KUALA LUMPUR - A Kyodo News survey shows that major Japanese companies plan to cut new graduate hiring from fiscal 2027 despite ongoing labour shortages, as they turn to digital tools and artificial intelligence to improve productivity.

A survey of 111 companies suggests a shift away from the strong hiring trend seen after the COVID-19 pandemic, as digitalisation changes work and global uncertainty, including the Middle East crisis, affects the economic outlook.

In the survey conducted from mid March to early April, 25 companies or 23% said they plan to reduce new graduate hiring for FY2027, up 11 percentage points from a year earlier.

By comparison, only 18 companies or 16% said they plan to increase hiring, marking the first time in five years that more firms are cutting intake than expanding it.

The results also show a clear shift towards more diverse hiring, including foreign workers and mid-career recruits instead of only new graduates.

About 39% of firms, including Fujifilm Holdings Corp and Skylark Holdings Co, said they plan to hire more foreign workers in Japan to support innovation and overseas growth.

Companies are also increasingly focusing on mid-career hiring to secure workers with specialised experience.

Hitachi Ltd and MUFG Bank said their FY2027 new graduate hiring will be lower than their mid-career recruitment in FY2026 due to strong demand for digital skills.

For firms cutting hiring, the main reason given was labour savings through digitalisation, including the use of generative AI to improve efficiency.

The survey also found that 35% of companies plan to keep hiring levels unchanged, while 22% remain unsure and 5% did not respond.

On labour shortages, 38% of companies reported a shortage while 37% said they did not, with engineers and manufacturing workers in high demand.

Competition for new graduates remains strong, with 77% of companies saying the job market is still favourable or becoming more competitive for students.

To attract talent, 74% of firms said they are raising starting salaries for FY2026, while 9 per cent are considering future increases.

The survey also showed that 77% of companies have already started rehiring former employees to help fill skills gaps.