As Japan takes a harder line on immigration, its nearly 2.6 million foreign workers are caught in a puzzling bind—desperately in demand yet steadily pushed away.

Take Japan’s strained care sector, which employs 90,000 foreign workers and still faces an estimated shortage of around 250,000 workers under the pressures of a rapidly aging population. So long as they worked as certified care workers in Japan for at least five years, foreign nursing students, predominately from Southeast Asian countries like Indonesia and Vietnam, have long been eligible to receive generous scholarships, full-time permanent contracts, and new, easier pathways to care worker certification. “Facilities are so happy to have them,” said Reiko Ogawa, a professor at Chiba University who is researching migrant care workers. “Without them, a number of facilities would have already gone under.”

But under new proposed measures revealed in July, these foreign care workers would no longer be able to acquire permanent residency in Japan. Many who planned to live in Japan for the long term are now reconsidering their plans or have begun to send earnings back home, instead of investing in real estate and permanent homes, workers’ representatives told Foreign Policy.

It’s not just in the care sector. Japanese Prime Minister Sanae Takaichi’s government will raise  permanent residency visa fees by 20 times this October and has proposed requiring permanent residency applicants to make more than the average annual household income, which is currently 5.8 million yen (around $36,000). That figure effectively disqualifies foreign workers in a broad range of sectors, including the care sector, hospitality, agriculture, fishing, tourism, and manufacturing, all of which have average salaries well under 5 million yen.

The proposed changes fit into a general conservative swing in immigration policy under Takaichi, whose Liberal Democratic Party (LDP) is adapting to increasing anti-immigrant sentiment amid electoral challenges from the ultra-nationalist right. The result is a contradiction that has become common in immigration debates among aging and rich nations in North America and Europe. But removing one of the key incentives for much-needed foreign labor—stable, permanent residency—could ring a death knell, especially in Japan’s critically underserved rural regions.

Japan’s leaders are well aware of its labor crisis. Throughout the 2010s—especially under the conservative LDP-led governments of Shinzo Abe—Japan invested extensive resources and created immigration pathways to help fill its shortages in at-risk industries and regions. The Technical Intern Training Program and specified skilled worker status address areas like nursing, manufacturing, and hospitality. The highly skilled professional visa encouraged accomplished scientists, academics, and business managers to reside in Japan. In 2017, Japan started allowing foreign workers to qualify for permanent residency based on a point system that tabulates factors like income, education, Japanese language ability, and career accomplishments.

These policies have been impactful. Japan’s foreign workforce almost doubled from 2012 to 2025 and is continuing to boom, despite a complete pause in foreign hiring during the COVID-19 pandemic. “We are seeing steady growth in our recruitment and placement of foreign staff, well above the Japanese staff,” said Kei Chiyoda, a manager at Staff Services, a major Japanese recruitment firm.

According to Kenichi Shishido at JP Mirai, a nongovernmental organization working to improve conditions for foreign workers in Japan, the highest demand for and fastest growth in foreign employment comes from automobile manufacturing in Japan’s central Toyota hub; IT and logistics in Tokyo; and hospitality and tourism in popular tourism destinations like Hokkaido and Okinawa. The largest growth in foreign workers have come from Indonesia, Nepal, and Myanmar. (Vietnam has tapered off due to a weaker yen and growing Vietnamese economy.)

Recent years, however, have seen developments that curb the potential for foreign workers as well as benefits for Japanese companies and communities. Japan already shut down accepting specified skilled workers in the restaurant industry in April. New changes to the business manager visa status, which raised the minimum capital requirement from 5 million yen to 30 million yen, has resulted in around a quarter of foreign-owned businesses considering either closure, sale, or merger.

Culturally, tensions are on the rise. In a 2025 poll from the Yomiuri Shinbun and Waseda University, 59 percent of Japanese, including 71 percent of respondents aged 18-39, disagreed with the statement of “Japan should actively accept foreign workers as a part of its workforce,” flipping from majority support just one year earlier.

