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Changing employment in Japan Newsletter of the lnstitute of Social Science, University of Tokyo ISSN 1340-7155 Social Science 41 September 2009

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  • Changing employmentin Japan

    Newsletter of the lnstitute of Social Science, University of TokyoISSN 1340-7155

    SocialScience 41September 2009

  • Page 2 Social Science Japan September 2009Page 2

    Published by:The Information Center for SocialScience Research on JapanInstitute of Social ScienceUniversity of Tokyo

    Editorial Committee:Hirashima KenjiYamazaki Yukiko

    DistributionSocial Science Japan is available onthe World Wide Web at:http://newslet.iss.u-tokyo.ac.jp

    All inquiries to:Social Science JapanInstitute of Social ScienceUniversity of TokyoHongo 7-3-1, Bunkyo-kuTokyo 113-0033 JAPANTel +81 3 5841 4931Fax +81 3 5841 4905Electronic mail:[email protected]

    CoverHotta Seiji"Blacksmith Shop"1929Courtesy of the Hotta family and theFukui Fine Arts Museum

    Editorial NotesPersonal Names

    All personal names are given inthe customary order in thenative language of the personunless otherwise requested.Hence in Japanese names, thefamily name is given first, e.g.Toyotomi Hideyoshi, and inWestern names the familyname is given second, e.g.George Bush.

    Copyright © 2007 by the Institute ofSocial Science, University ofTokyo, except where noted. Allrights reserved.

    Since last year's Lehman shock and its flurry of follow-on effects, people’s con-cern over their economic security has mounted. Reports of rising unemploy-ment—especially among temporary workers—and increasingly difficult jobsearches have been sweeping this country. Media interest was especially appar-ent in the extensive coverage of a tent village set up in Tokyo around NewYear’s Day for temporary workers who had lost both their jobs and residences(toshikoshi haken mura) and dark clouds of anxiety have continued to loomover society.

    This issue of Social Science Japan focuses on the recent unemployment problemin Japan and explores its development from various fronts. Kishimoto Takeshisummarizes recent employment policies of the Japanese government and givesus a detailed account of what the government thinks are the major problemsand how it has responded to them. Mizumachi Yuichiro explains why tempo-rary workers in Japan have been placed in a weaker position from a legal view-point. He recommends reforms such as the reinforcement of safety nets forthese workers, higher wages, improved benefits, and strengthening their collec-tive voice. Kobayashi Yoshinobu’s article tells us how hard it is to solve thetemporary workers problem in Japan as a political matter. Since so many peo-ple are now working on a temporary basis, prohibiting the use of temporaryworkers would cause even higher unemployment. This reality divides labourunions across various industries and political parties find it difficult to formu-late adequate policy responses. Nitta Michio gives us an overview of the unem-ployment problem and points out that government policies targeting only tem-porary workers would be ineffective. He calls for the creation of an environ-ment favorable for the normal operation of temporary staffing agencies and forthe implementation of reforms based on the notion of an "employment portfoliosystem."

    * This issue of SSJ is greatly indebted to generous assistance from the contribu-tors who participate in the Shōgai Seichō-gata Koyō Shisutemu Purojekuto (Life-long Developing Employment System Project) at Shaken. For more detailedinformation about this project, please see:http://das.iss.u-tokyo.ac.jp/future/index.htm (currently in Japanese only).


    Changing Employment in Japan

    Kishimoto Takeshi Japanese Employment Measures in the Face of a Global Recession..............p.3

    Mizumachi Yuichiro Why Are There Many Expendable Workers in Japan? Issues and Mechanisms Underlying the Non-Regular Worker Problem........................................p.7

    Kobayashi Yoshinobu Revising the Worker Dispatching Act: The Real Story behind the Non-Regular Employment Saga ........................................................p.11

    Nitta Michio Temporary Worker Termination and the Employment Portfolio Systems ..............p.15

    ISS Research ReportsHirowatari Seigo .........................................................................................................................p.18

    Arita Shin ....................................................................................................................................p.21

    Kuroda Sachiko...........................................................................................................................p.24

    Greetings from Visiting ProfessorAnnelise Riles .............................................................................................................................p.27

  • Kishimoto Takeshi

    Page 3Social Science Japan September 2009

    Kishimoto Takeshi

    Director, Office for Individual Labour Dispute


    Regional Bureau Administration Division

    Minister's Secretariat

    Ministry of Health, Labour and Welfare

    Introduction: The 2002 Recession

    In this article I will showcase the employmentmeasures that the Japanese government is takingin the current global recession triggered by the USsubprime loan debacle that came to light in 2008.1

    Let me begin by explaining how the employmentsituation in Japan has changed over the pastseven years. After the experience of a decade-longrecession in the wake of the bursting of the bub-ble economy in the early 1990s, Japan recorded anunemployment rate of 5.5% three times—in June2002, August 2002 and April 2003. This wasJapan’s worst ever unemployment rate (Figure 1).Japan was working to sort out its bad bank debtamidst a deflationary atmosphere and in theprocess, many companies went bankrupt andmany employees were laid off.

    Employment measures at that time focused heavi-

    Japanese Employment Measures in the Face ofa Global Recession

    1 In the broader sense, monetary easing to increase demand and financial assistance to prevent companies from going bankrupt can be alsoconsidered “employment measures,” but in this article I only focus on measures such as benefits for unemployed workers and job training.

  • ly on the involuntary unemployment of middle-aged workers who were shouldering the respon-sibility for family budgets.2 Measures were enact-ed to: a) revise the Unemployment Insurance Actto avoid the financial collapse of the unemploy-ment insurance system, lower insurance premi-ums while reducing benefits to voluntarily unem-ployed workers and maintain or extend benefitsto involuntarily unemployed middle-aged work-ers; b) assign temporary counselors in publicEmployment Security Offices to consult one-on-one with unemployed middle-aged workers; andc) provide subsidies to companies that hiredunemployed middle-aged workers.3

    2003-2007: New Employment Problems Emerge

    The economy grew between 2003 and 2007, main-taining growth rates of approximately 2%, andthe unemployment rate gradually declined intothe 3% range. As the number of involuntarilyunemployed middle-aged workers tapered off,people started to recognize three major issues thathad lain hidden in the shadows of the unemploy-ment problem. First, Japan needed to boost thelabor force participation rate, particularly amongyouth, women and the elderly in order to allevi-ate the impact of the increasing dependent popu-lation ratio brought on by the declining birthrateand the ageing of the population. Second, sincecompanies held off from new hiring throughoutthe 1990s, most of the new, young workers thatentered the labor market did so as non-regularworkers.4 Poor working conditions, employmentinsecurity and scarce training opportunities pre-vented them from achieving economic indepen-dence.5 Third, regular workers also faced prob-lems, such as health hazards caused by long

    working hours and disruptions to their work-lifebalance, which needed to be improved.6

    The following measures were taken to combatthese problems:

    1. In 2004 the Plan to Challenge Young Peopleto Become Independent—the first-ever pack-age of employment measures for youngworkers—was formulated and the Act onEmployment Security of the Elderly wasrevised to ensure job security between theages of 60 and 65.

