Japanese Labor in the 1990s: Stability and Stagnation

Abstract

We review the state of the labor market and employment practices in Japan over the past 15 years and try to evaluate the nature of the changes that have been occurring. We also look at how government policy has reacted to the conditions in the labor market and what implications this has for the future. Although there has been a continual shift of resources away from manufacturing and agriculture into services, employment practices have not been changing so rapidly, and job protection is actually stronger. This, along with wage restraint, accounts for why unemployment has only increased by some 2.5 percentage points during almost a decade of stagnation. We also note that much government policy has acted to maintain existing employment practices and that labor economists are divided as to whether or not this is a good thing.