Unlocking Human Potential Through Technology

One of the major challenges facing Japan is its demographic crisis. With the oldest population in the world, Japan’s workforce is aging and shrinking each year. This decline presents significant challenges for industries, including a shrinking domestic market and labor shortages. By 2040, Japan’s labor force shortage is expected to reach 11 million workers. How is this demographic decline affecting your business? To what extent must Japanese companies look overseas to secure their long-term future?

Japan’s demographic decline is having a significant impact. When I was a child, around 1.5 million children were born each year, but that number has now dropped to 700,000 to 800,000 and will continue to decline drastically over the next five to ten years. While the workforce may not be severely affected in the next three to five years, in ten years, labor shortages will become a serious problem.

As the number of workers declines, businesses—such as restaurants—are turning to automation, using QR codes and machines to deliver food to tables. These kinds of changes have been gradually taking place across Japan.

Ten years ago, Japanese culture placed a strong emphasis on hospitality, requiring a lot of human labor. However, restaurant owners are now struggling to find staff, which has shifted the trend over the past five to ten years. To address hiring difficulties, businesses have started employing more foreign workers and implementing IT solutions to remain operational. This shift is now evident across many industries.

I believe Japan’s services could become more efficient. In government and other sectors, for example, processes could be streamlined, similar to what we see in other countries. In the U.S., for instance, many places are automated. While the quality may not always be high, it is considered acceptable. However, in Japan, quality is a priority, which means that simply implementing automation is not enough. That said, I believe this mindset is beginning to shift.

Depopulation is not an issue unique to Japan. Countries like South Korea and China are facing similar challenges, and even European nations like Germany are expected to encounter significant labor shortages over the next 10 to 15 years. Some commentators suggest that Japan, having faced these issues earlier, has a head start in developing solutions such as automation, streamlining, and HR processes. This could position Japanese companies as leaders in the field, exporting their expertise and innovations abroad. Do you agree with this perspective? Which of your services or products do you see as having the greatest scalability for international markets?

Japan has one of the highest percentages of elderly people in the world, making aging society one of the country’s most pressing challenges. However, addressing this issue is particularly difficult because a large portion of voters are elderly, leading the government to prioritize policies that cater to them rather than younger generations. This creates a complex situation with no easy solution.

That being said, if Japan can successfully develop solutions to these challenges, it could export these innovations to other countries facing similar demographic shifts. As you mentioned, tackling the aging society is one of the most critical areas we need to focus on.

Your business model is built around an online tutoring system, which is particularly interesting given that Japanese culture traditionally values in-person experiences, especially with the omotenashi (hospitality) mindset. However, the COVID-19 pandemic has significantly changed people’s attitudes toward online services, leading to greater adaptation and acceptance. Could you walk us through how your business has evolved pre- and post-COVID? How did the Japanese general public initially perceive your services, and has there been a shift toward greater acceptance of online tutoring as a legitimate way to learn English? Additionally, what AI tools are you incorporating that give you an advantage over traditional classroom-based English learning?

Both before and after the COVID-19 pandemic, people's mindsets were evolving, particularly in the corporate world, where many began to accept that online meetings were effective—which, in turn, led to greater acceptance of online learning.

We started our business in 2007, when online learning was still uncommon. Our goal was to demonstrate its effectiveness. While face-to-face learning has clear advantages, such as better nonverbal communication, online learning also offers unique benefits. For example, chat applications allow teachers to quickly clarify meanings or correct grammar mistakes. While there can sometimes be audio issues, the overall advantages outweigh the drawbacks. We had already been offering these services before COVID-19, but the pandemic accelerated acceptance and adoption of online learning.

The peak periods for learning are January and April. In Japan, April marks the start of the academic and business year, and many fresh graduates join our platform during this time. Their first choice is often online learning, as they are still at home before the semester begins. We typically see two to three times the usual number of students enrolling in April and May. January is also a key period, as many people set New Year’s resolutions to learn a new language or develop new skills.

In a 2020 interview, you emphasized your goal of creating a platform to train global leaders through professional development. Since then, you have introduced Global Skills Power Training, which not only helps learners improve their English proficiency but also equips professionals with cultural awareness and communication strategies for engaging with diverse audiences. Could you walk us through some of the key components of this course? How is it designed to go beyond language proficiency and provide learners with the business skills necessary to succeed in global environments?

