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Contributing to the globalization of Japanese society

Interview - March 22, 2022

Global Trust Networks assists the lives of thousands of foreigners in Japan while the country faces challenges like the labor shortage that comes with the declining birthrate, as well as the border restrictions imposed during the global pandemic. We talked with Representative Director and President Hiroyuki Goto to learn more about how they help develop a foreigner-inclusive society by acting as rent guarantor, providing living support services, and leveraging their expertise in real estate, while also offering support in areas such as employment, mobile communication, and credit cards.

HIROYUKI GOTO, REPRESENTATIVE DIRECTOR AND PRESIDENT OF GLOBAL TRUST NETWORKS, CO. LTD.
HIROYUKI GOTO | REPRESENTATIVE DIRECTOR AND PRESIDENT OF GLOBAL TRUST NETWORKS, CO. LTD.

In the past six years, Japan has seen steady returns in terms of land price increases providing a stable and accessible market for investors. Even in the advent of COVID-19, the market still proved to be very resilient in Japan with transactions only falling 20% in the worst months of the pandemic. Some certain segments are outperforming their global benchmarks, such as housing and logistics. As a comprehensive provider of support services for foreigners in Japan, what is your take on the current state of real estate in Japan?

Japan's investment returns are better than other countries like South Korea, Taiwan, or China. The investment returns are about 3% to 8% in metropolitan areas such as Tokyo and Okinawa. These areas do not expect a declining population in 2040 or 2050, in contrast to the rural areas. The regional difference will become more evident, but the demand is going to be pulled by the metropolitan Tokyo area in the years to come. A factor that is working in our favour is the weak yen. Foreigners can purchase a high-quality property for ¥100 million to ¥200 million in Japan, which will not be feasible in Gangnam, South Korea. Due to Japan's ageing society, there seems to be a trend of elderly people selling their houses in rural areas and buying properties in metropolitan tower mansions that will be of greater value for their children. I think it is a trend unique to Japan. 

Also, because the interest rate is low in Japan, some think that more people prefer second-hand houses. However, it is not the case because we still see strong demand for new properties. The reason is that banks or financial institutions lend more to those who purchase a new property. A person can get a 35-year loan for a property, while a second-hand property will be much lower than that, and a reform loan is only 10 years. As a result, people who choose to buy a new property pay a lower monthly rent. The value of a house is appraised only based on the land, whereas apartments have a higher valuation.

 

In the next 15 years, one-third of Japanese people will be over the age of 65. One of the major repercussions of this outcome has been a decrease in the labour or workforce. Japanese companies are increasingly having to rely on foreign talents, both for skilled and unskilled work. Can you elaborate on the impact of Japan's ageing society has been for GTN?

Japan is at the forefront and much ahead of other countries like South Korea and China in terms of a declining population. These countries are starting to face this issue, so they are carefully watching how we are overcoming this challenge. Our government's focus is to increase workforce productivity as well as involve more women. The premise of society is for people to work up to 75. We can say that Japan has fostered an environment where people can work for a longer period compared to before. Still, these initiatives are not enough to resolve the issue. Two years ago, in October, the figure for foreign workers in Japan was 1.72 million. According to our analysis, we think that by 2040, we will have to accept 6.5 to 7 million foreign workers in Japan, which means there will be about four times the initial figure. We can maintain our labour force by doing so. There are also talks of accepting 10 million foreign workers in 2050, which poses several challenges. China used to be a country with an abundant workforce which other countries tapped into, but it will become a country accepting foreign labour as a result of its ageing population. Therefore, there will be a competition in recruiting foreign workers in East Asian countries like Japan, China, and South Korea. China is booming at a highly accelerated pace, and just last year, South Korea's average salary was higher than Japan's. It is apparent that the situation is changing. Korea has been producing a lot of unique content, including K-pop and K-drama, which contribute to making it a more attractive country.

Japan's technical interns are confronted with human rights issues as pointed out by America’s Ministry of State. Europe's Due Diligence Act implies that if an item's production process does not uphold human rights, then people will decide not to purchase it. With that trend, Japan needs to do a lot more. We have to review how we are going to open our market, our compliance, and our human rights system. If we do not do so, people will not choose to work in Japan because it takes a lot of time and money, and they will have to learn Japanese. These conditions have to be reviewed to make it more attractive for people to work here. 

 

Considering the immense number of predicted immigrant workers to enter Japan in 2040, how do you explain to those who are afraid of receiving foreigners that it is a necessary and inevitable measure to take?

I think there are two main concerns for that group of people. First, they think that foreigners may negatively affect Japan's public safety, and the second concern is that they think these foreigners will take their jobs. Recently, I did some research and found that the crime rate of foreigners in Japan is lower than that of Japanese. Foreigners are aware that they will be deported to their countries when they commit any crime. They do not want that, so it does not happen often. For the second concern, foreigners are, in reality, supplementing what we lack. The high end would be the IT and jobs that require language skills. The low end refers to the primary and secondary industries like restaurants, convenience stores, hotels, agriculture, and nursing care. In the nursing care alone, it is projected that there will be a shortage of 380,000 people in 2025.

