Economic activities are recovering from the COVID-19 pandemic, and labor shortages remain and are likely to intensify further. Labor participation rate among senior citizens (65 years or older) and women have been rising consistently in the past decade, which mitigated labor shortage to some extent, but such increases are expected to slow in the future. The unemployment rate as of April 2023 was 2.6 percent. The fact that Japan’s unemployment rate rose so slowly during the pandemic was remarkable and likely due to the social contract between worker and employer in Japan, as well as the robust government subsidies under the pandemic. Such government subsidies to retain workers ended in March 2023. Traditionally, Japanese workers have been classified as either regular or non-regular employees. Companies recruit regular employees directly from schools or universities and provide an employment contract with no fixed duration, effectively guaranteeing them lifetime employment. Non-regular employees are hired for a fixed period. Companies have increasingly relied on such non-regular workers to fill short-term labor requirements and to reduce labor costs. The pandemic has particularly hurt non-regular workers whose employment was concentrated in hard-hit service sectors such as tourism, hospitality, restaurants, and entertainment. According to the government’s Labor Force Survey (2022 yearly average), 68 percent of non-regular workers were women.
Major employers and labor unions engage in collective bargaining in nearly every industry. Union members as of June 2022 made up 16.5 percent of employees (“koyo-sha”), down slightly compared to 2021, and in decline from 25 percent of the workforce in 1990. Early results from Japan’s annual 2023 wage negotiations between major companies and labor unions resulted in “historic” wage hikes — for many, the largest since 2014, and for some, the first time in decades. The government provides benefits for workers laid off for economic reasons through a national employment insurance program. Some National Strategic Special Zones allow for special employment of foreign workers in certain fields, but those and all other foreign workers are still subject to the same national labor laws and standards as Japanese workers. Japan has comprehensive labor dispute resolution mechanisms, including labor tribunals, mediation, and civil lawsuits. A Labor Standards Bureau oversees the enforcement of labor standards through a national network of Labor Bureaus and Labor Standards Inspection Offices.
The number of foreign workers has been rising but slowed down slightly during the pandemic. As of October 2022, it is at just over 1.82 million, but they still represent a small fraction of Japan’s 68.92-million-worker labor force. The Japanese government has made changes to labor and immigration laws to facilitate the entry of larger numbers of skilled foreign workers in selected sectors. A revision to the Immigration Control and Refugee Recognition Law in December 2018, implemented in April 2019, created the “Specified Skilled” worker program designed specifically for “lower-skilled” foreign workers. (The Japanese government use the expression, “middle-skilled”) Prior to this change, Japan had never created a visa category for lower-skilled foreign workers and this law created two. Category 1 grants five-year residency to “lower-skilled” workers who pass skills exams and meet Japanese language criteria and permits them to work in 14 designated industries, such as agriculture or nursing care, identified by the Japanese government to be experiencing severe labor shortage. Category 2 is for skilled workers with more experience, granting them long-term residency and a path to long-term employment, but currently permitted only in a few designated industries, such as construction and shipbuilding.
The Japanese government also operates the Technical Intern Training Program (TITP). Originally intended as an international skills-transfer program for workers from developing countries, TITP is currently used to address immediate labor shortages in over 87 designated occupations (as of March 2023), such as jobs in the construction, agriculture, fishery, and elderly nursing care industries. The U.S. government and other institutions have pointed out the problems with the TITP, because the interns and trainees have been vulnerable to labor and human rights violations, including trafficking. Experts also point out the large discrepancy between the objective of the program (international cooperation and skills transfer to developing countries) and the reality (de-facto low skilled guest worker program). The 2018 Immigration Control Law revision enabled TITP beneficiaries with at least three years of experience to qualify to apply for the Category 1 status of the Specified Skilled worker program without any exams. Recently, discussions have been ongoing in the Japanese government to expand the number of designated industries that would qualify to hire Category 2 “Specified Skilled” workers, to respond to labor shortages, and as an attempt to retain those foreign workers who have had the experience working in Japan. The initial five–year term for the first batch of workers who started working under the “Specified Skilled” worker program (mostly in Category 1) will start ending in spring 2024, and under the current system, these workers would have to return to their home countries. Media reports have said this change may be officially decided as early as June 2023. Meanwhile, there is discussion in a government panel to fundamentally revise Japan’s foreign worker program by abolishing the TITP and establishing a new system with a clearer objective of “securing human resources.” A draft report was released by the panel on April 10, and a final report is expected in fall 2023.
To address the labor shortage resulting from population decline and a rapidly aging society, Japan’s government has pursued measures to increase participation and retention of older workers and women in the labor force. A law that entered into force in April 2013 requires companies to introduce employment systems allowing employees reaching retirement age (generally set at 60) to continue working until age 65. The law was revised again in March 2020 and entered into force in April 2021, asking companies to “make efforts” to secure employment for workers between 65 and 70. Since 2013, the government has committed to increasing women’s economic participation. The Women’s Empowerment Law passed in 2015 requires large companies to disclose statistics about the hiring and promotion of women and to adopt action plans to improve the numbers. The Law was revised in May 2019 expanding the reporting requirements to small SMEs starting in April 2022, and increasing the disclosure items for larger companies starting in June 2020. According to government data, the number of employed women increased by approximately 3.4 million between 2012 and 2021. According to the Ministry of Health, Labor, and Welfare (Labor Ministry), women’s average monthly wage was approximately 75 percent that of men in 2021. In July 2022, the new ministerial ordinance to the Women’s Empowerment Law went into effect, requiring large companies with more than 301 employees to disclose gender pay gaps.
In October 2022 Prime Minister Kishida Fumio announced a five-year $7.6 billion workforce reskilling to upgrade the human capital of the Japanese workforce. The reskilling subsidies to companies and individuals aim to expand Japan’s limited talent pool in digital and green industries and to increase Japan’s longstanding low wages by moving workers into better-paying jobs. PM Kishida resolved to continue discussions with a view to raise the (national average) minimum wage to 1,000 yen/hour ($7.65/hour).
On Human Rights in Supply Chains/ Business and Human Rights, the Ministry of Economy, Trade and Industry (METI) has taken the lead for Japan in attempting to focus company attention to this issue of increasing visibility internationally. Human rights and labor contacts welcomed the September 2022 issuance of Japan’s “Guidelines on Respecting Human Rights in Responsible Supply Chains,” but asserted that they did not go far enough. (Information is available: https://www.meti.go.jp/english/policy/economy/biz_human_rights/1004_001.pdf .)
In order to help firms take action on the initiatives in the “Guidelines,” METI released a set of “practical reference materials” on April 4, 2023, which provided detailed explanations and examples of what companies need to consider as a first step, such as the “formulation of a human rights policy” and “identification and evaluation of negative impacts on human rights (risk of human rights violations). Specifically, the new documents provided examples of items to be included in the human rights policy with explanations, explanations about the steps to identify where the “high risks” exist in the supply chains, and reference materials to support this process.
Japan has ratified 50 International Labor Organization (ILO) Conventions (including eight of the ten fundamental conventions).