    2. In 2005 the Industrial Safety and Health Actwas revised to prevent health hazardscaused by long working hours.7

    3. In 2006 the Human Resources DevelopmentPromotion Act was revised to encourageyoung people to acquire vocational skills,taking its cues from Germany’s dual educa-tion system, and the Equal EmploymentOpportunity Act was revised to stiffen regu-lations on sexual harassment in the work-place.

    4. In 2007 the Unemployment Insurance Lawwas revised to extend job placement servicesto young people with no history of unem-ployment insurance coverage; the Employ-ment Measures Law was revised to preventfirms from limiting new hires to peoplebelow a certain age (often 25); 8 the Mini-mum Wages Act was revised to increaseminimum wages; the Labor Standards Actwas revised to raise overtime pay rates(enacted in 2008); and the Part-Time LaborAct was revised to reduce disparitiesbetween full-time and part-time worker ben-efits.

    Page 4 Social Science Japan September 2009

    2 The majority were regular workers, i.e., full-time workers on non-term limited employment contracts.3 There are 12,008 public Employment Security Office staff in Japan (as of the end of FY2009), and the ratio of office staff to the overall

    workforce is 1/20 of that in Great Britain, for example. Also, since national public servant capacities are strictly controlled, temporary staffare often hired in response to rapid increases in unemployment.

    4 There is debate as to whether or not the major cause was companies’ prioritizing retention of their middle-aged workers.5 Some of the major temporary staffing agencies and contractors have been repeatedly found to be in grave violation of the labor laws, and this

    has become a cause of widespread public concern.6 However, when viewed over the long term, since the late 1980s when legally-defined working hours were stepped down from 48 hours to 40

    hours, both average working hours and the percentage of workers working long hours have declined considerably.7 Karōshi (death from overwork) is a representative example.8 This practice was not limited to Japan, but major Japanese companies have regularly hired young workers, primarily fresh graduates, as a

    major source of potential future management; however, since most companies limited the scope of regular hiring to young people under theage of 25, a large number of young people who failed to land a position in their company of choice immediately after graduation never gotanother chance to apply to that company.

  • In 2007 the Diet enacted a raft of labor legislationbut this of course does not mean that legislatorssought to revise the laws because they anticipatedthe current economic crisis.

    Employment Measures and the 2008 Recession

    Initially, some thought that since Japan’s financialinstitutions had already gone a long way towardscleaning up their bad debt during the last reces-sion, the impact of the latest global financial crisiswould be minimal. However, since exports andinvestments in related infrastructure contributedgreatly to the economic expansion between 2003and 2007, the global economic slowdown there-after triggered a rapid slump in production, mostnotably from the latter half of FY2008 onwards, aswell as a steep rise in unemployment (Figure 1).Starting in August 2008, the government of Japanannounced economic policy packages in fourstages, each including an expanded package ofemployment measures.9 I do not have enoughspace to describe each measure in detail, but I willexplain their main features.

    Employment maintenance subsidies

    Japan’s government can offer employment adjust-ment subsidies, i.e., subsidies granted to compa-nies to limit dismissals, which are based on Ger-many’s short-term work allowances (Kurzarbeit-ergeld). Since the 2002 recession came on the heelsof the long recession of the 1990s, the governmentopted not to offer the subsidies as the climate wassuch that one could not expect existing employ-ment levels to be maintained. However, becausethe current round of sharp employment contrac-tions was due to an exogenous shock and recov-ery is possible within the next one to two years,these subsidies are being put to use as important

    instruments of policy.

    • Employment Adjustment SubsidiesA system to partially subsidize payments toworkers on leave and wages for workers intraining, when companies put said workers onleave or in training to avoid dismissal due toreduced production or sales. Rates of subsidyfor small and medium-sized enterprises may beas high as 90%, while the maximum rate of sub-sidy for large corporations is 75%. There is 600billion yen in the FY2009 supplemental budgetearmarked for these subsidies.

    Policies for groups with high risks of unemployment—non-regular workers, women, the elderly and the dis-abled

    Since there was a time lag between the onset ofthis recession in the United States and the emer-gence of serious repercussions in Japan, theJapanese government was able to have employ-ment measures ready for the initial phase of therecession, in other words the phase when the firstgroups of workers start to feel a serious impact.10

    In particular, the following problems were recog-nized in relation to measures for non-regularworkers: a) a considerable number of non-regularworkers do not qualify for unemployment insur-ance because eligibility is limited to individualswith “anticipated employment of one year orlonger”11 ; b) young workers who graduated inthe 1990s and have only experienced non-regularemployment since then have not acquired suffi-cient technical skills and will find it difficult tosecure stable employment opportunities even ifthe economy recovers; c) the number of non-regu-lar workers without savings or their own homeswho will become homeless as soon they lose theirjobs is on the rise.12

    Page 5Social Science Japan September 2009

    9 English summaries of each policy package can be found on the Cabinet Office’s homepage.Stage 1: http://www5.cao.go.jp/keizai1/2008/0918summary-english.pdfStage 2: http://www5.cao.go.jp/keizai1/2008/081201outline-english.pdfStage 3: http://www5.cao.go.jp/keizai1/2008/081224summary-english.pdfStage 4: http://www5.cao.go.jp/keizai1/2009/0420summary-english.pdf

    10 Stage 1 employment measures were formulated in August 2008. The plunge in the mining and manufacturing production index started at theend of 2008.

    11 Since Japan does not have an unemployment assistance program for unemployed workers who cannot receive unemployment benefits, theonly protection for individuals ineligible for unemployment insurance coverage is from the Public Assistance Program. However, the after-mentioned Emergency Human Resource Development and Employment Support Fund, coupled with job training, now serves as a limited-term unemployment assistance program.

    12 Among others, this includes contracted workers who live in housing provided by employers and who forfeit this housing as soon as they

  • With these considerations in mind, in mid-2008the government instituted a system that providedunemployed workers who were ineligible forunemployment insurance with loans, instead ofpayments from the unemployment insurance cof-fers, as a form of social security while they werein job training. These workers are exempted fromrepayment provided they meet certain conditionsupon completing job training and reentering theworkforce. In addition, the government of Japanteamed up with local governments to providehousing consultations as well as employmentconsultations at Employment Security Offices andestablished a new housing rent loan program forunemployed workers.

    • Employment Security FinancingA program to provide low-interest loans fromthe Labor Bank to unemployed workers whohave lost their homes concurrent with involun-tary job loss. Applicants may receive a maxi-mum of 500,000 yen for initial expenses, a max-imum of 360,000 yen to partially cover sixmonths of rent and a maximum of one millionyen for living expenses. Applicants may beexempted from repaying part of the loan if theyhave reentered the workforce in a position withunemployment insurance coverage within sixmonths of receiving the loan.

    Furthermore, the Unemployment Insurance Actwas revised this year, relaxing eligibility restric-tions and expanding unemployment insurancecoverage to non-regular workers who had reason-ably expected to remain employed for six monthsrather than one year. A new fund was also estab-lished to provide social security benefits duringthe job training period to unemployed workerswho cannot receive unemployment insurance

    benefits or whose benefits have expired.