More Japanese students are pursuing four-year university studies than students who work fresh out of high school. There are only 180,000 high school graduates directly entering the workforce. Most university graduates do not go into nursing care, agriculture, fishing, and so on, which might later change. In 2019, before the spread of COVID-19, Japan’s unemployment rate was a relatively low 2.2%. This means that Japan does not have extra workforce that much. Due to COVID-19, some people who used to work in the food industry have moved to convenience stores. However, these workers will not be working in those places anymore after the pandemic when our economy recovers. Even now, we notice that restaurants lack staff which means slower services and more work for the managers. This is where we need the foreign workforce to give support. For example, one of Japan’s major convenience store chains, Seven-Eleven Japan, has around 30,000 foreign students at its registers. In Japan, convenience stores have a role as social infrastructure, and foreign workers are making great contributions toward maintaining it.

I want Japanese people to understand that foreigners are complementing us in areas that we do not excel at. Suppose you are a coach of a sports team. Would you rather have a team with only Japanese players, or would you combine Japanese and foreign players who possess unique talents? In any kind of sport, say baseball for example, we have foreigners who are the power hitters, while Japanese players bring speed and consistency. Rationally thinking, the mutual relationship is quite easy to understand. It is important to find the balance. 

For our company, it is vital to create the best team, and to do that, we need diversity. We have some from Hong Kong, Singapore, Vietnam and other universities. By putting a lot of emphasis on diversity, we improve our performance. I want to share the value of diversity to the Japanese people. That is the way I would convey this message.


People from about 20 countries are working at GTN


What I am trying to say is it is important to have people doing economic activities in this country to maintain our workforce and power as a country. I do not think that increasing people with Japanese blood is the most ideal way, rather I want to see a transformation from blood to land. Shohei Ohtani, the baseball player, is paying taxes to the US. We are not benefiting from him as a country in that perspective. On the other hand, if the number of people who buy products and pay taxes in Japan increases, we can maintain our social security and better economic indicator figures. Due to risk to the reputations of some Japanese politicians  they are avoiding this issue about immigrants. I think this population issue is also going to lead to a security risk, so we have to face these problems seriously. We must consider and discuss it determinedly.

 

For the last three years, more or less, COVID-19 completely halted the influx of new foreign workers or students in Japan. How have you been able to diversify your business during this time to overcome this challenge?

We have a subscription type of business; therefore, we can say that even in this pandemic situation, our sales or revenue did not decline. It stayed even or perhaps increased a little bit. We used to have 30% or 40% annual growth, so compared to that, you can say that these two years during the pandemic had a huge impact on us. As you said, with this situation, foreigners can go to their home countries, but they cannot come to Japan. And it is only Japan that is continuing with this kind of measure. Australia has started accepting students again, and also, South Korea never really stopped accepting students even with their stricter measures. Now, many students choose to study in South Korea instead. The government knows this; however, there is a strong albeit minority opinion that these foreigners are bringing COVID-19 into Japan. They have not considered these concerns, and because they have this mindset, the politicians are not able to do anything about it.

As for Japanese language schools, you can only stay in these schools for a maximum of two years, but they have almost shut down for two years. There was a state of emergency in April of 2020, and if we are not going to accept foreigners coming into these schools this March, it will be two full years. Some schools might even be close to having no students at all, which is a very serious issue. According to research by a group of six Japanese language education organizations in August 2021, if Japan's border restrictions continued, 52 percent of language education organizations said they would face bankruptcy within a year. If Japanese language schools shut down, it will impact the number of foreigners going into Japanese universities because they need to have proficiency in the language. This is not only for foreigners but for Japanese universities in general. In 2021, the number of students they got was lower than what they were seeking, and this was true for fully half of private universities. Japanese schools themselves are in this dire situation. 

In terms of agriculture, we are responding during this COVID-19 situation by simply decreasing the amount they produce because they cannot do as much without the labour. Also, Ibaraki prefecture had 30% of foreign workers, so they had to decrease the volume of products.

This also applies to the food industry, housing, and real estate. We prepared monthly mansions and hotels for the Olympics, but because of the situation, people did not come. These monthly mansions were not being used, which then created a price crash. So right now, if you look into the hotels in Tokyo, you can see some business hotels now offer prices from ¥2000 to ¥3000, it is a crazy price. It is really impacting the travel industry, real estate industry, and the renting market.

 

When companies in Japan hire foreign workers, there are a series of hurdles like administrative or visas, cultural, and housing. This maybe simple for a big firm like Sony, but is a real thing for SMEs. How does your business help employers welcome this foreign force?

