internet. Internet research was conductedprimarily on the JETRO website which has investment information in English for all
prefectures as well as some major cities. The information includes economic data as wellas information about human resources and education in the prefectures and cities, as wellas contact information for local officials who are involved in business attraction efforts.
There is in each prefecture and major city a contact person who specializes in working
with foreign companies, often in coordination with JETRO, or who is actually part of
JETRO’s staff. The contact information was listed on the website, including email

1

JETRO Press Release, “JETRO Releases the Results of its Survey of Foreign-affiliated Firms in Japan”,
April 21, 2006

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Job Training in Japan: An Incentive to Increase Foreign Direct Investment?
December 22, 2006
addresses. The JETRO website is an excellent source of English language information on
all prefectures for any foreign firm considering locating an office or factory in that
prefecture.
The American Chamber of Commerce in Japan also maintains an extensive website
which was examined thoroughly. This website has basic business information for anyone
considering investing in Japan, and has extensive research materials on Foreign Direct
Investment in Japan.
The next step was to send emails in English to all prefectures and cities on the JETRO
website asking them whether they provided any job training programs as an incentive forforeign companies to locate in their prefectures. Emails were sent to the 47 prefecturesand 15 cities listed on the JETRO regional information website.
The question by email in English was an inquiry as to whether there are any Human
Resource Development incentives offered by the prefecture to attract foreign direct
investment in their region. Specifically, they were asked if there were job training
incentives, recruitment assistance, subsidies for hiring workers or any other workforce
incentives being provided to foreign companies to invest in their prefecture or city. The
response rate to these email inquiries was very poor, however, with only 5 responses.
Emails were also sent to JETRO and some American businessmen and government
officials, as well as the American Chamber of Commerce in Japan (ACCJ), regarding job
training in Japan and as to whether or not there were job training incentives available forforeign companies locating in Japan.
Next, interviews were conducted in the U.S. (San Francisco) with representatives of
JETRO, as well as with Osaka, Kumamoto, and Aichi prefectures. These interviews
were very useful and these representative offices were very helpful. Osaka maintains an
office in San Francisco devoted to all aspects of business attraction to Osaka as well as
promotion of tourism. Aichi maintains staff in the JETRO office in San Francisco
dedicated to attracting investment into Aichi. Kumamoto prefecture representatives
regularly attend Semicon, an annual international convention for semiconductor
equipment manufacturers in San Francisco. Kumamoto’s goal at the convention is toattract investment in their prefecture by foreign semiconductor equipment manufacturers.
In Japan, direct interviews were conducted with representatives of a diverse group oforganizations such as the Tokyo Metropolitan Government, Yokohama City government
officials, and Chiba Prefecture government officials, all dedicated to attracting foreign
investment or assisting foreign businesses that have located in their area. Two JETRO
investment seminars for foreign companies were attended, including the “U.S. – Japan
Investment Initiative ‘Investment Seminar in Yokohama’” on October 6, 2006, and a
JETRO and Chiba investment reception on October 5, 2006 at Makuhari Messe in Chiba.
Direct interviews were conducted with Japanese business people and university
researchers involved in areas related to job training. Students and general citizens were

