Like many firms in Aichi prefecture, Japan's manufacturing heartland, Nishijimax, a maker of machine tools for the car industry, is struggling to find workers. Its solution in a country with a drum-tight labour market is one that is increasingly common in Japan: raising the age of retirement. More than 30 of the company's 140 employees are over 60; the oldest is 82. Putting qualified people out to pasture early is a waste, says Hiroshi Nishijima, a manager; "If they want to work, they should."

Since peaking at over 67m in the late 1990s, Japan's workforce has shrunk by about 2m. The government says it could collapse to 42m by mid-century as the population ages and shrinks. The number of foreigners inched up in 2015 to a record high of 2.2m, but that is far from enough to fill the labour gap. Instead of opening its doors wider to immigrants, Japan is trying to make more use of its own people who are capable of working.

Large companies in Japan mostly set a mandatory retirement age of 60 – mainly as a way of reducing payroll costs in a system that rewards seniority. But other businesses are less stringent. About 12.6m Japanese aged 60 or older now opt to keep working, up from 8.7m in 2000. Two-thirds of Japan's over-65s say they want to stay gainfully employed, according to a government survey. The age of actual retirement for men in Japan is now close to 70, says the OECD, a rich-country think-tank. In most countries people typically stop working before the age at which they qualify for a state pension. Japan, where the state pension kicks in at 61 (it is due to rise to 65 by 2025), is a rare exception.

The greying of Japan's workforce is clearly visible. Elderly people are increasingly seen driving taxis, serving in supermarkets and even guarding banks. Bosses are getting older, too. Mikio Sasaki, the chairman of Mitsubishi Corporation, a trading company, is 79. Masamoto Yashiro, the chairman and CEO of Shinsei Bank, is 87. Tsuneo Watanabe, editor-in-chief of the world's biggest-circulation newspaper, the Yomiuri Shimbun, is a sprightly 90.

It is inevitable that people will stay in the workforce longer, says Ken Ogata, the president of Koreisha, an agency that provides temporary jobs exclusively to people over 60. He notes that the country has little appetite for importing workers, so it will have to make more use of pensioners, women and robots. Many of those who find work through Koreisha were once employees of Tokyo Gas, Japan's largest supplier of natural gas to homes. They do the same kind of work now—reading meters and explaining the use of appliances to homeowners. "They have so much experience and knowledge that can be put to good use," says Mr Ogata.

They can also be cheaper. Companies often hire back retirees on non-permanent contracts offering poorer terms than their previous ones. Takashimaya, a department-store chain, has introduced a performance-based system for such employees aged 60-65 (at no extra cost to the company, it says).

At Nishijimax, managers clearly want elderly workers to stay. The company's work routine is tailored to their needs. So, too, are the canteen's offerings—right down to the reduced-salt miso soup.

The Economist