First of all, when a company accepts foreign workers, they need to prepare for the person's day-to-day lifestyle. For example, they would need to make arrangements for a house, a mobile phone, medical care etc. In metropolitan areas, awareness of this issue is growing, but it is difficult to acquire an understanding in rural areas. There is this kind of burden due to the number of procedures they have to go through, and they do not fully appreciate this. In 2006, even branch heads in Japan of huge Chinese companies that now have a market cap of a few trillion dollars had a hard time passing apartment rental evaluations. It is important for us as a company to give correct information and to have these companies understand, especially in these rural areas. 

They have to go through laborious procedures, which is a burden, but they can get more from doing that. We have to make sure that they understand this. There is a concern about foreign workers going to quit easily. To prevent that, we have to educate them on the facts as well. Several companies segregate Japanese and foreign workers in their minds and use foreign workers with lower compensation. That is why our responsibility is to reform their way of thinking towards that. We also have to reform the system that allows that difference between Japanese workers and foreign workers. 

We have to make companies that accept foreign workers understand that their approach is beneficial from a short-term perspective, but their reputation can be destroyed in the long term. It is going to come back to them, and it is not going to be good. Furthermore, we are in charge of being in the middle and giving out the correct information.  The unique service that we provide is to act as the company that takes risks on their behalf. We talk with the management companies, the real estate companies, the telecommunication companies, and the credit card companies, and we are the ones shouldering the risks. We are not the real estate or credit card owners, but we are the risk-takers. In doing that, we are not putting so much burden on either side.

Most importantly, we have been risk-taking for foreigners for 15 years in the market. We have this know-how of risk management and scoring, and that is something we are proud of, and we also have a support centre for livelihood. This support centre, which resolves 80,000 cases per year, is comprised of our employees only, so this is a unique service that we give out.


The global lifestyle support division resolves 80,000 cases per year


You mentioned that your main know-how skill is risk management with your role as the middle man. Can you please explain how do you convince these other firms, the real estate firms or credit mediums, to collaborate with GTN?

The Japanese market is shrinking, but the growing market is the cloud workers and the foreigners. A little while ago, it was said to be the youngsters and the female workers, but now it is the cloud workers and the foreigners. In a lot of companies, the management already knows this, but they hesitate to get foreign workers, because of this risk management issue. That means it is very diverse because there are all kinds of people, cultures, and habits, and the rules for real estate are different in each country. The real estate management companies take responsibility from the owners. They have a responsibility to properly manage the property. They are still hesitating to accept foreigners because they do not know how to deal with them.. Our strength during these 15 years is that we say: "If you are willing to accept foreigners, then we will do everything else for you. We will do the customer acquisition, risk management, and support. We will do everything bundled together." That is something other companies cannot offer; we are the only company in Japan that can do that.


GTN provides foreign workers with online training, teaching them Japanese lifestyle and  communication skills for the companies that hire them


You have accompanied this company through its growth, and in the long future, you are going to take a well-deserved retirement and hand over the company to the new generation. When that happens, what goal or objective would you like to have achieved?

We have the issue of our declining population, but it is important to have a global perspective, not only Japan. When you look at the global sphere, we have this issue of demographic dividend, so there is an increase in population, which is becoming a concern. In 2050, the population is said to become 9.8 billion – there is going to be a 2 billion increase from now to 2050. It is important to rebalance the population. We are going to experience a population decrease in Japan, which means we will have an environment in which the people that want to come to Japan will be readily accepted, as compared to other countries like Cambodia that will have a younger population. Those countries might be seeking experts or people with a lot of experience or know-how, then we can export our personnel, our 60-year-olds that are still healthy and still willing to work. We need to look at the global size, and I want to make the demand of people flat. I want to have as little stress as possible while doing that. What I mean is that when people are switching from place to place, there is the stress of language, network, or insufficient information that comes up. Let us say, if I were to go to China, I would be using Alipay, but I will start from 10,000 yuan because of my lack of credibility in the country. I will keep using Alipay in order to increase this limit. Let us say I moved to Malaysia after that. I will have to do the same thing. This is a stress factor of people moving from place to place and also results in increasing switching costs. I want to make this financial service flat so that your trust can keep on accumulating wherever you go, instead of just starting from scratch. I want the GTN branches to be worldwide, so you will have that kind of trust in each country.

That will be my ideal picture of moving ahead and going borderless. I think this is how we can resolve this population issue. I love Chinese people, South Korean people, but that is because I have been to these countries, and I have interacted with them. On the other hand, if people live in Japan and have Japanese education, just looking at the Japanese media, they might not have the same opinion. If they have interacted with the world and saw for themselves, their opinion will change positively. That is why I think it is important to go borderless, and I want to keep growing my company to contribute to that.

Ultimately, it is ideal for Asia to become something like the EU, but it is difficult for Asia with many differences culturally to become united like the EU. Even if that is difficult, at least in the service sector, I want to make this flat status situation, and I want to contribute to that. 

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