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December 22, 2006
interviewed regarding their impressions about FDI and their attitudes about working forforeign companies. These interviews were conducted in cities such as Tokyo, Osaka,
Hiroshima and Kyoto. A seminar was conducted in Nagoya in regards to job training that
was attended by Japanese businessmen, lawyers, and other professionals.
RESULTS AND FINDINGSAre there any job training programs in Japan designed to increase Foreign Direct
Investment (FDI)?
The major finding of this report is quite simple. At this time, there appear to be no
specific job training programs in Japan that are used to attract FDI to Japan or any of theprefectures. There is no evidence that job training is being used as an economic
development tool to recruit foreign companies to invest in Japan. Thus, one of the major
economic development tools that is commonly used in the U.S. to attract investment is
not being utilized at all in Japan.
Following are a few examples of the information provided by prefectural governments aswell as certain cities in regards to whether or not they use job training programs to recruit
foreign companies to invest in their city or prefecture. These responses came either fromdirect interviews or via email.
The Tokyo Metropolitan Government was very clear that there is no need to provide any
special incentives to foreign firms to locate in Tokyo since foreign companies naturally
locate in Tokyo even without incentives. However, they are providing support to foreign
firms in Tokyo, especially the smaller ones. They have established the Tokyo Business
Entry Point which provides counseling and guidance to foreign firms locating in Tokyo.
One of the services they provide is to introduce foreign companies to the same
recruitment services and job training programs that all Japanese firms are eligible to use.
Although this is not a special program developed for foreign firms, there is nothing thatwould prevent foreign firms from using existing job training programs. Therefore, theTokyo Business Entry Point provides a valuable service to foreign companies investing inTokyo.
Osaka is a very good example of a prefecture that is actively attempting to attract foreign
investment to the prefecture. It maintains a very well established office in San Franciscowith excellent English language material about investment opportunities in theirprefecture. When asked whether they have any specific job training incentives to attract
FDI, the answer was no, but they did have an abundance of information about the local
workforce and educational facilities in the area.
Hyogo Prefecture also responded from the International Economic Development Divisionof the Hyogo Prefectural Government. Although they have no specific job training
programs for foreign based companies, they did fax a list of all the relevant job training

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December 22, 2006
programs in Hyogo Prefecture (in Japanese). Presumably, foreign firms can access thesetraining programs.
Kagawa prefecture responded but had no workforce development programs specificallyfor foreign companies. KitaKyushu responded that there are no special incentives fortraining workers. However, they do have hiring incentives for foreign and Japanesefirms. In fact, based on a review of the JETRO website, it is apparent that many
prefectures have incentives for companies to hire new workers. These incentives areavailable for Japanese as well as foreign firms.
One representative of a prefectural government stated that he felt that a job training
program would be a good incentive to attract foreign firms to his prefecture. He further
stated that foreign firms are eligible for existing job training projects just like Japanesefirms, but that they rarely participated in these programs. Usually foreign firms are
introduced to public, government funded and managed job training and placement
services through the “Hello Work” offices just like regular Japanese companies.
He further stated that although governmental agencies provide some recruitment
assistance to foreign firms, private personnel agencies (temporary and recruitment firms)
provide additional recruitment services. Recruitment for mid-level and higher positions
is almost all done by private recruiting services.
Does Japan use the high level of its education and workforce to promote FDI?
A secondary finding is that the availability of a highly educated workforce in general isbeing used in the recruitment of FDI into Japan. Through JETRO’s website andpublications, as well as through the publications of many prefectural governments andcities, the high quality of the Japanese workforce and the educational system are bothbeing used to encourage foreign companies to invest in Japan.
In other words, when promoting foreign investment in Japan, JETRO makes a great effort
to show the high level of the Japanese educational and training system. For example, in
JETRO’s publication “10 Advantages to Investing in Japan”, the fifth advantage listed is“Highly-skilled human resources.” In this publication, JETRO states that Japan has“abundant highly-skilled human resources”.
JETRO also provides a great deal of services to attract foreign companies to invest inJapan. One of its services includes introduction services to potential partners in Japan.
Representatives of foreign companies are provided the opportunity to participate in
Investment Seminars in Japan, usually free of charge. At these seminars, the foreigncompanies make a presentation to an audience of potential business partners. During themeetings that are scheduled, the business representatives meet with local officials who
can provide business assistance, including employee recruitment services.
The city of Yokohama conducted one such investment seminar on October 6, 2006. Partof their presentation to the foreign business people was the high level of Human

