At the start of 2020, just as Japan was getting a new wave of overseas investment into the energy sector via the upcoming auctions for offshore wind, Covid-19 hit the world and locked down borders for over two years. Dozens of companies that planned to expatriate experienced talent were not able to do so, whereas Japanese firms were able to bring their own people back from where they had been gaining experience in overseas markets.
This led to a high demand and low supply of experienced talent in key technical skill sets during the pandemic. Not limited to offshore wind, other solutions such as VPP technologies, battery storage and energy trading experts also confronted significant demand but were limited by lockdowns.
Now that the world is open again, can Japan leverage global talent pools? Should they do so? What limitations can companies and overseas experts expect in Japan?
Language Barrier
Let’s start with the easy one. Japan is an island, and many aspects of business operate in highly domestic ecosystems. Subcontractors, utilities, and many engineering and survey firms will not have sufficient English-language capabilities to be well engaged by non-Japanese speakers. As far as local stakeholder management or negotiations, technical documentation and applications for permits? All in Japanese.
Does this close the door to non-Japanese speaking talent? Not 100%. In areas where the Japanese talent pool is in short supply, foreign expertise can be highly valued. Companies must however, consider hiring and developing local resources to complement overseas talent.
Expat and the local balance
Can you have a team of all expats? In the early to mid 2010s we did see a number of PV solar firms with very little Japanese talent. Developers, in large part from Europe, came in with expertise that included EPC firms, as well as producers of modules, racks and power conditioners (inverters).
For a brief moment in time, knowledge of Japanese was only needed for a few key elements such as forestry permits, grid connections etc. The ‘Spanish Solar Mafia’ came and experienced success – however, this could not last forever. It was only a matter of time for the Japanese to learn the solar business, build local expertise, leverage bigger partnerships, lower cost of capital, and ultimately drive out much of the early foreign solar players.
Those who stayed have two things in common: Firstly, they learned to speak Japanese, and secondly, they diversified their teams to have a healthier expat / local balance.
If we look now at the offshore wind market, there are a number of foreign players who have teams comprised primarily of expats and are relying on their Japanese consortium partners for the local content, but this is the minority.
Most global players have a 10~20% contingent of expats and are building up the bulk of the team with local talent. Expats bring real experience in various engineering disciplines, project management, or in leading competitive tender bids.
Companies with longer term vision and plans for Japan are leveraging this expat knowledge to hire, train and build out strong local capability for two reasons: Firstly, they recognize the need for Japanese technical expertise and understanding of local regulations, as well as language abilities to effectively work within this
ecosystem. Secondly, the market is growing at such a rapid rate globally that many firms do not have enough talent to send to Japan; distributing skills among all key markets is a topic to be tackled strategically and with care.
Are firms hiring overseas talent?
There are cases of energy companies hiring overseas talent with in-demand technical skill sets from overseas. A number of these firms have invested in translation/ interpretation resources in-house to leverage this talent. Typically, the profile of these companies have been Japanese firms playing in new markets (offshore wind, trading, energy storage) that don’t have an expat pool to pull from and therefore have turned to headhunting talent from global markets.
Another case where this is evident is the battery technology manufacturers. Japan used to be the center of the world for battery technology, however there has been a heavy talent leak to China and the U.S., with the impact compounded by Japan’s aging population. This has led to opportunities for global talent in the research, development and production areas as can be seen in firms such as Murata and AESC.
Technical limitations
Japan has various specific regulations and technical challenges, which are very difficult, if not impossible to circumvent without knowledge of Japanese. Ask any wind turbine manufacturer, ship operator or developer about Nippon Kaiji Kyokai (ClassNK) and hear their challenges. Foreign electrical engineers can transfer a lot of skills to Japan, until faced with the challenges of different technical requirements and regulations for grid connection depending on the local utility and region.
Long-term expats
As we discussed above, there is real value for global firms to expatriate experts in talent-starved areas. For the expat however, these assignments have an end date, and some people wish to remain in Japan beyond that expiration date.
This is possible, as demonstrated by the hundreds of global citizens in the solar community here, and a growing number in wind. To do so successfully, in almost all cases you should learn Japanese to the business level!
In addition, understand your value. As an expat, your value is to bring expertise to develop local capability, and to act as a communication bridge back to HQ. Once you step out of that organization, you must add the same value. This means your next
employer should be a global firm that has struggled to understand the intricacies of the Japan market, which you are quite knowledgeable of. You can act as a bridge and help that new employer to build out or improve local capabilities.
Especially if we look at the executive and functional leadership level we can see many examples of long-term, non-Japanese success cases.
The glass ceilings
Due to the technical and language limitations listed above, there are some glass ceilings that can be hard (but not impossible) to break through. A frequent example that best illustrates this is Site Engineers desiring to take on HQ Engineering roles. Often, managing the construction site for a plant is a role well done by non- Japanese, especially when leveraging major or global EPCs, contractors, vendors etc.
Though many of these professionals have strong engineering skills, they struggle to make the move to Tokyo HQ and work on plant design, grid connections etc., as the technical and language barriers are high.
Summary
There is certainly a place for global talent in the Japan market. The key is in the supply and demand of the particular skill set and market niche that we are considering. Secondarily, the Japanese are masters in mastering skills; just look at their whiskey!
This means that the window of opportunity in a particular niche is always temporary. Once enough local capability is established, the need, and therefore the value of the foreign talent will diminish, with the exception foreign talent who invest in themselves to integrate better into Japanese society.
Andrew Statter is Partner and Head of GreenTech at Titan Consulting in Tokyo.
