Overview of the Japanese Labour Market 

Written By Miho Izumi

Overview of the Japanese Labour Market 

Japan's labour market is characterised by its unique features, including a highly skilled workforce, strong work ethic, and a distinct employment culture. This labour market is influenced by various factors such as demographics, economic conditions, and cultural norms. Let’s look at the key aspects of the Japanese labour market. 

Key Characteristics 

1. Aging Population: 

  • Japan has one of the oldest populations in the world. The percentage of the population aged 65 and older is at the historical highest number of around 29.3% in 2024, which is over 36.3 million people, making it one of the highest proportions globally. By 2050, it is projected that over 36% of Japan's population will be aged 65 and older. The total population is expected to decrease to around 100 million by 2050 due to the low birth rate and high mortality rate among the aging population.  

  • This demographic trend is leading to a shrinking labour market and increasing demand for healthcare and eldercare services. 

  • The aging population also impacts the labour market by creating a need for policies that address workforce shortages and the integration of older workers. 

  • Labour market shortages are becoming more common as the working-age population shrinks, prompting the need for policies to boost labour market participation, such as increasing the retirement age and encouraging more women and older adults to work. 

2. High Employment Rates: 

  • Japan boasts a relatively high employment rate where working population of 68.14 million people, with low unemployment rate at 2.5% (2024) compared to many other developed countries.

  • The country has implemented various measures to maintain high employment rates within the labour market, such as promoting female workforce participation and encouraging older individuals to remain in the workforce. 

3. Lifetime Employment: 

  • The traditional Japanese labour market system is known for its concept of lifetime employment, particularly among large corporations. Employees are often hired straight out of school and remain with the same company within the labour market until retirement. 

  • This system promotes job security and loyalty within the labour market but has been gradually changing due to economic pressures and the need for more flexible employment practices in the labour market. 

4. Gender Dynamics: 

  • Although female labour market participation has been increasing, Japan still faces challenges regarding gender equality in the workplace. According to The Global Gender Gap Index, in 2024, Japan ranked at 118th in the world at the score of 0.663.

  • Women often encounter barriers to career advancement within the labour market, and there is a notable gender pay gap. Efforts are being made to address these issues in the labour market through policy changes and corporate initiatives. 

5. Work Culture: 

  • Japanese work culture is known for its emphasis on dedication, long working hours, and a strong sense of duty and responsibility within the labour market. 

  • The concept of "karoshi" (death from overwork) has raised concerns, leading to efforts to promote work-life balance and reduce excessive working hours in the labour market. 

Key Sectors and Employment Trends 

1. Manufacturing: 

  • Manufacturing, which contributes around 20% of GDP in 2022, especially in the automotive and electronics sectors, remains a cornerstone of the Japanese economy and labour market. Around 10.55 million workers are in the manufacturing industry in 2023.

  • Despite global competition and technological advancements, the labour market in this sector continues to provide significant employment opportunities. 

2. Technology and Innovation: 

  • Japan is a global leader in technology and innovation, with strong sectors in robotics, electronics, and biotechnology. 

  • The labour market in these fields is characterized by high demand for skilled professionals and ongoing investment in research and development. 

3. Services Sector: 

  • The services sector, including finance, retail, and hospitality, is a major employer within the Japanese labour market, added up to over 70% of GDP (2024) with 29.78 million workers are in this industry.

  • There is a growing focus on service quality and customer satisfaction, which drives the need for skilled and customer-oriented employees in the labour market. 

4. Healthcare and Social Services: 

  • With an aging population, the healthcare and social services sectors are experiencing significant growth within the labour market. According to METI, CAGR of healthcare service industry in Japan was at around 3% expected to grow 12.5 trillion yen industry in 2025.

  • There is a high demand for healthcare professionals, caregivers, and related support staff to address the needs of the elderly population in the labour market. 

Labour Market Challenges 

1. Workforce Shortages: 

  • Japan faces labour market shortages in various industries, particularly in healthcare, construction, and IT. 

  • The government has implemented policies to attract foreign workers and utilize automation and AI to address these labour market shortages. 

2. Wage Stagnation: 

  • Despite low unemployment rates, wage growth in Japan’s labour market has been relatively stagnant. 

  • Efforts are being made to increase wages, particularly for non-regular workers, to stimulate economic growth and improve living standards within the labour market. 

3. Non-Regular Employment: 

  • The rise of non-regular employment (part-time, temporary, and contract work) has created a dual labour market. 

  • Non-regular workers often face job insecurity, lower wages, and limited benefits compared to regular employees within the labour market. 

4. Work-Life Balance: 

  • Balancing work and personal life remains a challenge in Japan’s labour market, with long working hours and high stress levels being common. 

  • Initiatives to promote flexible working arrangements, such as telecommuting and flexible hours, are being encouraged to improve work-life balance within the labour market.  

Government Policies and Reforms 

1. Womenomics: 

  • The government has been promoting "Womenomics" to increase female labour market participation and advance gender equality in the workplace. 

  • Policies include improving childcare services, encouraging flexible work arrangements, and supporting women in leadership positions within the labour market. 

2. Immigration and Foreign Workers: 

  • To address labour market shortages, Japan has been gradually opening up to foreign workers through various visa programs and reforms. 

  • These policies aim to attract skilled professionals, caregivers, and workers in sectors facing severe labour market shortages. Government announced “Policy Package for Promoting Foreign Direct Investment into Japan to Make Japan a Global Hub” in 2024 to attract highly skilled professionals to Japan.

3. Work Style Reform: 

  • The Japanese government has implemented work style reforms to reduce excessive working hours and improve productivity within the labour market. 

  • Measures include capping overtime hours, promoting telework, and encouraging the use of paid leave within the labour market. 

Conclusion 

Japan's labour market is marked by its unique characteristics and challenges, from an aging population and traditional employment practices to labour market shortages and work-life balance issues. As Japan navigates these labour market challenges, ongoing reforms and initiatives aim to create a more inclusive, flexible, and sustainable labour market. For businesses and individuals looking to engage with the Japanese labour market, understanding these dynamics is crucial for success. 

Resource:

Ministry of Internal Affairs and Communication Statistics: https://www.stat.go.jp/data/topics/pdf/topics142.pdf

Statistic Bureau of Japan: https://www.stat.go.jp/data/roudou/sokuhou/tsuki/index.html

The Global Gender Gap Index (2024) , The World Economic Forum; https://www.weforum.org/publications/global-gender-gap-report-2024/in-full/benchmarking-gender-gaps-2024-2e5f5cd886/

METI Journal Online (2024), Ministry of Economy, Trade and Industry: https://journal.meti.go.jp

White Paper (2024), Ministry of Economy, Trade and Industry: https://www.meti.go.jp/report/whitepaper/mono/2024/index.html

Service Industry Research (2024), Statistic Bureau of Japan: https://www.stat.go.jp/data/mssi/kekka/pdf/m202406.pdf

The Basic Policy on Gender Equality and Empowerment of Women (2024), Gender Equality Bureau Cabinet Office: https://www.gender.go.jp/policy/sokushin/pdf/sokushin/TheBasicPolicy2024.pdf

Policy Package for Promoting Foreign Direct Investment into Japan to Make Japan a Global Hub (2024), Cabinet Office : https://www.cao.go.jp/invest-japan/committee/policy_package_summary_en.pdf

Work-life Balance for Men and Women (revised in 2010), Gender Equality Bureau Cabinet Office: https://www.gender.go.jp/english_contents/mge/wlb/index.html

Miho Izumi https://www.global-gw.com
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