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December 22, 2006
Resources in the area. According to their statistics, there are more engineers in
Kanagawa Prefecture (where Yokohama is located) than in Tokyo prefecture. They also
indicated that there are 10 universities with science and engineering degrees in
Yokohama. This publication further mentions that Japan has one of the highest rates ofuniversity attendance in the world and states that “Talented, highly educated humanresources are available in abundance.” 2
JETRO also has an excellent publication called Invest Japan which sometimes deals withworkforce issues. In the November 2005 edition (edition #10), they have an extensive
article on investing in Kumamoto prefecture. In that article, they have a section called“Workforce with a Strong Background”. They quote an executive of Teradyne
corporation, Mr. Masao Suzuki, about the workforce. The article states that “the highly
skilled workforce was one of the major reasons for choosing to establish their facility” inKumamoto. He was quoted as saying “The governor’s assurance to assist us in securing
talented personnel was the decisive factor in choosing to set up our base in Kumamoto.”
The article continues to state that Teradyne, which is a foreign owned firm, has beenhighly successful in recruiting top engineering talent from local universities. It also goeson to state that the “abundance of workers with a background in science and technologies
is a large advantage for companies moving to the region.” The local universities havespecialized in semiconductor education and training and have created a workforce withthe skills needed to manufacture semiconductors. Teradyne has been successful inrecruiting post-graduate engineering students to work for them.
Kumamoto officials are actively attempting to recruit FDI by frequently attending
international semiconductor conferences in San Francisco, U.S.A. The material preparedby these officials discusses the available and highly skilled workforce, as well as training
programs that have been designed locally to train workers for the semiconductor industry.
It should also be mentioned that there are also important alliances between major
universities and businesses at the local level that produce graduates with skills that would
be useful for foreign firms. Many prefectures are trying to nurture and grow specificindustries such as aerospace, biotech, semiconductors, and nanotech. In order to growthese industries, links have been developed between industry and universities. These
alliances also recruit foreign researchers to participate in these alliances. This can be send
as a strategy to encourage Human Resources Development at the highest level.
Another example of a prefecture actively seeking FDI is Aichi prefecture. Thisprefecture also maintains an office in San Francisco at the offices of JETRO. Based on
an interview and an additional response to the email question, representatives of Aichi
said they said would introduce foreign companies to the appropriate human resource
programs as necessary. It also has assistance for recruiting.

2“Business Environment of Yokohama” by the Business Development Division, Economic and Tourism
Bureau, City of Yokohama, October 6, 2006

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December 22, 2006
Aichi’s publication, “Aichi: The more you know, the more you like Aichi” mentions its“Talented Human Resources” and indicates there are 49 universities, 33 junior colleges,
one technical college and 233 senior high schools in Aichi prefecture. It also has
statistics on how many times Aichi residents have won the National Skill Olympics(almost twice as many winners as the second place prefecture, Tokyo).
In addition, Aichi has a service called I-BAC which is the Aichi-Nagoya International
Business Access Center. According to their publications, I-BAC offers a variety ofservices for foreign companies seeking to locate in the prefecture, including information
on human resources.
Another example is the following excerpt from the recruitment brochure “Greater
Business Opportunities” by the Greater Nagoya Initiative: “The presence of 45
universities and technical colleges with science or engineering majors means a constantsource of new and exciting innovations as well as a constant source of well-educatedscience and engineering personnel.”3
The prefecture of Chiba has an excellent publication in English called “Chiba Means
Business – The Gateway for Business Investment in Japan”. In this publication, theyhighlight under “Excellent Human Resources” that there are more than 33 universities in
the prefecture and 18 junior colleges. It also has very useful information on the Hello
Work program that provides job referrals and recruitment services. Some of the Hello
Work offices offer foreign-language assistance to job seekers and employers.
Are Japanese workers willing to work for foreign companies?
Willingness to work for a foreign firm is, of course, a major issue for Japan if it is to
double FDI. There is no way that Japan can increase FDI if Japanese workers are
reluctant to work for foreign firms. Historically, Japanese workers were offered life-time
employment with major Japanese firms. Japanese workers were very hesitant to workfor foreign owned firms since those firms did not guarantee life-time employment andhad employment practices that were not common in Japanese companies.
In 2006, however, life-time employment is becoming rare even in Japanese firms.
Therefore, Japanese workers are becoming more willing to change jobs and change
companies. The labor market situation is becoming more “liquid” which means thatworkers are becoming more mobile and willing to change jobs to improve their careers.
In JETRO’s publication “10 Advantages to Investing in Japan”, it mentions that there is“labor market liquidity” that assists in the hiring of highly-qualified staff. This theme of“liquidity” of the labor market means that job seekers are no longer looking for life-time
employment but are willing to take alternative paths in their job lives, including being
willing to work for foreign firms.

