* Japan PM has modest immigration aims for skilled workers

* Business lobby seeks to relax rules on foreign householdhelpers

* Domestic help from Philippines, elsewhere work in shadows

* Plan moving slowly even though could allow more women towork

* Shows difficulty of dealing with wider immigration reform

By Lisa Twaronite

TOKYO, Dec 11 (Reuters) – During the early days of”Abenomics,” U.S. businesses were optimistic they could convinceJapan’s government to make a small change to the nation’s tightimmigration rules to let more household helpers into thecountry.

But a year after Prime Minister Shinzo Abe took office, anidea that some thought might be an easy win for immigrationreform while meeting a stated aim of Abe’s growth strategy hasmade no apparent progress.

If Abe’s government drags its feet on one small step, itsuggests scant prospects for any broader measures to let inforeign workers any time soon – which many experts say will benecessary for Japan to sustain its economic growth in the faceof a rapidly shrinking workforce.

“Japan needs to let in more foreign workers to solve itspopulation problem,” said Hidenori Sakanaka, former head of theTokyo Immigration Bureau. “Letting in more domestic workers isjust a small part of the big picture, but it might make a bigdifference to the people who employ them.”

The proposal has been discussed by three ministries, peoplefamiliar with the process say, although Abe has not publiclymentioned the idea. Loosening visa requirements for domestichelpers could allow more Japanese women to return to full-timework, proponents say.

That is one goal in a broader Abe strategy to get Japan onthe path of stable economic expansion after almost two decadesof debilitating deflation and sluggish growth.

But after Abe won plaudits for pushing aggressive fiscal andmonetary expansion after coming to power last December, reactionto his longer-term economic growth plans has been lessenthusiastic.

His immigration-reform plans would make it easier for highlyskilled immigrants to get work visas and cut the time needed toqualify for permanent residency. This falls short of thecomprehensive steps needed to address the country’s shrinkingbirthrate and burgeoning elderly population, experts say.

TAKING JOBS

A quarter of Japan’s population is already over 65, and thatwill increase to almost 40 percent by 2050. Ominously, thenumber of people aged 18 to 24 has shrunk by nearly a third overthe past two decades.

Japan will need 10 million immigrants over the next halfcentury to offset its projected population decline, saidSakanaka, who founded the Japan Immigration Policy Institutethink tank after retiring from the bureaucracy.

Officials say changes will take time and might not be aseasy as they appear on the surface.

“Before Japan decides to let in more foreign workers forcertain jobs, we must first determine whether there are Japanesecitizens who could do such jobs,” said Yusuke Takeuchi, deputyplanning director in the Immigration Bureau at Japan’s Ministryof Justice.

The tangle of issues involved in employing foreign workersas housekeepers or nannies helps to illustrate the labyrinthinetask Japan would face if it were to try to tackle much broaderimmigration reform.

There are no clear statistics on the number of foreignhousehold helpers in Japan as many are working informally andthose working legally, do so under a broad visa category. Butforeign workers themselves say their numbers are shrinking.

“It has gotten much harder since I first came in 1990 on atourist visa to look for work,” said a 69-year-old housekeeperfrom the Philippines. She has a work visa – but on a passportbearing her dead sister’s name.

She said she was forced to leave Japan a few years agobecause authorities learnt she was no longer employed by herprevious visa sponsor. So she said she was forced to resort tousing her late sister’s unblemished paperwork to get back intoJapan.

Her employer, an American executive, had hoped to hire aJapanese housekeeper.

“I couldn’t find anyone who would commit to full-time workand was willing to perform multiple job duties, from childcareto cleaning to marketing,” she said.

Abe’s plan to get more women working focuses on expandingthe number of daycare centres. But Japanese women are findingthat daycare centres do not stay open to match the long hoursthey need to adopt to compete in a male-dominated workplace.

Japanese domestic-help services exist, but many limit thehours and duties of their workers.

“MIND-BOGGLING”

Foreign helpers tend to be willing to work for less and aremore flexible, but only foreign diplomats and expatriates withan elite visa status can offer legal visa sponsorship andemployment.

“The fact that I, as an American national and a foreigner,can sponsor a foreign domestic helper, yet my Japanese peerscannot, is just mind-boggling,” said Kathy Matsui, chief Japanstrategist at Goldman Sachs.

She estimates that raising women’s participation in thelabour force to 80 percent, matching men, could lift Japan’sgross domestic product by as much as 14 percent.

“The demand is clearly there, the supply exists, but givenall of the strict immigration rules here, Japan is not theobvious destination for many of these domestic helpers,” Matsuisaid. “It’s as if the government is preventing these supply anddemand curves from meeting.”

Underlining the point, Japanese and foreign domestic workerscomprise less than 0.1 percent of the labour force, theInternational Labor Organization, a United Nations agency,estimates. That compares with about 0.5 percent in the UnitedStates and 7.7 percent in Hong Kong.

The American Chamber of Commerce in Japan urged thegovernment in June to revise its immigration laws to letcitizens and permanent residents with household incomes of 7million yen ($68,200) or more to sponsor household help.

“If you keep the doors open, there are going to be,legitimately, Japanese young families who will be able to employforeign domestic workers,” said Kumi Sato, president and chiefexecutive of public relations firm Cosmo in Tokyo, an author ofthe U.S. business proposal.

She said some Japanese families already hire foreign workersillegally, so the change would help legitimise some existingarrangements that fall into grey areas.

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