Changes in Long-term Employment and Their Impact on the Japanese Economic Model: Challenges and Dilemmas

Abstract

Long-term employment is considered one of the most distinctive features of the Japanese employment system, as well as one of the essential elements of the Japanese economic model. During the period of economic expansion, long-term employment was praised as one of the key factors of Japan’s success story. After the bubble burst in the early 1990s and economic recession left many companies with a huge excess of employees, long-term employment came under criticism as one of the obstacles to economic recovery. Since then many scholars have argued for a revision of long-term employment and for granting more flexibility to the employers. The main objective of this paper is to examine changes that have been taking place in long-term employment and labor law and their impact on the Japanese economic model. After introducing the concept and the nature of long-term employment in Japan, the paper examines new trends and developments by analyzing the reactions of employers with regard to employment patterns, changes in the legal framework, and the impact those changes may have on corporate governance. Particular attention is given to the analysis of the possible future developments of long-term employment by considering various factors, such as the need for a more flexible labor market, the social constraints that may present an obstacle to comprehensive changes in the existing system, and the actions undertaken by the government in the light of existing challenges and dilemmas.