    • Emergency Human Resource Developmentand Employment Support Fund

    A fund that provides unemployed workerswho do not receive unemployment insurancebenefits with a maximum of 120,000 yen permonth in benefits and a maximum of 80,000yen per month in loans to help them make endsmeet during their job training periods. Thefund totals 700 billion yen and is limited tothree years. Recipients are not required to makeany contributions of their own, but eligibility isdependent on income level.

    Finally, this round of employment measuresincludes subsidies for companies that hire unem-ployed workers designed primarily to support thehiring of young people and non-regular workers.

    • Special Subsidy to Promote Young Workers’Transition to Regular Employment

    A subsidy of one million yen for small andmedium enterprises or 500,000 yen for largecorporations that have established regularemployee recruitment quotas for hiring non-regular workers between the ages of 25 and 40.

    Conclusion: Outlook for the Future

    In March 2009 the mining and manufacturing pro-duction index rebounded and ever-so-slight signsof recovery could be seen. On previous occasions,however, even after production has fully recov-ered, it has taken some time for any visible upturnin employment figures to become manifest. At thispoint in time, the Ministry of Health, Labour andWelfare has just commenced discussions on newemployment measures for FY2010.

    Page 6 Social Science Japan September 2009

    lose their jobs, as well as contracted workers who sleep in 24-hour internet cafes (stores in business districts that offer booths with internet-connected PCs and reclining chairs for around ¥1000 per night) and who can no longer pay booth rental fees when they lose their dailywages.

  • Page 7Social Science Japan September 2009

    Mizumachi Yuichiro is an Associate Professor ofLabor and Employment Law at the Institute ofSocial Science, University of Tokyo

    Institute of Social ScienceUniversity of TokyoHongo 7-3-1Bunkyo-ku, Tokyo [email protected]

    The global economic downturn that began in thefall of 2008 quickly brought to light concerns overlayoffs of temporary workers (hired through con-tracts with temporary employment agencies) andfixed-term workers (contracted to work for a defi-nite period) and the underlying issues involvingthe working poor and social disparity in Japan.The “employment crisis” is now perceived as amajor social issue. Why have these problemsarisen?

    New Problem or Old? The Nature of the Issue

    The employment issues that we are currently see-ing are fundamentally the same as those observedin the past: employment termination practices, wagedisparity and access to unemployment insurance.Legally, from the outset, temporary work hasbeen defined as a relationship in which a work-er’s employment contract terminates concurrentlywith the termination of the dispatching contractbetween a temporary employment agency and aclient company. Through litigation, fixed-termcontract workers have received some protectionthrough court precedents in cases when there isreason to expect continuation of employment, butthe courts have also been deemed it reasonable(i.e., legal) for personnel cutbacks to target fixed-term workers prior to regular workers. In addi-tion, wage disparity between regular and non-regular workers has almost never been consid-ered illegal,1 and given the low minimum wagestandards in Japan,2 non-regular workers oftenfind it difficult to live even at subsistence level ontheir wages. This situation is not new.3 Further-more, since eligibility conditions for unemploy-ment insurance have long required workers toprove anticipated employment of one year orlonger, there have always been a large number ofworkers who would not be covered by unem-ployment insurance if they lost their jobs.

    Measures to sufficiently address this situation

    Why Are There Many Expendable Workers in Japan? Issues andMechanisms Underlying the Non-Regular Worker Problem

    Mizumachi Yuichiro

    1 The Part-Time Worker Act, revised in 2007, includes a provision that prohibits the discriminatory treatment of part-time workers vis-à-visregular workers (Article 8). However, the following three conditions that a part-time worker must meet to qualify for protection drasticallylimit the scope of the law: (1) actual duties and responsibilities are of equivalent levels, (2) employment under indefinite-term employmentcontracts (or terms which can be construed as such), (3) whose likelihood of being transferred or given different duties is the same as theirregular worker counterparts throughout their period of employment.

    2 Minimum wages in Japan are set by each prefecture. As of June 2009, the minimum wages ranged from a high of 766 yen per hour in Tokyoand Kanagawa prefectures down to 627 yen per hour in Miyazaki, Kagoshima and Okinawa prefectures. An inverse relationship has beenfound to exist between a prefecture’s minimum wage and the amount of welfare benefits it disburses, especially in urban areas with highcosts of living.

    3 According to the Ministry of Health, Labour and Welfare’s Basic Survey on Wage Structures (2007), the average wages (i.e., official monthlysalary) for a permanent employee were 313,200 yen (347,500 yen for men; 243,300 yen for women) compared to 192,900 yen (224,300 yen formen; 168,800 yen for women) for all other types of employees. On a scale of 1 to 100, if permanent employee wages were 100, non-permanentemployee wages would be 61.

  • had not been taken by the time the economic cri-sis struck, which led to the current controversyover temporary and fixed-term worker layoffs.Now these individuals’ struggles to stay afloathave finally sparked public debate over whatshould be done.

    Why is the Non-regular Worker Issue Still Unre-solved? The Problem in Context

    The treatment of non-regular workers must beviewed in the context of the Japanese employ-ment system and its historical focus on long-termemployment of regular workers. This focus hasbeen internalized in Japan’s labor and employ-ment law which fundamentally supports theemployment system. The custom of “lifetimeemployment” in which companies are disinclinedto dismiss employees was established around1960, after which it is said to have spread amongJapanese companies concurrent with the nation’shigh economic growth.4 Through the courts, thispractice became law based on the doctrine of abu-sive dismissal. According to this doctrine, anobjectively unreasonable or socially unacceptabledismissal constitutes an abuse of the right to dis-miss. Such dismissals are declared null and void(Labor Contract Act, Article 16). Japan’s courtsinterpret just cause (i.e., objective reason andsocial acceptance of dismissal) strictly, and tend todeny the validity of the dismissal unless there hasbeen serious misconduct by the worker.

    This doctrine is also applied either directly oranalogously to non-regular workers; however, asI mentioned earlier, the courts have deemed itreasonable to distinguish between regular andnon-regular workers’ employment. With regardto dismissals and contract terminations, they havesanctioned personnel cutbacks that target non-regular workers before regular workers. In thisway, non-regular workers have been treated asbuffers to protect the jobs of regular workers, andthis practice has been and still is legally accepted.

    It was against this backdrop that the use of non-regular workers as a low-cost and flexibleapproach to employment became common inJapan, fueled by the growing intensity of globalcompetition from the 1990s onwards.5 People arestarting to recognize that not only is the increaseof workers with unstable positions and poor payand benefits socially inequitable, it also raises therisk of widespread economic and social instabili-ty. That is why efforts to put labor and employ-ment law reforms—including a system-wideoverhaul—are now getting underway.

    What Should Be Done? Options for Reform

    There are three primary issues regarding non-reg-ular workers: employment insecurity, low wagesand limited benefits, and the lack of opportunityto participate in collective labor-managementtalks. I address each of these below.

    1) Employment insecurity–should we regulate hiring?What about safety nets?

