Overview

In the past few years there has been a growing concern over the future of the Japanese economy. Partly reflecting this concern, and partly because of the need to reshape their structure and organization, Japanese firms have been reconsidering their traditional employment policies.

The purpose of this chapter, that introduces part II of the book, is to describe the key institutional changes under way. We argue that these changes focus on three key aspects of the employment relationship. The first aspect is recruitment. Labor shortages in the late 1980s prompted firms to consider the possibility of expanding their pool of potential applicants by loosening up their strict adherence to the principle of hiring only new school graduates. The second aspect involves both the size and the composition of employment. Since the early 1980s, many firms have become increasingly concerned about the impact of demographic changes on horizontal and vertical hierarchies. The rapid ageing of the labor force and the shift in the mandatory retirement age from 55 to 60 have both contributed to the sharp increase of middle–senior aged employees in the Japanese workplace.

Last but not least, there are organizational changes. There is a widespread concern about the effectiveness and competitiveness of the Japanese firm system in general – and, in particular, about its ability to swiftly organize and deploy resources in fast-growing and rapidly changing markets.