Our Global Skills Power Training program is primarily designed for corporate clients. Their goal is not just to improve employees' English proficiency, but to help them communicate effectively with international counterparts, negotiate with foreign companies, and conduct business abroad. However, many employees lack the necessary practical skills to achieve these objectives.

At first, HR managers focus on improving employees’ English fluency. However, they soon realize that even fluent speakers often struggle with presentation, negotiation, and cross-cultural communication. For example, in Japan, it is common to exchange business cards, whereas in many other countries, a handshake is the standard greeting. These differences in business etiquette and communication styles create challenges for professionals working internationally. Recognizing this need, we provide business communication training alongside language learning, as this has become one of the top priorities for corporate clients.

The course is structured to enhance English proficiency while developing essential business communication skills, including presentation, networking, meeting attendance, and meeting facilitation—all taught in English. Participants learn practical phrases and strategies applicable to real-world business scenarios. Since Japanese business practices differ significantly from those overseas, we focus on bridging that gap by teaching global business customs and logical communication strategies.

To effectively participate in this program, a B1 or higher level speaking skill on the CEFR scale is required, as the training would be too difficult otherwise. For employees who have not yet reached this level, we offer English language training to help them build the necessary foundation before advancing to business communication skills training.

Do you see an opportunity to expand this program in the future, either by offering it overseas or by making it available to non-corporate clients, such as job seekers or individuals looking to work in Japan but who may not fully understand the Japanese corporate environment?

Currently, we offer our training courses exclusively to corporate clients in Japan. While we recognize that some individuals  may be interested in this type of training, the majority of our existing individual customers have other purposes than business. As a result, we have focused our efforts on promoting it to corporate clients.

Expanding to overseas companies is something we may consider in the future, but for now, our priority remains on strengthening our presence in the domestic market.

Your PROGOS AI-driven English-speaking test, which aligns with the CEFR scale, provides users with a quick and accurate assessment of their English proficiency. Since its launch in 2020, it has gained popularity not only in Japan but has also been adopted in many countries and regions. Are there any specific countries or regions where you have seen notable success? What do you believe are the key factors behind the app’s global growth and success?

Right now, Japan is the leading market for PROGOS, with many corporate clients, particularly large companies, integrating it into their HR processes. For example, fresh graduates applying to a global e-commerce company are required to take the PROGOS test to prove their spoken English proficiency. Additionally, many large companies mandate that employees take the test annually, with their scores stored in the HR system. This allows managers to evaluate employees' English levels, determine department assignments, and decide whether they are suited for overseas roles. Many companies are leveraging PROGOS for these purposes.

Outside of Japan, PROGOS has been particularly successful in the Philippines, where we have local subsidiaries. This has allowed us to offer our services to a wide range of clients, including universities. For example, one of our university clients requires students to take the PROGOS test at the beginning and end of each semester to measure their English proficiency improvement. Additionally, users in India and Pakistan have also adopted the service, making these countries among our top international markets.

We are also expanding through partnerships. We currently have a tie-up with EnglishCentral, which provides English self-training services using videos. They have a large user base in Turkey, Brazil, and Korea, among other countries. We supply PROGOS on an OEM basis, allowing them to offer it to their students. Rather than expanding internationally solely on our own, we are actively leveraging strategic partnerships to grow in overseas markets.

PROGOS for testing English

Could you explain the AI component of PROGOS in more detail for our readers? How does the technology work, and what makes it different from traditional English proficiency tests?

We first introduced our speaking test about ten years ago in response to corporate client demands. Many HR managers wanted a way to measure their employees’ English proficiency improvements between the start and end of their training courses. Initially, we offered paper-based tests like TOEIC, which assess reading and listening skills. However, since our focus was on speaking proficiency, we decided to develop our own speaking test.

At first, our team manually evaluated the tests. However, by 2019–2020, AI technology had advanced significantly, so our R&D team began working on automating the evaluation process. Through machine learning, we successfully developed an AI system capable of assessing speaking skills with accuracy comparable to human evaluation.

To ensure accuracy and reliability, we worked with CEFR experts, integrating CEFR standards into the AI evaluation model. We also validated that the AI-generated scores align with human assessments, allowing us to process thousands of tests efficiently while maintaining consistent and reliable results.