3“Greater Business Opportunities” by the Greater Nagoya Initiative

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December 22, 2006
Tokyo Metropolitan Government officials stated that foreign firms do not have trouble
attracting Japanese workers, in particular young workers, in Tokyo. The reason is thatyoung workers do not see that they will be having life-time employment in a Japanese
firm, and are likely to change employment situations in the future. Therefore, they seethat opportunities will be greatest in foreign firms. They describe the employment
situation in Tokyo as being very “liquid”.
However, from interviews with Japanese university students, workers and businessmen, it
became clear that the workers outside of Tokyo and Osaka are very reluctant to work forforeign companies. When given the choice of working in a Japanese firm or a foreign
firm, those that were interviewed almost always said they would choose the Japanese
firm, even if the jobs were exactly the same. Most of those interviewed (outside ofTokyo) said working for a foreign firm would be too risky.
One American businessman described it this way. Foreign companies have the image
that they are unstable and might leave Japan at anytime. For that reason, this Americanbusinessman expressed his opinion that the best Japanese workers will not want to work
for a foreign company.
This same American businessman had a few other interesting observations about foreigncompanies in Japan. He said that foreign companies, especially new ones, are having
difficulty dealing with language issues, which does serve as a barrier for them. Thereexists in foreign businesses in Japan distinct cultures with top management being English
speakers, middle management being bilingual, and the workforce generally speaking only
Japanese. This suggests that an education program would be very useful in teaching
Japanese to foreign executives and English to the Japanese workers.
Overall, in his opinion, workforce issues are very difficult for a foreign owned company.
He also stated that a job training program for foreign companies could be very beneficial
at upgrading the skills of workers that the foreign company hires.
One Japanese businessman in Nagoya provided another interesting observation. His
background includes an MBA degree and many years of employment in the U.S. withJapanese firms. He stated that in Tokyo, there are many foreign firms and many Japanese
workers have experience working with foreign companies. Because of that fact, there isless fear of working for a foreign company. In other prefectures, however, Japanese
workers do not have such experience. Therefore, they are naturally more reluctant towork for foreign firms. It is considered “safer” to work for a Japanese firm.
For female workers, the opposite appears to be true. Many Japanese women would liketo work for foreign firms. They perceive foreign firms as being more willing to promote
female workers. This attitude seems to be true in most prefectures. Foreign firms inJapan actually appear to have an advantage in hiring qualified female workers throughout
Japan.

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Is Japan’s vocational training system being used to attract foreign companies toJapan?
Japan has a very well developed vocational training system. In fact, the Japanese
vocational training system is considered to be one of the best in the world. The
government of Japan supports a variety of job training organizations that were contacted
as a part of this research project. These organizations include the Employment andHuman Resources Development Organization of Japan (EHDO), Overseas Vocational
Training Association (OVTA), and The Japan Vocational Ability Development
Association (JAVADA).
These three organizations were contacted regarding whether they offer any types oftraining programs to foreign firms in Japan as a part of the FDI recruitment efforts ofJapan. The answer is that none of these organizations are involved in providing a job
training program as part of an FDI effort. However, all three have resources that
potentially could be used by foreign firms in Japan to upgrade the skills of their workers.
Following is a brief description of each program and their interaction with foreign firms.
The Employment and Human Resources Development Organization of Japan (EHDO) is
one of the primary organizations that fund job training programs in Japan. It operates
many training centers in various prefectures, as well as working in cooperation with
Polytechnic Universities, colleges, and centers. EHDO focuses on unemployed people byproviding vocational skills training.
It also does provide training for employed persons (incumbent worker training) throughthe Polytechnic centers. This training is designed to improve human resources that
support the industrial base of Japan. These are relatively short courses which average
between 2-5 days. They also provide technical assistance and advice to employers toprovide their employees with life-long human resources development. EHDO will send
instructors to conduct training organized by employers and employer associations.
EHDO also provides through their Polytechnic colleges short training courses (over 60
hours) for employees where they can learn advanced technical skills and develop
expertise. EHDO can offer career development assistance to businesses so that they canprovide career advancement services for employees. There is also assistance provided tostart-up businesses and entrepreneurial training. At the prefectural centers, start-up
businesses are provided assistance in recruiting and training new employees.
EHDO representatives were not aware of any foreign firms using their programs but said
it was quite likely that some companies did use their programs. They stated that they do
not routinely track and study such information.
If Japan created a job training program to encourage FDI, clearly EHDO would be a very
important player in that effort. EHDO already has established job training programs thatwould be very beneficial to foreign firms. It would be relatively easy for EHDO to create
and implement such a training program as the training infrastructure is already in place.

