Japan’s⁣ Construction Industry ⁣Grapples⁢ with Labor Shortage, ‍project ​Delays

‌ ‍ Updated⁣ June 29, 2025
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Tokyo – Japan’s construction sector is facing notable‌ headwinds as factory and commercial building projects‌ experience unprecedented delays. Unfilled ⁤orders have surged to a record⁣ high, ​exceeding 15 trillion yen ($103 billion), signaling trouble for the nation’s economic growth.

The slowdown, primarily‍ driven by ⁣a chronic labor shortage, has intensified since new overtime limits were implemented last‍ year. These regulations further strained an‌ already stretched workforce, impacting project timelines across the country.

The construction industry,​ a key component of Japan’s domestic demand, accounts for approximately ‍5% of ⁢the nation’s gross domestic product and about a third of ‌total capital spending. Experts warn that unless the sector ⁣improves ⁢its project delivery rate, private investment and public infrastructure spending could stagnate, jeopardizing broader economic expansion. The labor‍ shortage in construction is a major concern.

aeon Mall, a retail developer, is among the companies grappling with these challenges. The company ⁢postponed the opening of its ‍shopping mall in Date, Fukushima prefecture, ⁢from late 2024 to the second half of 2026. The reason: a lack of available workers to ⁣complete construction on schedule.

“The challenge in the Tohoku region lies not only in the limited pool of construction workers,​ but also in​ their wide geographic dispersion,” a company official⁢ said.

Ministry of Land, Infrastructure, Transport and Tourism statistics show that as ⁢of March, construction ‍companies’ order‌ backlogs reached 15.3 ​trillion yen on a 12-month ​moving ⁤average basis.This is the highest level since April 2011, when comparable industry-wide data became ‌available, partly ‍fueled by rising prices.

While order ⁣backlogs surged‍ in ‌the early 1990s ⁢before Japan’s economic stagnation, today’s delays stem primarily ⁤from labor shortages‍ rather than increased⁤ demand. A Ministry of ‍Internal Affairs and Communications survey revealed that ‌the⁢ construction ⁢sector‍ employed 4.77​ million workers ​in 2024, a ⁢6% decrease from a decade⁤ prior. Nearly 20% of these workers, or 800,000 individuals, ⁢were aged 65 or older, a 5 percentage point increase over the same period.

The emphasis‌ on⁤ work-life balance has also made it harder for the construction industry ⁢to attract and retain ‍labor. Regulations implemented in April 2024 limit construction workers’ overtime to 45⁢ hours per month and 360 ⁢hours per year.‌ Consequently, the industry’s average working hours per person ‍decreased by 32.3 hours in 2024 compared to‍ the previous year, substantially exceeding the all-industry average decline of 14.3 hours.

Competition for workers is intensifying, particularly in Hokkaido, where Rapidus, a Japanese semiconductor manufacturer, is constructing a mass-production⁤ plant ⁤for advanced chips.In 2023, contractors with a⁣ workforce of 10‍ or more employed approximately 130,000 construction workers in ⁢the ⁣region, a​ 23% increase from the previous year. ⁣Monthly basic salaries in Hokkaido ‌averaged around 326,000⁢ yen, an⁤ increase of more than 30,000⁣ yen, compared with a national average ‌rise of about 14,000 yen.

Construction companies are‌ now more selective about new projects, focusing on profit margins.The average unit price of construction starts for ​private-sector industrial buildings rose by 18% in 2024 from⁤ the previous year,reaching about 300,000 yen per square meter.

A top executive ‍at a major⁣ construction company said, ⁤”We ‍carefully evaluate projects based on their profit potential and⁤ expected completion timelines.”

Many smaller companies have been forced to close due to the inability to secure ‌sufficient labor or ⁣win projects‍ with adequate ‌profit⁣ margins. The industry’s reliance on labor-intensive methods has further exacerbated the bottleneck.

Takayuki Sueyoshi,senior economist at ⁣Daiwa Institute of Research in Tokyo,noted that “Japan’s construction industry has been slow to adopt IT,largely because the sector is dominated by smaller companies.” The institute estimates that Japanese builders invest only about one-fifth as much⁢ per worker in labor-saving software compared to their British and French ⁣counterparts.

What’s next

Given ‍the construction sector’s crucial role in the‌ Japanese economy,improving builders’ ability to ‍manage workloads ⁣should be⁤ a priority. The industry will need to accelerate digitization and implement productivity-enhancing measures if labor​ shortages persist.