Global Economy Exposes Japan's Shortage of English-Speaking Graduates

November 01, 2011

In Japan's business world, they call it the "Rakuten English shock." The country's largest online retailer has told its 6,000 employees that they must be fluent enough in English to converse with one another by next year. Executives who aren't up to speed will be fired; rank-and-file workers will find their path to promotion blocked.

That dramatic move by Rakuten's Harvard Business School-educated founder, Hiroshi Mikitani, is the latest sign that some Japanese companies are accepting a long-held truism: English is the language of global business. It is also, however, exposing a long-term shortage of local university graduates fluent in the world's lingua franca.

Japanese children learn English starting in elementary school and throughout high school, and many go on to study it at college. By the time they're ready for work, hundreds of thousands of graduates have spent nearly 10 years struggling with the language, but few can do more than speak a handful of wobbly phrases: Japan ranks lower than North Korea, Mongolia, and Myanmar in the much-watched Test of English as a Foreign Language, or Toefl.

The problem is compounded by a sharp cooling among Japanese for study abroad, a trend that has rung alarm bells at the highest levels of government. U.S. Secretary of State Hillary Clinton recently joined a growing list of officials expressing concern that Japanese university students are increasingly staying at home.

"As recently as 1997, Japan sent more students than any other country in the world to study in America," Secretary Clinton told the U.S.-Japan Council in Washington last month. Today "Japan ranks sixth." She pointed out that the number of Japanese students studying in America has dropped by almost 50 percent over the last 14 years.

While cost is certainly a factor, experts in Japan also noted structural barriers at home, including the lack of credit reciprocity, the traditionally low value attached by Japanese employers to foreign degrees, and the reluctance of most Japanese universities to waive fees for students who decide to study outside the country.

John Belcher, president and co-chief executive of the Study Abroad Foundation, a nonprofit that provides study-abroad opportunities, cites another key factor: "the sheer force" of Japan's lopsided, aging demographic. "With a shortfall of some 20 million people in 50 years, this does mean significantly fewer young people today."

The fear that Japanese graduates are unprepared to work in international companies has become more urgent since Japan's currency began to surge against the dollar this year. Now at a record high, the yen's strength will push more Japanese corporations to shift production offshore, warned Prime Minister Yoshihiko Noda of Japan in October, increasing the demand for workers who are fluent in foreign languages.

Japan's largest business federation, the Nippon Keidanren, takes that demand seriously enough to have organized a summer conference bringing together the country's top universities and corporate bosses. Among the problems discussed by a university-business forum held by Global 30, a group that aims to internationalize 30 Japanese universities, was how to bring Japan's traditionally aloof institutions closer to the corporate table.

In a striking acknowledgment that the decline in foreign study must be halted, the Keidanren used the forum to announce a scholarship plan that will, from next year, give 1 million yen, or $12,835, each to 30 students from the 13 universities now designated Global 30 institutions. Every little bit helps, says William Saito, a venture capitalist and adviser to Japan's ministry of education who himself finances up to four scholarships a year to the United States out of his own pocket.

"Awareness of the problem is growing, I think. I'm seeing a lot more companies this year using English as a hiring criteria, and a lot more discussion at the university level."

Mr. Saito says that Japanese universities are slowly dealing with some of the key barriers to study abroad, including harmonizing the amount of credit awarded to students who study at other universities. He is encouraged by news that the University of Tokyo, Japan's leading education institution, is mulling enrolling Japanese students in study-abroad programs in the fall, a move that would help harmonize the nation's higher-education system with the West.

Will that be enough? Mr. Belcher points out that the number of students going abroad would rise quickly if more colleges dropped their insistence that they pay fees at home. "The biggest obstacle to studying abroad is the universities," he says. His organization has been very successful in brokering deals with colleges that they drop this requirement. "We get more students per university in Japan than anywhere else."

It remains to be seen, however, if the lumbering universities will move fast enough for Japan's companies, some of which are now hiring abroad rather than trying to find fluent English speakers at home. Mr. Mikitani is one of an ambitious new breed of foreign-educated entrepreneurs who acknowledges that his companywide edict wants was a "desperate measure." It may not be the last.


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