Looking at your stock price history, it has been declining since its 2020 peak of over JPY 2,700. However, this does not seem to align with your financial performance, as your consolidated sales nearly doubled in the same period, and your consolidated profits have remained strong. What do you believe is causing this disconnect between the stock price and company performance? What steps do you think are necessary to redress this balance?

To increase our stock price, we need to exceed investor expectations. Even if our revenue and profits are strong, if investors expect even higher results, the stock price will not rise. Therefore, we must outperform these expectations to drive stock growth.

Additionally, our market capitalization is relatively small, and a large portion of our investors are individual traders engaged in day trading, making quick buy-and-sell decisions. This dynamic makes it challenging to convince investors of our long-term growth potential. It requires continuous communication and trust-building.

Once we set fiscal year targets, we must not only meet but exceed them to earn investor confidence. If we fall short of expectations, trust can erode, leading to a decline in stock price. To prevent this, we must consistently deliver on our commitments and surpass expectations, ensuring that we gain the trust of both individual and institutional investors.

One of your key growth strategies has been acquiring other companies. In 2021, you acquired a 49% stake in Borderlink and later purchased the remaining shares in 2023, making it a fully owned subsidiary. Additionally, you have acquired shares in Shikaku Square and formed a business alliance with Gakken Holdings. How have these strategic acquisitions strengthened your business? Looking ahead, are you actively seeking new M&A opportunities? If so, what specific sectors are you targeting for expansion?

When it comes to M&A, we focus on two key objectives: strengthening our core business and expanding into new business areas. Our goal is to accelerate revenue growth. While our existing business can grow organically over time, strategic M&As allow us to achieve rapid expansion, potentially doubling revenue within a year when a new company joins our group.

Our first acquisition was in 2016, when we acquired Ripple Kids Park, an online English tutorial service for children. While its JPY 100 million revenue was relatively small, it served as a valuable starting point for our expansion. Since then, we have pursued several acquisitions, including our 2021 acquisition of Borderlink, which has been our largest to date. Today, Borderlink contributes nearly half of our total group revenue, helping our overall revenue grow from JPY 3 billion to JPY 5 billion—a significant jump that underscores the importance of strategic M&As.

Borderlink specializes in providing English teachers for schools, while we primarily focus on English education for consumers. We saw an opportunity to create synergy between online and offline learning. Currently, we have a large network of online tutors in the Philippines, and we use student evaluations and attendance records to identify top-performing tutors. We then offer these tutors the opportunity to come to Japan and teach in person. Over the past year, we have placed around 100 tutors in elementary and junior high schools across Japan, creating new career opportunities while strengthening English education locally.

Additionally, our ability to provide both online and offline training allows us to offer comprehensive language programs to local governments and schools. Using the same teaching materials, we can deliver blended learning solutions, further maximizing the synergies from our M&A strategy. Thanks to Borderlink, we have significantly increased both our revenue and profitability while enhancing our service offerings.

You mentioned bringing selected teachers to Japan to work in schools. As Japan sees an increase in foreign staff, adapting to Japanese society can be challenging. Many newcomers need assistance with practical matters, such as opening a bank account or finding housing. Have you implemented any specific support systems to help these teachers adjust to life in Japan? What measures are in place to ensure a smooth transition for them?

Firstly, Borderlink provides housing for the teachers upon their arrival in Japan. Additionally, we send instructors to the Philippines to conduct pre-departure training. For example, just two weeks ago, our instructors traveled to Cebu to provide onsite training, helping teachers understand Japanese culture and what is expected of them in the classroom.

Once teachers arrive in Japan, we offer ongoing support to help them navigate daily life. If they encounter difficulties or have questions, we assist them as needed. We also ensure they have safe and reliable housing. While housing preferences vary, some teachers prefer to live near people of the same nationality—for example, Tokyo has established Filipino and Indian communities. Teachers can choose to spend their weekends with friends from these communities, helping them relax and adjust to life in Japan. We provide them with all necessary information to ensure a smooth transition.

In addition to practical support, we educate them on cultural differences between Japan and their home country. For example, in many Asian cultures, people tend to arrive at social gatherings after the official start time. However, in Japan, if an event is scheduled for 4:00 PM, arriving on time or slightly early is expected. Punctuality is highly valued in Japan, and we emphasize these nuances to help teachers integrate smoothly.