    Employment insecurity is a problem common totemporary and fixed-term workers alike. Thereare two main ways that policymakers can chooseto handle this issue: (1) enact “intake regula-tions,” that is, place legal limitations on fixed-term employment contracts and the placement oftemporary workers, or (2) put a safety net in placeto counter insecurity without regulating intake.The former approach is the method that has beenadopted in Europe (for example, fixed-termemployment contracts and temporary workerplacements have been limited to those instancesfor which there is reasonable justification). How-ever, an oft-cited adverse affect of this method isthe rigidity of the overall employment systemwhich, in turn, generates more unemployment.On the other hand, if Japan were to employ thesafety net method, a plausible approach wouldentail making unemployment insurance coverage

    Page 8 Social Science Japan September 2009

    4 For a recent excellent treatment of this discussion, see Nitta, Michio and Hisamoto, Norio, eds. Nihonteki koyō shisutemu [JapaneseEmployment Systems]. Nakanishiya Publishing, 2008.

    5 According to the Ministry of Internal Affairs and Communication’s Employment Status Survey, the share of non-regular workers in 2007exceeded one-third of all employees (part-time and casual workers: 24.3%, temporary workers (employed via agencies): 3.0%, contractemployees (keiyaku-shain): 4.2%, contract employees hired after mandatory retirement age (shokutaku): 2.0%, other: 2.0%, total: 35.6%). Thepercentage of non-regular workers has nearly doubled since 1987 when 19.7% reported being non-regular workers.

  • mandatory6 for all employed workers (includingpart-time and fixed-term contract workers) whiledefining some minimum conditions for voluntaryresignee entitlements (such as having worked forat least three of the six months immediately pre-ceding resignation) in order to prevent the moralhazard of workers repeatedly working for shortperiods and then leaving to receive insurancebenefits. Additionally, when it comes time tobuild a safety net, one priority will be the provi-sion of personalized, constructive support (i.e.,employment activation) to ensure that unem-ployed individuals do not remain out of the workforce for long periods of time.

    2) Low pay and benefits–should we adopt the Europeanor the American style?

    The second issue is low pay and benefits—thedisparity problem. The European Union hasalready issued directives (1997/81/EC;1999/70/EC; 2008/104/EC) that essentially pro-hibit the discriminatory treatment of part-time,fixed-term contract, and temporary workers.Efforts have been made to reduce the disparity ofpay and benefits compared with full-time direct-hire employees. In the United States, by contrast,employment conditions are treated as issues to bedecided through the terms of individual con-tracts. The fundamental approach is to respect thefreedom of contract; the law does not intervene.

    One possible option for Japan is to take the Amer-ican approach and let the market adjust for payand benefit disparities that stem from differenttypes of employment. However, given the factthat Japan has already followed this path, albeitpassively, and that it has led to today’s labor mar-ket instability and increased disparity—and giventhe growing consensus that this is a socially unac-ceptable outcome—Japan should actively consid-er the European option.

    In this regard, the possibility of Japan adopting an“equal pay for equal work” rule has been strongly

    advocated recently. Such a rule could functioneffectively for the adoption of the Europeanapproach of correlating wage rates and job class-es, but in Japan many companies determine payand benefits not by job class, in the narrow sense,but with an eye on an employee’s mid-to-longterm career path (i.e., performance-based pay).Companies may also adopt other benefit schemes,such as seniority-based pay and cost-of-livingpay. What is important for improving pay andbenefits for non-regular workers is not to forcethe adoption of wage rates correlated to job class-es that make equal pay for equal work possible.Doing so would rigidify pay and benefit systemsand make the situation worse for companies thatrequire mid-to-long term worker training.Instead, what is needed is a sustained effort toprohibit discrimination and improve pay andbenefits in a manner that suits the particular ben-efit system in question. Japan could prohibit “dis-crimination without reasonable justification” anduse the scope provided for the definition of “rea-sonable justification” to address the particularneeds of different benefit systems.

    3) Giving non-regular workers a voice–labor unions orworker representation systems?

    We need to take measures to get non-regularworkers who have been left out of labor-manage-ment dialogue back into the loop. Be it the issueof employment termination or the issue of wagesand benefits, sufficient communication with allinvolved parties is important for improving thelevel of satisfaction with decisions made. As soci-ety grows more complex and people becomemore intricately involved in profit-sharing,processes to coordinate different interests willbecome even more important. Listening to work-ers’ opinions and building a platform for coordi-nating and representing those opinions will notonly boost worker morale, it will contributedirectly to company profits.

    The question is, who should lead this communi-

    Page 9Social Science Japan September 2009

    6 The Employment Insurance Act originally excluded: (1) individuals who work less than 20 hours per week, and (2) individuals whoseanticipated period of employment is less than one year from receiving unemployment insurance until a 2009 amendment relaxed the lattercondition to “less than six months” effective from April of that same year. Individuals whose anticipated period of employment is less thansix months are still not eligible for unemployment insurance.

  • cation effort? In recent years, labor unions havebeen working to organize non-regular workers.7

    Ideally, a labor union voluntarily organized byworkers would undertake such a role, and onewould like to hope that labor and managementwould cooperate going forward in expanding thecircle of communication. The reality, however, isthat there is an incredibly large number of compa-nies and workplaces in Japan that do not havelabor unions, making it difficult to expand the cir-cle of communication to include non-regularworkers by means of self-motivated labor unioninitiatives.8

    This leaves one more possible option: creatingworker representation systems in which represen-tatives are democratically elected by all workers,including non-regular workers, in a given compa-ny or workplace. Organizations which give voiceto non-regular as well as regular workers can playa crucial role in the reform of Japan’s labor andemployment laws. In designing such organiza-tions, it will be important to define rights andresponsibilities such that labor unions and workerrepresentatives function synergistically and in a

    mutually complementary manner. At the sametime, it will be important for the representationsystems to provide incentives to companies fornegotiating and formalizing agreements withworker representatives.

    Comprehensively enacting the measures I dis-cussed in this article would lead to a better bal-ance between Japan’s employment system andthe overall labor market, and engaging in anextensive and level-headed series of debates tothat end most likely constitutes the shortest pathto solving today’s problems.


    Sugeno, Kazuo. 2002. Japanese Employment andLabor Law. Durham, North Carolina: Caroli-na Academic Press.

    Araki, Takashi. 2002. Labor and Employment Law inJapan. Tokyo: The Japan Institute of Labor.

    Mizumachi, Yuichiro and Shunichi Uemura. 2007.“Changes in Industrial Relations and theIdeal Legal System.” Japan Labor Review 4(1):113-133.

    Page 10 Social Science Japan September 2009

    7 Efforts are underway to organize part-time workers in labor unions, mainly in supermarkets and other retailers. The estimated 3% rate ofpart-time worker unionization in 2003 rose to an estimated 5% in 2008 (Ministry of Health, Labour and Welfare’s Basic Survey on LaborUnions). For details on these recent efforts, see Nakamura Keisuke, Kabe wo Kowasu [Break the Wall]. Daiichishorin Publishing, 2009.

    8 Since peaking at 55.8% in 1949, Japan’s rate of labor unionization has continually declined, falling to 18.1% in 2008. The rate of laborunionization at companies with 100 or fewer employees is a mere 1.1% (Ministry of Health, Labour and Welfare’s Basic Survey on LaborUnions).

