Copyright (c) 2001 The American Society of Comparative Law, Inc.The American Journal of Comparative LawFall, 200149 Am. J. Comp. L. 627LENGTH: 11365 wordsARTICLE: JAPANESE LAW SYMPOSIUM: Labor Law Reform in Japan: A Response to Recent Socio-Economic ChangesNAME: RYUICHI YAMAKAWA*BIO: * Ryuichi Yamakawa is Professor of Law, University of Tsukuba. This article is based on a paper submitted to the Sho Sato Conference held on November 1999 at the Boalt Hall School of Law at the University of California, Berkeley. The contents of the paper were updated based on new developments after the conference. The author is grateful to Ms. Stacy Steele for her valuable assistance on the manuscript.SUMMARY: ... Japanese labor law has undergone a number of reforms over the last few years. ... In thissense, Japanese labor law is now going into a new phase. ... Then, Part IV considers whetherrecent reforms have actually affected the fundamental features of Japanese labor law. ... In some respects, the recent labor law reforms have been influenced by the "deregulation" policies of the Japanese government. ... Implications for Japanese Labor Law ... A. Features of Japanese Labor Law ... One of the most distinctive features of Japanese labor law is the case law doctrine of abusive dismissal. ... B. Future Prospect of Japanese Labor Law ... Of course, this is not to say that there will be no reason for changes in major features of Japanese labor law. ... Thus, it remains to be seen whether it will become necessary to reexamine the core features of Japanese labor law. ... TEXT: [*627] I. Introduction Japanese labor law has undergone a number of reforms over the last few years. Significant amendments were made to such major statutes as the Labor Standards Law, the Equal Employment Opportunity Law, the Employment Security Law, and the Worker Dispatching Law. Also, the legislature enacted new statutes such as the Individual Dispute Resolution Law and the Labor Contract Succession Law. In this sense, Japanese labor law is now going into a new phase. These reforms are aimed at bringing the system of labor laws in line with socio-economic changes that are now taking place in Japan.This article analyzes how Japanese labor law has responded to recent socio-economic changes, and it examines the implication of recent reforms. First, Part II briefly describes the current situation regarding employment management and the labor market in Japan. Next, Part III outlines the recent amendments made to major labor laws, and clarifies their relationship with recent socio-economic changes. Then, Part IV considers whether recent reforms have actually affected the fundamental features of Japanese labor law. This article concludes in Part V that these features have been maintained despite the significance of recent reforms.II. Recent Socio-Economic Changes in Japan Japan is now experiencing a number of changes in its society and economy. Employment management and the labor market are not exception to this trend. The following is a brief description of the changes that are relevant for the purpose of the topic of this article n1 [*628] A. Individualization of Working Conditions Traditionally, wage systems in Japan have been described as "seniority-based wage systems." n2 Although many large companies have adopted wage systems based on a worker's grade or rank with respect to job-related ability, the grading itself has been stronglyinfluenced by the age or years of service of workers. Also, wage differences arising from performance appraisal have been relatively small among workers. However, in recent years, Japanese employers have begun to emphasize more effective use of performance appraisal, thereby making wage differentials larger. n3In addition, a number of companies have now implemented a so-called annual salary determination system. n4 Under this system, a worker's salary is determined on a yearly basisaccording to an evaluation of the worker's performance over the previous year. Under this annual salary determination system, salary differentials tend to become much larger because they depend on each worker's performance, although the scope of such systems is usually limited to managerial or professional workers. The purpose of this individualization ofwage determination is to provide incentives for workers to be more competitive and to reward those who have achieved better performances.Such individualization can also be seen in changes to other working conditions such as working hours. This is, at least in part, due to changes in the type of work being performed. As the Japanese economy has become more service-oriented, uniform ways of working that might have been standard in factories are now giving way to more flexible working styles. Asa result, many companies have implemented flexible working time arrangements such as flextime. n5 Overall, the contents of employment contracts are in the process of diversification.B. Increase in Atypical Employment There has also been an increase of atypical workers. n6 The term "atypical worker" refers to part-time workers, dispatched workers, and workers who conclude fixed-term employment contracts. While [*629] regular workers (mainly in large companies) who conclude employment contracts without fixed term have enjoyed so-called Japanese employment practices such as seniority-based wage systems and long-term employment, atypical workers have been outside the scope of such practices. In fact, they have functioned as a "buffer" during times of recession. In a process of reducing a workforce, it is usually these workers whose employment is terminated before the dismissal of regular workers.Although such atypical workers have long played an important role in the Japanese labor market, their numbers have been increasing considerably in recent years, especially in the service sector. In 1999, atypical workers comprise 27.5 percent of the employed workforce inJapan (it was 22.8 percent in 1994), part-timers being the largest component (20.3 percent). n7 In retail, wholesale, and food service industries, part-timers comprise 38.1 percent of the employed workforce as of 1997. n8 This is partly based on the employers' need for workers who are less costly than regular workers. There is also a need for part-time work from the workers' side, mainly from women who have responsibilities for childcare.C. A Decline in Long-term Employment? In the mass media, it is often claimed that Japan's
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