Over the last decade, Masato Shiota brought his papermaking business back from the brink, paying down debt and buying machinery to automate some production. But he struggles to find workers to keep output at full capacity.

"We have three machines but only have two running on any day," said Shiota, president of Wako Seishi, which produces tissues, disinfectant wipes and toilet paper in Ino, a town in Kochi Prefecture known for its paper industry.

"If we don't have the people we can't make products and we can't turn a profit. We'll go under. This is the biggest problem for small and medium-sized companies."