“I chose to be repatriated rather than stay on when my employer eliminated essentially all expat packages,” he said. “My family and I will return before the end of the year. I loved living in Tokyo and wanted my kids to be able to finish the school term before heading back.”
Packages normally cover children’s annual tuition for international schools – over $25,000 per child. In addition to salaries and bonuses, expats receive a cost-of-living allowance that is usually 25-35% of their base pay, exclusive club memberships, paid rent and utilities, a car allowance, yearly home leave for the family, and even tax equalization to ensure that they are not paying hefty Japan taxes.
A package costs companies anywhere from $350,000 to $1 million or more each year, depending on the level and position of the expat. However, due to the poor economy, foreign companies are now reducing expats. One European-based insurance company, who requested to remain anonymous, recalled nearly all their expats or gave them a generous “early retirement” package.
Nick Masee, managing director of the moving company Asian Tigers Japan, has watched the foreign community exodus that has been a focus of the finance sector. “The level of people relocating out of Tokyo over the past two years has been somewhat higher than pre-crisis levels, while the number of expats coming into Tokyo over that same time frame has been essentially flat,” he says.
Home office financial controllers have complained about the total annual expenses for their office’s expat population, no matter how small, because each expat costs more than two comparable positions back at the home office.
Many competent Japanese managers are replacing these foreigner execs. Their salaries are the same as that of their foreign counterpart’s base salary, they speak English and often have U.S. university degrees or MBAs. They have worked under foreign managers, some overseas, and are familiar with Western management. Many longtime foreign residents are also replacing the expats as local hires without the packages. They speak Japanese, know the business culture, and can work well with the head office.
Japan’s western housing market has seen the effects of expats moving out as well.
“Apartments that used to rent for $10,000 to well over $13,000 to the expats who were on fully paid company housing are now going for $6,000 to $8,500,” says Masa Sakaguchi, president of Apple Homes K.K., a real estate agency which specializes in expat housing. “The impact since the Lehman shock on my company has been pretty severe. I had to let go of two staff, move to a smaller space and I’m working longer hours, including more weekends these days to keep up.”
For the foreseeable future locally hired managers, whether foreign or Japanese, will be the new wave.
Joe Peters is a contributing writer for Majirox News and a former full-package expat who now runs his own Tokyo-based executive search company.