Around the world, we keep hearing about job cuts and layoffs happening all the time. But what about Japan? People often believe that the chances of losing your job are zero because of something called shushin koyo. This article aims to explore the reality of layoffs in Japan within the global scenario, examining local employment practices and evolving trends, comparing them to Western approaches, and understanding why, despite recent shifts, getting laid off in Japan has been quite rare historically.
But is it really impossible to get fired in Japan? Let’s find out together!

The Global Landscape of Layoffs: A Recurring Theme

Across the globe, various economic headwinds have triggered significant workforce reductions. Technological disruptions, economic downturns, inflationary pressures, and strategic restructurings have led major companies in numerous sectors to implement layoffs. From Silicon Valley giants to established industrial conglomerates, the news of job loss has become increasingly common in Western economies and beyond. This global context sets the stage for understanding the unique position of employment in Japan.

Shushin Koyo: The Foundation of Japan’s Employment Culture

The concept of shushin koyo (終身雇用), or lifetime employment, has historically been a cornerstone of Japan’s corporate culture, particularly within larger enterprises. This system fostered a sense of long-term commitment between employers and employees. Companies often hired individuals directly after graduation with the expectation of continuous employment until retirement. In return, employees typically exhibited strong loyalty and dedication to their companies. This model inherently discouraged layoffs as a primary means of managing workforce adjustments.  

Why Historically Lower Layoff Percentages in Japan?

Decreasing or eliminating overtime pay is a common first step to manage labor costs without reducing headcount.

• ・The Tenets of Shushin Koyo: The ingrained cultural expectation of lifetime employment discouraged layoffs.
• ・Legal Protections for Employees: Robust labor laws made it difficult and costly for employers to implement job loss without just cause.
• ・Alternative Workforce Adjustment Mechanisms: The preference for measures like reduced overtime and shukko helped avoid outright termination.
• ・Government Initiatives: At times, the Japanese government has implemented policies to encourage job retention.
• ・Reputational Concerns: The potential damage to a company’s reputation from large-scale layoffs acted as a deterrent.
• ・Labor Shortages in Specific Sectors: The long-term trend of an aging and shrinking workforce in Japan has made retaining skilled employees a priority for many companies.

Local Practices: Prioritizing Stability Over Sudden Dismissal

Even when faced with economic challenges, Japanese companies have traditionally favored alternative measures to avoid outright job loss (kubi ni naru – 首になる, literally “to have one’s head cut off,” a direct term for being fired). These practices include:

Reduced Overtime:

Decreasing or eliminating overtime pay is a common first step to manage labor costs without reducing headcount.

Shukko (出向 – Temporary Transfers):

Employees might be temporarily transferred to subsidiary companies or related entities to absorb excess labor. While potentially disruptive for the individual, it avoids permanent termination of employment.

Hiring Freezes

Restricting new hires is a natural way to manage workforce size during periods of uncertainty.

Early Retirement Programs (早期退職制度 – Souki Taishoku Seido):

Companies might offer incentives for employees to voluntarily retire early, reducing the workforce without resorting to involuntary layoffs.

Evolving Trends: A Gradual Shift in the Landscape

While deeply ingrained, the traditional model of shushin koyo is gradually evolving in Japan. Factors contributing to this shift include:

• ・Globalization and Competition: Increased global competition necessitates greater efficiency and flexibility, sometimes challenging the rigidities of lifetime employment.
• ・Economic Pressures: Prolonged periods of economic stagnation have prompted some companies to reconsider traditional employment practices.
• ・Changing Demographics: An aging workforce and labor shortages in specific sectors can create complex workforce management challenges.  
• ・Performance-Based Evaluations: A greater emphasis on individual performance and meritocracy is leading some companies to adopt more flexible employment practices.
• Recent high-profile layoff announcements by major Japanese corporations, as discussed previously, signal a potential acceleration of this trend, albeit within the existing legal and cultural context of Japan.

Instances of Job Loss in Japan

While the traditional image of lifetime employment suggests job security, Japan has witnessed notable instances of workforce reductions. Recent announcements include Panasonic’s plan to cut approximately 5,000 jobs within Japan as part of a global restructuring, and potential significant layoffs at Nissan due to financial pressures. The COVID-19 pandemic in 2020 led to over 54,000 job terminations, disproportionately affecting non-regular employees. Furthermore, the Global Financial Crisis of 2008-2009 resulted in substantial job losses, with an estimated 125,000 non-regular workers facing layoffs. These examples illustrate that while not always the norm, job loss does occur in Japan due to economic shifts and company-specific challenges.

Japan vs. the West: Contrasting Approaches to Job Security

The approach to job security differs significantly between Japan and many Western countries:

Legal Framework:

Employment law in Japan provides stronger protection against unfair dismissal compared to the “at-will” employment prevalent in some parts of the West. The “abuse of the right to dismiss” doctrine makes it legally challenging for employers in Japan to implement arbitrary layoffs.

Cultural Norms:

The emphasis on company loyalty and social harmony in Japan makes layoffs a more sensitive issue with potential reputational consequences for employers. In contrast, workforce adjustments are often viewed as a more routine business practice in some Western economies.

Corporate Philosophy:

Historically, Japanese companies have often prioritized long-term investment in their employees, viewing them as valuable assets. Western corporate models can sometimes prioritize short-term shareholder value, making layoffs a more readily considered option during economic downturns.

🔍 Corporate Value and Investing in People in Japan Guidelines for effective investment and timely, appropriate disclosure

Conditions for Legally Getting Fired (Kubi ni Naru) in Japan

While layoffs for economic reasons are subject to strict scrutiny, individual employees in Japan can be legally fired (kubi ni naru) under specific conditions, aligning with the “objectively reasonable grounds and societal acceptance” principle:

Severe Misconduct:

Engaging in serious offenses such as theft, fraud, violence, or significant harassment can be grounds for immediate termination. The severity and impact of the misconduct will be carefully considered.

Consistent Poor Performance:

Repeated failure to meet clearly defined and reasonable performance standards, despite receiving adequate training, warnings, and opportunities for improvement, can lead to dismissal. Employers must demonstrate a fair performance management process.

Violation of Company Rules:

Significant and repeated breaches of clearly established and reasonable company regulations can be grounds for termination, especially if the violations are detrimental to the company’s operations or reputation.

Incapacity to Work:

If an employee is unable to perform their duties due to illness or injury for an extended period, despite reasonable accommodation efforts by the employer, termination may be considered, although employers often explore options like long-term leave first.

Dishonesty and Breach of Trust:

Actions that significantly undermine the trust between the employee and employer, such as falsifying documents or engaging in conflicts of interest, can be grounds for dismissal.

It’s crucial to note that even in these cases, employers in Japan are generally expected to follow due process, provide warnings where appropriate, and offer a clear explanation for the termination. Challenging a dismissal deemed unfair is a right afforded to employees under employment law in Japan.

Take Away

While the traditional image of unwavering job security in Japan holds a degree of truth, particularly when compared to the more fluid labor markets of some Western nations, the reality is more nuanced. Layoffs, though historically less common, do occur and appear to be a growing trend in response to global economic pressures and the need for corporate restructuring. However, the legal framework in Japan provides significant protection to employees facing job loss, and the cultural emphasis on long-term employment still influences corporate behavior. For global talent considering employment in Japan, understanding this complex interplay of tradition, law, and evolving trends is essential for making informed career decisions.