  • Page 11Social Science Japan September 2009

    Kobayashi Yoshinobu is the RepresentativeDirector of the Global Research Institute forIndustrial Relations

    Japan is experiencing an unprecedented employ-ment crisis amidst what is being called a once-in-a-century global economic predicament. Accord-

    ing to the latest Ministry of Health, Labour andWelfare survey, the number of non-regular work-ers who were either terminated when theiremployment contracts expired or dismissed mid-way through their terms of employment reached207,381 across all industries between October2008 and June 2009. Of this number, 132,000 weretemporary workers employed via agencies, 44,000were contract laborers and employees, 16,000were contractors and 14,000 were direct-hire tem-porary workers. Meanwhile, the same survey esti-mated that 18,315 regular employees lost theirjobs. A quick calculation shows us that this is lessthan 1/11 of the number of non-regular workerswho lost jobs. The real face of contemporaryJapan’s employment crisis is the unemploymentproblem caused by the termination of non-regularworkers.

    Why has this employment crisis centered on non-regular workers? Figure 1 shows the fluctuations

    Revising the Worker Dispatching Act: The RealStory Behind the Non-regular Employment Saga

    Kobayashi Yoshinobu

    Figure 1. Fluctuation of Worker Numbers by Employment Type

    Source: Ministry of Internal Affairs and Communications

  • in the number of workers by employment typefrom 1985 to 2008, divided into the following foureras: the bubble years from 1985, when the Tem-porary Worker Dispatching Act was promulgat-ed, until 1990; the end of the bubble from 1990until 1995; the structural adjustment phase from1995 until 1999; and the structural reform phasefrom 1999 until 2008. During this time, regularemployee numbers fell by 3.17 million while thenumber of non-regular workers—temporaryworkers, subcontractors, fixed-term contractemployees and the like—soared by 6.24 million.

    The employment crisis that Japan now facesresulted from the dismissals of excess non-regularworkers amidst a major global recession. Addi-tionally, the large factories of major exporterswere responsible for the massive increase in non-regular workers between 1999 and 2008, and thatis why this round of non-regular worker termina-tions occurred mainly in multinational manufac-turers such as Toyota, Canon and Sony. This factalone garnered much public attention and led toincreased calls for better protection and expandedunemployment insurance benefits for temporaryworkers.

    In December 2008, the government submitted itsproposed revisions to the Temporary Worker Dis-patching Act to the Diet in an attempt to provideprotection for temporary workers; however, theproposal was relegated to the House of Represen-tatives' Committee on Health, Welfare and Laboron January 5, 2009 and has yet to be debated. Atthis rate the revised act may never be passed.

    As to why the revisions have stalled, the rulingLiberal Democratic Party (LDP) has argued thatthe opposing Democratic Party of Japan (DPJ)refuses to let the issue be debated, while the DPJclaims that the ruling party has not evenapproached them to begin the discussion. Whileeach side tries to place blame with the other, thereal reasons that the debate has stalled appear tolie with both parties. The LDP-led governmentfears that discussions will reveal that the legisla-tion is defective because the proposed revisionswere drawn up before the recent wave of non-regular worker terminations and will not serve toaddress the current temporary worker unemploy-ment problem. On the other hand, the three oppo-

    sition parties—the DPJ, the Social DemocraticParty and the People’s New Party—have beendiscussing how to shape a joint three-party plansince last year, but they have not been able tocompromise on their approaches to several pointsconcerning temporary agencies, so if the debategoes to the Diet it will further expose the discordwithin the opposition. Therefore, the ruling andopposition parties have come to a peculiar agree-ment that it is best to delay this legislation.

    There are three points of contention concerningthe Temporary Worker Dispatching Act. The firstpoint is whether to the prohibit day labor dis-patching. Day labor dispatching refers to one-dayonly jobs that workers locate by accessing tempo-rary agency job sites via cell phone mail. Suchjobs include light work such as sorting and bag-ging products in warehouses, moving or reloca-tion, preparing for events and the like. Many criti-cize day labor dispatching as piecemeal employ-ment, and the ruling and opposition parties bothagree on prohibiting this practice. The Ministry ofHealth, Labour and Welfare estimates that 40,000people work as day laborers, but if you speakwith industry insiders, they will tell you that theactual figure is between 100,000 and 150,000. A lotof people would lose their jobs if day labor dis-patching was prohibited.

    The second area of disagreement is over the gen-eral prohibition of short-term job placements viatemporary staffing agencies. 93.6% of actualplacement contract terms last for less than threemonths, and very few contracts last longer thansix months. According to the three oppositionparties, the instability of this kind of employmentis the reason why working conditions for tempo-rary workers have deteriorated, and the partieshave agreed that staffing via temporary agencyplacements should be prohibited as a rule (withexceptions for specialized job types). However,the ruling LDP maintains its endorsement of cur-rent practices noting that a ban on temporaryagency hires would limit employment opportuni-ties for the estimated 2.8 million workersemployed via temporary agencies (73% of all tem-porary workers).

    The third contentious issue is whether to ban dis-patching temporary workers to manufacturing

    Page 12 Social Science Japan September 2009

  • firms. It was illegal for manufacturers to utilizetemporary workers until Temporary Worker Dis-patching Act was revised in 2004. The Minister ofHealth, Labour and Welfare, Masuzoe Yoichi,noted that the subsequent surge in temporaryworker numbers led to the recent round of termi-nations by major corporations when he boldlycalled for the “prohibition of dispatching tempo-rary workers to the manufacturing industry” atthe Japanese Trade Union Confederation’s(RENGO) 2009 New Year’s party. After this decla-ration, the opposition parties’ demands for thispractice to be banned quickly gathered steam.Despite the fact that the government’s proposedrevisions to the Temporary Worker Act wouldallow current practices to continue, it seems thatthe LDP and New Komeito are leaning towardprohibition. On the other hand, some say that themood within the government, especially that ofPrime Minister Aso, is cautious, and this isthought to be another reason why the ruling par-ties are disinclined to rush to debate the legisla-tion. The Ministry of Health, Labour and Welfareestimates there are 400,000 temporary workers inthe manufacturing industry, but industry insiderssay that the figure at last year’s peak was one mil-lion. The situation will not be easily resolved.

    There is one other reason why the revisions hasreached this impasse in the Diet—the fact that theopposition parties and labor unions, which havebeen united in their vehement disagreement withthe ruling party, have not yet resolved their owninternal differences of opinion concerning ban-ning or tightening temporary worker. For exam-ple, RENGO has agreed on a policy to prohibitboth day labor dispatching and other temporaryplacements while the Jinzai Service GeneralUnion (JSGU)—a member of an influentialRENGO-affiliated union federation, the JapaneseFederation of Textile, Chemical, Food, Commer-cial, Service and General Workers' Unions (UIZENSEN)—has stated its “discomfort” with theRENGO policy and will not approve it. In addi-tion, one “left-wing” RENGO member, the JapanCommunity Union Federation (JCUF) has statedits preference for banning temporary placementby and large (with room for exceptions on a pro-visional or ad hoc basis).