Reflecting national discomfort about the growing number of both foreign residents and tourists in Japan, the ultra-nationalist Sanseito party grew in popularity and took votes from the ruling LDP in elections for the upper house of parliament in 2025. The LDP won big in this year’s lower house election, in part because of Takaichi’s willingness to capitalize on Sanseito’s momentum and speak to its constituencies’ concerns about immigration, public safety, and cultural integration.

Labor gaps and shortages aren’t distributed equally across the nation. Between 2019 and 2024, Tokyo was the only prefecture in Japan with significant population growth, while rural prefectures like Akita in northern Japan have lost nearly 8 percent of their population. Rural companies and governments have been especially proactive over the last decade in devising ways to attract foreign workers and make them comfortable: building regional recruitment platforms, funding Japanese language education, and creating foreign student scholarships. Some areas, including Kochi prefecture, have established comprehensive demographic strategies that promote foreign families to build communities.

These initiatives require plenty of time and effort to bear fruit. “There’s a much higher hurdle for recruiting foreign workers in rural areas,” Chiyoda said. “It’s faster and smoother to hire in areas where foreigners already live and are integrated, like Tokyo and Aichi.”

In the countryside, meanwhile, schools are forced to merge, long-running businesses fold without successors, and communities struggle. “Concerns voiced in regional areas are suggesting the situation is becoming critical,” Shishido said. “It’s no longer a simple matter of a labor shortage but a challenge to maintain essential functions like medical care and transportation infrastructure.”

The decline of rural areas isn’t just a problem for the people living there. Japan’s food self-sufficiency fell to 37 percent this year, one of the lowest among developed nations. Japanese villages are repositories for cultural treasures and natural resources. Just a few examples of crafts with economic and artistic value that have nearly zero apprentices or successors are: Iwate prefecture’s shrine carpentry; Ibaraki prefecture’s bark-gathering, which is required to make traditional Japanese paper; and Wakayama prefecture’s high-quality charcoal-making. The decline of the rural forestry industry threatens city-goers and suburbanites alike with landslides, flooding, and sediment runoff.

“More and more companies in the Japanese countryside are realizing they need to think strategically about how to encourage young people from other countries to be a part of the local community,” said Adam Fulford, CEO of Fulford Enterprises, a Tokyo-based consultancy that works on regional revitalization projects in rural Japan. “If Japan is not perceived as welcoming to these workers, there is a severe risk that companies will find it more difficult to recruit.”

Industry insiders highlight the need for two-way education: helping foreign workers learn local customs, and Japanese locals adjust to outsiders. “Japanese businesses need to have the mindset, resources, and manuals to create an environment that accepts foreign workers,” Chiyoda said.

Takaichi’s proposed measures recast permanent residency as a prize for elite white-collar workers—those who will contribute tax money but not sustain the nation’s valuable traditions or fill its critical labor shortages. Keeping permanent residency as an attainable goal at lower salary bands is essential to attract and retain integration-minded migrants in threatened rural areas.

The damage that will accompany stricter immigration policy may prove particularly severe in the care industry, which already hemorrhages around 14 percent of its workers annually due to harsh conditions. “There are now more risks for foreign workers around prejudice, especially care workers, who have to interact with patients in person,” Ogawa said, citing a recent incident in which a patient physically attacked a Chinese nurse out of anti-China sentiment. “Do [anti-foreigner] patients not understand that without foreigners, there is no care?”

The proposed measures, and the deleterious effect they may have, reveal a widening gap between Japan’s national and local governments on immigration. Localities and prefectures will be the ones to suffer the material changes on the ground—plummeting food self-sufficiency, shuttering businesses, and an increasing struggle to maintain basic infrastructure like transportation and health care. They will likely continue to drum up all the incentives they can to attract and retain foreign labor. But there is only so much that local governments can do without national pathways to stable residency.

“We’ve seen thousands of foreigners quit because of poor conditions,” Ogawa said. “Workers have their hopes pinned on permanent residency.” The hope may prove a fleeting one.