The Sega Effect: Will Wages Start Rising in Japan?

By Rodrigo González, Tokyo director

We held our April EICN event on the topic of wages in Japan. We were very pleased to have on the stage Professor Akira Kawamoto of Keio University and Ken Cogger, Head of HR at Nikko Asset Management Group.

For those who missed it, here are a few key takeaways from the event:

-Traditionally, Japanese companies and labour unions have negotiated salaries and employee benefits through a process known as “Shunto”. However, non-regular workers, who account for 37% of all the workforce in Japan, are generally not covered by such negotiations. In Japan, 56% of all working women are under non-regular employment contracts.

– Amidst the many reasons for wage stagnation in Japan, a preference for economic stability through lifelong employment, and an overarching seniority system are particularly salient. A performance-based system, which rewards individual contributions and promotes workers based on their own merit, could benefit companies and workers alike.

– Japanese labour laws are extremely rigid when it comes to employment termination. Being unable to lay off underperforming or troublesome employees adds to a company’s inability to redistribute the staffing budget to where it is needed the most. Deregulation of strict labour legislation is being considered in government.

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