    The prohibition of dispatching temporary work-

    ers to manufacturing industries is one issue thathas quickly gathered momentum since the begin-ning of 2009. The Japanese Electrical Electronic &Information Union (JEIU) and UI ZENSEN, bothRENGO members, have opposed outright prohi-bition in this area. In particular, UI ZENSEN con-vened a “Non-Regular Worker Emergency Mea-sures Task Force” in January 2009 and issued astatement declaring, “banning the dispatching oftemporary workers to manufacturing industriesis inappropriate.” Thirteen members from bothHouses of Parliament, including a deputy leaderof the DPJ, Kawabata Tatsuo, participated in thismeeting. The reason that the DPJ is waffling on itsstance toward prohibiting the use of temporaryworkers in manufacturing firms is because thestrong convictions of JEIU and UI ZENSEN,members of major DPJ backer RENGO, havemade it difficult for the party to maneuver.

    On the surface, these schisms within the opposi-tion and labor unions appear to be based on dif-ferences in opinion between the left and rightwings. Politically speaking, the left wing consistsof the old Socialist Party and Social DemocraticParty factions within the DPJ, former members ofthe General Council of Trade Unions of Japanwho are now part of RENGO, and left-wing laborunions (unaffiliated, small-scale unions that arenot enterprise or company-based unions). Theright-wing and the centrists are an amalgamationof members of the old Democratic Socialist Partyfaction within the DPJ, the old Japan Confedera-tion of Labor, and the Federation of IndependentLabor Unions.

    However, these forces are divided not only alongpolitical and ideological lines. Observing the actu-al differences in the policy preferences of each fac-tion towards temporary workers makes the situa-tion easier to grasp. The reason that JEIU andJSGU oppose the ban the use of temporary work-ers in manufacturing is because they haveworked to organize these same workers who arepresent in large numbers in factories and shopswhose regular employees are JEIU or JSGU mem-bers. This is the same reason why the left-wingJCUF is cautious about the prohibition of tempo-rary placements. Labor unions that count tempo-rary workers among their ranks cannot easilyvoice support for outright prohibition because

    Page 13Social Science Japan September 2009

  • prohibition or stiffer regulation would limitemployment opportunities for union memberswhose interests the unions are meant to serve.

    In the meantime, forces backing prohibition orstiffer regulation of temporary worker dispatch-ing in Japan are now in the majority. From theirpoint of view, the best option is to drastically limitthe scope of worker dispatching by treating it as atemporary or ad hoc practice, to return to the pre-2004 prohibition of temporary workers in manu-facturing industries, and limiting the use of tem-porary labor to specialized duties. In other words,the majority opinion is to drastically reduce firms’access to temporary workers.

    Conversely, in light of the fact that employingtemporary workers in offices, factories and shopshas become a firmly entrenched practice since theTemporary Worker Dispatching Act was promul-

    gated nearly a quarter century ago, there are fac-tions—albeit in the minority—that stress thattemporary work should be recognized as a well-established type of employment and that effortsshould be focused on employment protection andequal benefits for temporary workers.

    It is fascinating to compare these differences inopinion on employment policy in Japan to theevolving policies on temporary workers aroundthe world. In other words, global trends, especial-ly recent trends in the European Union, have set acourse toward equal benefits, expanded socialsecurity and other measures that increase tempo-rary workers’ employment rights, rather thanfocusing on limiting firms’ reliance on theseworkers. The time has come for Japan to changetack to benefit temporary workers and to bring itspolicies in line with non-regular employmenttrends around the globe.

    Page 14 Social Science Japan September 2009

  • Page 15Social Science Japan September 2009

    Nitta Michio is a Professor of Industrial Relationsat the Institute of Social Science, the Universityof Tokyo

    Institute of Social ScienceUniversity of TokyoHongo 7-3-1Bunkyo-ku, Tokyo [email protected]

    Mass Layoffs of Temporary Workers

    When I was a faculty member at a private univer-sity, I once asked students in my human resourcemanagement class, “What would you do if youlost your job, couldn’t find gainful employmentand found yourself in situation where you could-n’t rely on your parents?” When a student stoodup and replied, “I’d go to the West Exit of Shin-juku Station and join the ranks of the homeless,” Iwas disappointed. The answer that I was expect-ing was, “I would go to the Public EmploymentSecurity Office and apply for unemployment ben-efits.” If someone had replied correctly, I wasgoing to ask, “What would you do when yourunemployment benefits expired?” to instructthem that they should go to the Welfare Officeand apply for public assistance, but the answer tothe first question had already derailed my lessonplan.

    Unfortunately, when the media picked up on the

    recent spate of temporary worker firings andstarted reporting on the difficult situations thatthese workers faced, unemployment insurancewas not even on their radar. News coveragefocused almost entirely on housing, shelters andother measures to counter poverty. Unemploy-ment insurance is the primary safety net to guar-antee income after job loss—or is it? Have webecome a society that no longer employs thisassumption?

    Did unemployment insurance not get much presswhen temporary workers were laid off en massebecause most workers were able to receive unem-ployment benefits and weather the crisis? Or, didmost of these workers fall through the gaps in theunemployment insurance safety net because itcould not be counted on in the first place?

    By law, many of those temporary workers shouldhave access to unemployment insurance. It is notuncommon for fixed-term contracts to last onlytwo months, so it is no wonder that we end upwith some workers who are ineligible for cover-age if their contracts are not renewed. However,the majority of temporary workers—whetherhired directly or through temporary agencies—who lost their jobs and are now hard-pressed forwork expected to be re-contracted and in actualityhad been working continuously for more thanone year. These workers were therefore eligiblefor unemployment insurance coverage.

    The media and the government should assumeresponsibility for carefully assessing if eligibleworkers either did not seek or were denied bene-fits and inform the public of the results; only thenwould an appropriate policy response be formu-lated. If people who should be covered by unem-ployment insurance are not receiving it, then wehave to declare that temporary staffing agenciesthat deliberately let workers slip through thecracks or client companies that hired large num-bers of temporary workers deprived of a safetynet bear a grave responsibility for the situation.

    Temporary Worker Termination and theEmployment Portfolio Systems

    Nitta Michio

  • Issues with Temporary Agency Contracts

    One issue with temporary worker firings thatraised everyone’s ire was the termination ofplacement contracts before the end of their terms.The legality of the premature dismissals of direct-hire temporary workers (i.e., workers on fixed-term contracts not hired through an agency) wascalled into question and some companies wereforced to retract their decisions, but the courts didnot extend similar protection to temporaryagency workers. This disparate treatment raisesdoubts about the agency system itself. I do notknow the details of the contracts between tempo-rary staffing agencies and their client companies,but I find it hard to believe that they allowedclient companies to prematurely terminate con-tracts without the consent of the agencies. Prema-ture termination would constitute a breach ofcontract and temporary staffing agencies couldsue for damages, but I have yet to hear of anysuch lawsuits filed. Temporary agencies are in aweak position compared to their client compa-nies, so this could mean they have chosen to suf-fer in silence rather than put future contracts atrisk.

