Is Japan the New Robot Haven?

When well-known noodle chain Ramen Nagi recognized its dwindling shop staff numbers and the growing difficulty of attracting new workers, its CEO leapt at the opportunity to revamp and mechanize its shop floor operations.

The outskirts of Tokyo are an unexpected place to find a half-a-million dollar automated ramen investment. General Manager Atsushi Makino says the Saitama branch, an hour from major commercial districts, was chosen in 2015 as a guinea pig to incorporate a new automatic customer ordering and serving system.

In Japan, the trend toward automation is seen as the final solution to the crippling worker shortage threatening businesses across the country. With a 2.4 percent unemployment rate, Japan’s economy is pushing full employment and the pool of unemployed workers is running dry. This ramen chain is one of many restaurants exploring robotics as a way to dodge the worst of the low-skilled labor shortage crisis.

In the store there aren't any waiters or front of house staff. Staff are designated to the kitchen to focus on cooking. The typical cycle of welcoming guests, taking orders, and serving food has disappeared, replaced by a tablet interface and delivery lanes. Unlike rotating sushi, automated lanes carrying hot food is considered unusual even by Japanese standards.

Ramen is far from flashy or elegant. Old standing ramen restaurants are typically grimy, narrow, and shabby. But this noodle soup dish is a modern staple synonymous with traditional Japanese cuisine, rich in regional variations. It’s a cheap food for time-strapped salaryman and a cult-like custom for nighttime revellers.

Makino says with a 24-hour operation, peak times required at least four to six workers in the past. These days as few as two to four workers are enough. Alongside labor productivity gains, the decision to renovate and install machinery was a way to wow customers and draw attention. “We have been able to cut costs but also there isn’t any other ramen shop like us. We’ve been able to invent a new kind of fun for customers” he explained.

Three years on, Makino says they’re still fine-tuning their ramen system to be more user friendly. While some customers find aspects hard to understand, he says, ultimately the hospitality industry is under immense pressure to adapt and is at risk of disappearing along with other industries. He believes the mechanical facelift has given the store a new lease on life.

Under Japan's outdated lifetime employment and seniority wage system, older workers earn more based on years of company service rather than experience, skills, or output. Jun Saito, a senior research fellow at the Japan Center for Economic Research in Tokyo and a former cabinet economic advisor, says Japan’s booming post war economy helped bring to life the permanent employment system, which companies cannot offer anymore. As the population shrinks, raising workers wages is a financial burden in the long run. If there’s a way to get around hiring, companies would naturally opt for automation.

Robots are expected to fill manual labor shortages in transport, e-commerce, and postal services but Saito says there’s a degree to substitutability. Workers in Japan shouldn’t think twice about job security. “You can’t just replace everyone with robots,” he said, warning that “if you’re going use more robots you have to make more robots and that’ll increase jobs but exacerbate the labor shortage.”

Throughout Japan’s four consecutive years of modest economic expansion, dismal population demographics and a tight domestic labor supply should have provided ripe conditions for fatter worker paychecks. Theoretically, a worker shortage should bring obvious wage hikes, higher household spending, and inflation – none of which can be applied to Japan.

Japan’s job openings-to-applicant ratio stands at 1.58 per person, the lowest since 1974. The latest Finance Ministry data reveals 71 percent of small- to medium-sized companies are feeling the labor pinch in day-to-day business operations. However, while part-time wages have gradually increased between 2 to 3 percent, permanent full-time workers’ wages are falling – drawing stark attention to Japan's “unique” labor practices.

Non-manufacturing productivity is only at 70 percent of American levels. However, Saito points out that entertaining clients and building rapport is an inseparable element of brokering business deals and is done outside work hours. “We’re proud about ‘omotenashi.’ It isn’t paid but staff have to offer it and it doesn't show up in productivity,” he explains.

Akane Yamaguchi, an economist at the Daiwa Institute of Research in Tokyo, says it’s not uncommon to see staff without a specific scope of work duties juggling a variety of roles and consequently being overloaded with fluctuating workloads.

Yamaguchi says if workers are being pushed to work more productively without higher pay, it would be to their considerable disadvantage. Companies who do raise wages would see money return in a reciprocal cycle of positive economic growth.

While the entire labor force isn't covered by lifetime employment, she says it is gradually fading away in favor of performance-based wages thanks to growing worker mobility and job changing making its way to the mainstream.

Saito, however, says it’s hard to shake off the lifetime employment system while an increasing number of people still support it. He believes “Japanese society hasn't caught up.”

Saito says non-manufacturing companies are very cautious about expanding their employment as they see their market shrinking internally.

But in the case of Ramen Nagi, they’re excited to mechanized parts of the kitchen and expand abroad as ramen becomes well known overseas.

“Traditional style ramen will always remain in Japan but if companies that are taking steps to automate and be innovative disappear, traditional ramen itself will end up in a tiny market,”
Makino argues.