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December 22, 2006
Another relevant training organization is the Overseas Vocational Training Association(OVTA). OVTA provides Japanese workers training in foreign cultures and customs
before they are dispatched to foreign countries. They also have a skills upgrade programfor employees and can organize employee training programs for companies. Their goal isto help prepare Japanese companies for globalization.
This organization also specializes in training workers from foreign countries, primarily
Asian countries, so that they have the skills necessary to work for Japanese companies
within those countries. OVTA has great experience working with foreign companies andforeign countries, as well as providing job training services. OVTA also could be a very
important player in providing job training to foreign companies in Japan since they havemuch experience dealing with foreign countries and companies, and also has job training
facilities.
The Japan Vocational Ability Development Association (JAVADA) is an organizationthat is focused on vocational ability evaluation standards and systems and tests. Many ofthese skills standards are available for downloading from its website. JAVADA works
frequently with foreign countries, primarily Asian, to spread the use of skills standards
and evaluations to help those companies improve productivity and workers skills.
JAVADA also works with Prefectural Vocational Ability Development Associations to
help individual employees to advance their careers through job training programs. Thisadvancement of individuals leads to the development of society and corporations. These
Prefectural Associations run Service Centers that provide employers and employees withprofessional information on vocational ability development. Professional consultants andcareer counselors assist individuals to upgrade their skills.
JAVADA stated that they have no mechanism to determine if foreign companies usedtheir services, but some might have. They stated that no foreign company has asked
about using their services. Since many of their services such as the Vocational Ability
Evaluation System can be used from the web for no cost, they do not know who uses that
information. However, the services are available to any company that is located in Japan.
In meeting with EHDO, JAVADA and OVTA, it was clear that they had no programs
developed specifically for foreign firms operating in Japan, and that they were not awareof foreign firms in Japan using their programs. However, all these programs haveabundant English language information on their websites and excellent printed materials
in English. It would be relatively easy for any of these organizations, or all of them
together, to reach out and recruit foreign companies in Japan to use their services. It
would also be quite easy for them to develop training programs for foreign firms newly
locating in Japan.
Another interesting finding was that some smaller Japanese firms also are not accessing
the vocational training system as well as the larger firms. Interviews with Japanesebusinessmen in smaller companies indicated a belief that Japan’s vocational training

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system works well for large Japanese companies that already have a large budget fortraining. These same businessmen expressed their opinion that smaller companies are theones that need more training but don’t have the resources to do adequate training. Thesebusinessmen, some who are presidents of smaller companies, said that they want moregovernment assistance with job training.
The same can possibly be said about foreign firms in Japan too. For example, most large
corporations have adequate budgets for recruitment and training, but small and medium
size enterprises (SMEs) do not. The SMEs are the firms that would need the most
governmental assistance with job training.
SUMMARY
In the United States, job training programs are one of the most commonly used incentive
programs used by the individual states to recruit investment by businesses into the states.
In Japan, this study has shown that Japan does not use job training programs as anincentive to attract Foreign Direct Investment into Japan.
Japan does have a workforce that is excellent, and a very advanced workforce training
and Human Resource Development system. Japan through JETRO and the prefectural
goverments do promote the fact that Japan has a very highly qualified workforce.
However, in areas outside of the major cities, Japanese workers are reluctant to work forforeign companies. Therefore, foreign companies will have difficulty finding qualified
staff in many parts of Japan. Executives in foreign based companies will not want toinvest in Japan if they feel that they cannot find qualified workers.
One way to alleviate this concern would be to provide extra training to workers hired byforeign firms, especially in areas outside of the Tokyo and Osaka areas. This training
program would be used to upgrade the skills of the workers employed by foreign firms
which would help narrow the gap between the skill levels of employees in foreign andJapanese firms. This would also reduce the concerns of foreign executives about being
able to find qualified workers.
Of course, job training is only one incentive that prefectures would use to attract FDI.
Executives in foreign firms will consider a wide variety of factors when choosing a site
location for an office or factory, but human resources tends to be the most importantfactor. Japan already has an excellent vocational training system, so it would be
relatively easy for Japan to create a job training program for foreign companies.
Given the facts presented in this study, along with our experience in the U.S. with job
training programs as incentives for investment, I have the following recommendations.
RECOMMENDATIONS
1. Japan should consider establishing a job training program as an incentive toattract FDI into Japan.