    In Japan, the Act against Delay in Payment ofSubcontract Proceeds, etc. to Subcontractors (orsimply, the Subcontractor Act) addresses inequali-ties in commercial relationships stemming fromunequal bargaining power and unfair trade prac-tices hinging thereon. If you read the Subcontrac-tor Act, you will find a section that clearly makesit illegal for a client firm to return ordered prod-ucts or refuse to accept shipments. It is in no waystrange to apply this provision to a case involvingpremature termination of a contract to hire anagency's workers. If you view the Japan FairTrade Commission's website you will see that itissued thirteen warnings in FY2008 alone, prov-ing that the Subcontractor Act is being activelyenforced and is not merely window dressing.However, according to the website's FAQs, tem-porary placement differs from a service transac-tion as defined in the law, so unfortunately fortemporary staffing agencies, they are not coveredunder the Subcontractor Act. It is conceivable thatlawmakers in the Diet will revise the law so as tocover temporary staffing transactions under theSubcontractor Act if there is the political will to

    do so.

    In general, there is a strong tendency not to viewtemporary staffing agencies as typical businesses.Evidence of this lies in the discussion of profitmargin regulations unthinkable in any other kindof private business. In order to provide temporaryworkers with more stable employment and avoidworsening working conditions, we will most like-ly need to create an environment in which tempo-rary staffing agencies can operate as normal busi-nesses.

    The Need to Reform the Employment PortfolioSystem

    Temporary agency workers are only a fraction ofall non-regular employees; there are many othertypes of non-regular workers. Attempting tosolve the agency worker problem on its own willmost likely result in failure. When compared tothe nations of Europe, Japan’s regulations onfixed-term employment contracts are lax, so try-ing to control temporary placements might onlylead to an increase in other types of fixed-termcontract workers. I believe that we need to take aholistic view of these different categories of non-regular workers and approach the task of improv-ing working conditions through the notion ofemployment portfolio systems.

    The phrase “employment portfolio systems” hasnot been used thus far in either academic or gen-eral terms. I use it as a conceptual tool to addresswhat has been termed the “diversification ofemployment types” from the perspective of cor-porate macro-management of employment. Origi-nally, the Japan Federation of Employers Associa-tions (Nikkeiren) used the phrase employmentportfolio in its 1995 report titled, “Japanese Man-agement for a New Era,” after which it gainedwide popularity. In this report, employment port-folio is specifically defined to refer to the opti-mum combination of three kinds of personnel—long-term, highly specialized and flexibly-employed workers—but when you think about it,Japanese companies had been combining a vari-ety of personnel types in myriad ways longbefore that. In this sense, the Federation’s“employment portfolio” was nothing more than atypical example of 1990s hype, a mere re-labeling

    Page 16 Social Science Japan September 2009

  • of the employment practices that already existed.

    One way of quantifying shifts in Japan’s employ-ment portfolio system is to refer to the Employ-ment Status Survey that the Statistics Bureau inthe Ministry of Internal Affairs and Communica-tions conducts every five years. Figure 1 is basedon those survey results. As seen from the figure,the number of temporary agency workers isincreasing but the ratio to total non-regularemployees remains limited.1 Government mea-sures that only focus on temporary workers will

    most likely be ineffective.


    Nitta, Michio. 2003. Henka no naka no koyō shisute-mu. [Employment Systems in a ChangingJapanese Society]. University of TokyoPress.

    Nitta, Michio., and Hisamoto, Norio (eds). 2008.Nihonteki koyō shisutemu [Japanese Employ-ment Systems]. Nakanishiya Publishing.

    Page 17Social Science Japan September 2009

    Figure 1: Workforce Composition by Employment Type, 1982-2007 Unit: 1000 people

    Source: Employment Status Survey* Figures for 2002 include contract employees and direct-hire temporary workers** Figures for 2002 represent workers dispatched from temporary staffing agencies

    1 Figures start from 1982 because that is the year that the Employment Status Survey first included questions on those types of employmentstatus. Surveys prior to that only classified workers into two groups, regular and temporary/day laborers. 1982 was the first year that part-timers and “arbeiters” (originally meaning student workers but later expanded to other kinds of temporary hires) statistics were tabulated. Inthis survey, “part-timer” does not necessarily refer to workers who work shorter hours, but rather to the job title used in the workplace. Byusing this definition of part-time worker, the survey method takes into account the large number of workers who are “part-time” in nameonly and work as many hours as regular employees.

  • Page 18 Social Science Japan September 2009

    ISS Research Report

    The Subject Matter of Law– Science, Fiction, andPrograms

    Hirowatari Seigo is a Professor of Law at SenshuUniversity and an Emeritus Professor at theUniversity of Tokyo

    I. Introduction

    I have been engaged in the study of law now for atotal of forty-one years, since my graduation fromuniversity in March 1968 until my retirement inMarch of this year, 2009. Yet when presented withthe opportunity upon my retirement to reflect onmy research thus far and my feelings about thefuture progress of the field, what came to mindwas an extraordinarily rudimentary question,namely, “what subject matter should the study oflaw address?”

    Professor Oho Fujio, my mentor and formerteacher during my university days, spoke the fol-lowing words at his retirement lecture in 1971,“Law aspires towards no law.” Unfortunately, Idid not have the chance to ask Professor Ohowhether his statement was connected to theMarxist maxim of the “withering away of thestate and law” but I realized that he was essential-ly asking himself the very same question of whatsubjects should legal scholars address. In this arti-

    cle I have taken the opportunity to record mythoughts and feelings about this omnipresentquestion.

    II. Science and Ideology

    Academic research is governed by the paradigmsof the times through which it develops. The envi-ronment in which I began my research was what Icall the “postwar legal studies paradigm” which,roughly speaking, can be characterized in termsof political values by support for democracy (towit, modernization and the development of civilsociety); the increasing use of Marxist methodolo-gy; and in terms of subject matter, a view of thesociology of law as a positive science as opposedto normative legal interpretivism. In brief, thefield regarded the study of law as science andjurisprudence as a social science.

    Professor Kawashima Takeyoshi, who played akey role in forming this paradigm, drew a sharpdistinction between the understanding of law as ascience versus law as something upon which toapply value judgments. He declared that the hith-erto dominant form of jurisprudence was not ascience. He proposed that law belonged to thediscipline of the sociology of law as a cognitivescience. The Japanese Association of the Sociolo-gy of Law was established in 1947, and the Insti-tute of Social Science at the University of Tokyo inthe same year. The young legal researchers at theInstitute at the time were heavily influenced byProfessor Kawashima.

    This paradigm, law as a science, had a prescrip-tive and sustained impact on postwar Japaneselegal studies (the effect of which has declinedsomewhat due to the proliferation of ideas as towhat comprises “science”). At the root of thisparadigm is the notion that research on legal the-

    Hirowatari Seigo

  • ory, which involves the interpretation of law,should not be a contest between the truths posedby the various different theories, but shouldinstead analyze the theories as ideology. In otherwords, the content of the theory, from the point ofview of the political, economic, and societal inter-ests it serves, ought to be critically exposed. Ide-ology is essentially a set of ideas regulated bysuch interests.