Additionally, we sometimes receive feedback from Japanese clients regarding small cultural misunderstandings. When these occur, we provide guidance to our ALTs to ensure they align with Japanese workplace expectations. Through these efforts, we help our teachers adapt to Japanese culture and work environments effectively.

We know that you have an extensive network in the Philippines, where your subsidiary recruits and trains teachers locally. As you continue to expand your services, do you have plans to broaden your recruitment efforts to other countries? If so, are there any specific countries you believe would be a good fit for your hiring strategy?

For our online English services, we have established a partnership with a South African company, which provides us with tutors from South Africa. Additionally, we are actively hiring native English-speaking tutors who are already living in Japan. Some of our ALTs also teach online after finishing their school duties, allowing them to expand their teaching experience beyond the classroom.

While we aim to hire teachers from around the world, our initial focus is on recruiting native English speakers who are already in Japan and other Asian countries. This serves as our first step before expanding further.

In addition, we are not limiting our ALT recruitment to the Philippines. Two years ago, we established a partnership with the Pakistani government, which led to 30 Pakistani English teachers coming to Japan to work in schools. Moving forward, we are also looking to hire English teachers from Africa, South America, and the Caribbean, providing them with opportunities to teach in Japan.

We know that you have made several overseas acquisitions and have already established a presence in Thailand, Vietnam, and India. Looking ahead, are there new markets where you would like to expand? If so, how do you plan to enter and establish your presence in those regions?

We recently launched our RareLingo iOS app, the global version of RareJob Eikaiwa. It is currently available for download in Asian countries and will be expanded to the US and Europe. The tutors available on the platform are primarily from the Philippines, and our goal is to provide these services worldwide.

For our initial marketing efforts, we decided to focus on Taiwan, as its culture is similar to Japan’s, and the time difference is only one hour, making it an ideal starting point. Moving forward, we will need to refine our approach to operating global teams and develop effective marketing strategies for different regions as we expand.

RareLingo: Online English Tutoring

In the future, we aim to enter the US and Saudi Arabian markets. Saudi Arabia is actively seeking investment from around the world, increasing the demand for English proficiency. For example, when we spoke with English school owners in the UK, they mentioned that a large percentage of their foreign students come from Saudi Arabia. Many Saudis also travel abroad to learn English, highlighting a significant market opportunity for us to offer online language learning services tailored to their needs.

However, Saudi Arabia presents unique challenges, particularly due to language and design differences. Arabic is read right to left, making it a complex market for application developers. As we expand, we plan to develop applications specifically for the Middle Eastern market, despite the challenges involved, as we see strong potential in the region.

For the US market, we see an opportunity in serving immigrants who do not speak English fluently. While market penetration can be difficult, higher salaries in the US mean that consumers are more willing to invest in language learning applications. We believe there is significant potential in targeting non-native English speakers within the US immigrant community.

We have learned from past experiences. Ten years ago, we expanded into Brazil, but due to the challenges of operating in the market, we had to withdraw after three years. This time, we are taking a different approach, starting with Taiwan and gradually expanding into other countries, ensuring a more sustainable international growth strategy.

If we were to return for another interview in 2030, five years from now, what goals or personal ambitions would you like to have accomplished by then?

I want to create an innovative service that transforms society and the way we live. In Japan, we have already changed how people learn English. Twenty-five years ago, learning English meant attending in-person classes once a week, which was insufficient for fluency. Traveling abroad for language immersion was time-consuming, expensive, and difficult. However, with the internet, we made it possible for people to learn English from home, making fluency more accessible to many in Japan. Through this innovation, we fundamentally changed the way English is learned.

Looking ahead, I want to create more services that make a meaningful impact. PROGOS is one such tool that is already helping to redefine English evaluation. In Japan, many corporate clients rely on TOEIC to assess language proficiency, but TOEIC primarily measures reading and listening skills. As a result, even those with high TOEIC scores may struggle with spoken English, a challenge many of our corporate clients face. This is why we developed PROGOS, which is now being widely adopted as a new standard for evaluating English proficiency.

Over the next five years, my goal is to establish our company as a global leader in this space. I want our innovations to not only impact Japan but influence society worldwide, transforming how skills are assessed, learned, and applied on a global scale.

For more information, please visit their website at: https://www.rarejob.co.jp/