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December 22, 2006
2. This job training program should be used primarily in prefectures with low
numbers of foreign firms. There does not appear to be a need for such a programin Tokyo and some of the larger cities where foreign firms are already locating
without the need for incentives, and where there is an adequate workforce willingto work for foreign companies.
3. Efforts should be concentrated on small and medium sized enterprises (SME’s).
Large foreign firms usually have an adequate budget for job training, althoughextra job training assistance is a good incentive for large firms too. Priority
should be given to the SME’s.
4. This job training program for foreign firms should be customized to the needs ofthe employer, not a standard program for all employers. Providing job trainingthat is customized is the key to success. Language training in English for
employees is also very useful. Foreign firms must also invest heavily in Japanese
language training for foreign staff, and the Japanese language training should be
paid by the foreign company as their investment in staff development.
5. In order to establish this type of job training program, there should first be asurvey of foreign companies in Japan about their workforce needs and the typesof training that they need to survive in Japan. The job training program should be
conducted by established job training organizations in Japan.
6. If Japan does not create a new job training program for foreign firms, then more
information should be provided to foreign companies about the current job
training programs in Japan. This should be directed first to companies that are
established here in Japan, and then to companies outside of Japan. This would
hopefully increase their use of existing job training programs.

CONCLUSION
Based on this study, I have one final conclusion regarding the vocational training system
in Japan. The three training organizations that were studied, EHDO, JAVADA andOVTA, are currently under review by the national government of Japan for budgetary
reasons. Apparently there is consideration of reducing these programs due to budget
deficits.
These agencies have concerns regarding the reorganization of their programs based on
current budget shortfalls, and potential cutbacks of their programs. Even if theseorganizations are reorganized or privatized, it would be a mistake to reduce Japan’s
vocational training programs. In America and Europe, the perception is that Japan’s
vocational training system is one of the best in the world. Any reduction in that training
system would make recruiting of qualified personnel by foreign firms even more difficult
and would work against the efforts to attract FDI.

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December 22, 2006
During this period of reorganization, one recommendation would be to use theseorganizations to provide a job training program to attract foreign investment. For
example, these organizations could create a special program to use job training as anincentive for FDI and work with JETRO to attract FDI.

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December 22, 2006
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Nagoya, Japan (2006)
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http://www.accj.or.jp/content/01_home, (2006)“Business Environment of Yokohama” by the Business Development Division,
Economic and Tourism Bureau, City of Yokohama, October 6, 2006
“Chiba Business Opportunity Gateway – Market Entry Strategies for Japan”, Chiba
Investment Support Center Brochure, Chiba Prefecture, Japan (2006)“Chiba Means Business – The Gateway for Business Investment in Japan”, by the Chiba
Investment Support Center, Chiba, Japan, (2006)
Chiba Investment Support Center (CISC) Reception at Makuhari Messe, Chiba – joint
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Organization of Japan (EHDO), Yokohama, Japan (2006)“From Goals to Reality: FDI Policy in Japan”, the American Chamber of Commerce inJapan, 2003
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Policies”, Invest Japan, Japan External Trade Organization (JETRO), Autumn 2005
“Overseas Vocational Training Association (OVTA) – Guide to Our Activities”,
brochure by the Overseas Vocational Training Association, Chiba City, Japan, July 2006

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December 22, 2006
“10 advantages to investing in Japan”, Invest Japan Division of the Japan External Trade
Organization (JETRO), Tokyo, Japan (2005)“Pioneering the future with career wings”, Japan Vocational Ability Development
Association (JAVADA), Tokyo, Japan (2006)
Seminar on Job Training in America, presented at the Sasaki International Academy(SIA), Nagoya, Japan, October 2006
“Tokyo Business Entry Point – the Tokyo Metropolitan Government’s One-Stop
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Bureau of Industrial and Labor Affairs, Tokyo, Japan (2006)

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