    My own work as a scholar developed under theinfluence of this paradigm. My first monograph,Freedom and Escape from Law – Private Law underthe Weimar Republic (Nihon Hyoronsha, 1986) isbased on ideology-based analysis of legal theory,and my second, Legal Changes in Unified Germany– One Settlement of Unification (Yushindo, 1996),applied an empirical, sociological analysis of thefit between law and social problems in Germanybefore and after unification.

    III. Thinking about “Fiction”

    If we take the study of law to be part of the socialsciences, I contend that we can classify it into twomajor types: research that is empirical and basedon cognitive science and critiques of legal theorybased on ideology. In this vein, a posthumouswork of a scholar of civic law, Kurusu Saburo(1912-1998), was published in 1999 entitled, Fic-tion and the Law, (University of Tokyo Press). Thisbook taught me the significance of fiction as analternative to ideology. Professor Kurusu locatesthe idea of the social contract in fiction: “In reality,nothing like the social contract existed historical-ly. Proceeding as if it did exist and championingprinciples of popular sovereignty and justice tobring about change in our normative reality isindeed presuming that it existed when it did not.It is an ideal that is grounded in reality, however,and we should therefore not think of it as com-pletely fanciful. Applying this logic, we shouldthink of the social contract as fiction.”

    By locating modern legal theory in fiction ratherthan ideology, Professor Kurusu’s argumentenables us to protect “modernity” from its prima-ry challengers, i.e., it makes it epistemologicallyand theoretically possible to protect modern legaltheory (namely, the legal justification for thesocial contract and an understanding of free will

    as the departure point for the legal order) fromboth Nazi and postmodern legal theories whichseek to undermine “modernity.” The Nazisargued that a system in which citizens could actin accordance with their own free will would infact be a distortion of liberalism. They attemptedto establish a system in which citizens had obliga-tions as constituent members of their race. Fromthe point of view of scientific ideological criti-cism, treating the theory of citizens acting accord-ing to their own free will as ideology almostrequires us to criticize the Nazi experiment asbeing the product of double-ideologization.However, treating the theory as a fiction, or notexactly fiction but as an ideal grounded in realityenables it to be protected from the Nazis. Ofcourse, what one understands the roots of realityto be is integral to this theory of fiction. Whilekeeping in mind the concepts of science and ide-ology, however, I believe the idea that laws arebased on fiction presents an exceptionally richargument that deserves more research and debate(Hirowatari, Research into the Comparative Sociologyof Law, Nihon Hyoronsha, 2009).

    IV. The Science of Law as “Programmed Instruction”

    It was during the process of forming my thoughtsabout the theory of fiction that I came to be famil-iar with the theory of science proposed by theo-retical sociologist, Yoshida Tamito. I was alreadyfamiliar with his theory of the composition of sci-ence, namely his tripartite classification of “cogni-tive science, structuring science, and scientificskills” (A New Scientific System – How to CombineTechnology and the Humanities in Society, ScienceCouncil of Japan, 2003). However, I came across amore structured version, with scientific and neo-ontological underpinnings (Yoshida Tamio “ASociological Perspective on ‘Ownership’: The His-torical Development of ‘Social Control’ and Con-ceptual and Real Choices,” in Kaino Michiatsuand Kurumisawa Yoshiki (eds.) An Inquiry into theLegal Roots of the Enterprise, the Market, and CivilSociety, Nihon Hyoronsha, 2008). According toYoshida, existence has three layers—the material,the biological, and the human. While the materiallayer is produced by natural laws operating ingiven circumstances, the biological and humanlayer cannot arise in such a natural way, andinstead must be constructed according to a given

    Page 19Social Science Japan September 2009

  • blueprint or set of assumptions. The blueprint forthe construction of the biological layer is thegenome. How science ought to proceed is largelydefined by grasping this very fact. Social scienceswhich aim to understand the human layer cannotbe rule-based sciences. Human society is notsomething that is created by natural rules. It issomething that is designed, constructed, andunderstood. Social sciences are therefore program-based sciences that try to understand the dynam-ics inherent in such a process. According to Pro-fessor Yoshida, economics and law are also pro-gram-based sciences. As he aspired towards anew theory of science, he made the followingobservations:

    The philosophy of the social contract under-stands society as an idea or as a series of fab-ricated facts. In other words, it constructssocial reality cognitively by providing adominant master plan, a design underwhich social structure can be created. In tra-ditional terminology, there is both a descrip-tive and a normative approach to the con-

    struction of social reality. Philosophy func-tions mainly as an epistemological ‘guise’under which one can hide aspects of one’sreality, and also as a legal fiction, enablingcognitive consistency in the interpretation ofone’s social and normative reality.

    My interest was piqued by the realization thatYoshida’s argument makes the construction of fic-tion discussed by Kurusu — “not fact, but notentirely fanciful; an ideal grounded in reality” —into a scientific theory.

    V. Conclusion

    Whether or not it is appropriate to even debatethe question of what is the study of law in thecontext of what I have presented above is itself aquestion. While it may appear that legal researchis proceeding apace in spite of this methodologi-cal skepticism, this problem is still a large obsta-cle. I am currently examining ways in which wecan expand on these postwar legal paradigms inmore productive ways.

    Page 20 Social Science Japan September 2009

  • Page 21Social Science Japan September 2009

    ISS Research Report

    Arita Shin is an Associate Professor ofComparative Contemporary Societies at theInstitute of Social Science, University of Tokyo

    Institute of Social ScienceUniversity of TokyoHongo 7-3-1Bunkyo-ku, Tokyo [email protected]

    Research on South Korean Society as Area Studies

    I pursued sociology as an undergraduate andarea studies, particularly Korean studies, in grad-uate school. My research thus far on South Kore-an society has been conducted from the perspec-tive of sociology. I have focused primarily on therelationship between education and social stratifi-cation because the South Korean people’s desireto achieve in education is extremely high com-pared to other societies and has produced a num-ber of interesting social phenomena. I felt thatfocusing on the role of education in society wouldhelp us to better comprehend the structure ofSouth Korean society.

    My first realization after embarking on empirical,sociological research in South Korea was the

    extraordinary improvement of research standardsin South Korea itself. Rapid economic growth anddemocratization provided opportunities for a pre-viously unimaginable level of empirical sociologi-cal research, which left research conducted inpost-1990s South Korea looking nothing like stud-ies in the 1980s. For my cohort of non-nativeKorea scholars, just beginning our research in the1990s, where our “comparative advantage” laybecame a question of key concern. My search foran answer led me, an area studies researcherexamining South Korean society from the outside,to attempt to carve out significance for my ownresearch by taking the following two approaches.

    The first stemmed from my strong desire to avoidthe tendency of much of today’s research to sub-divide research areas according to the differentdomains of society. Instead I sought to emphasizethe mutual connections that exist between thedomains. In other words, I felt that analyzingSouth Korean society from a more comprehensiveperspective would make it possible to providesome kind of answer to the larger question, “whatkind of society is South Korean society?” The sec-ond approach is to illuminate aspects of SouthKorean society that might be self-evident to SouthKorean researchers via empirical analyses thattake adequate account of conditions unique to thecountry. In other words, I tried to conductresearch that made the most of the “outsider’sperspective.”

    At the time, imposing these two conditions on myresearch was overly ambitious, and I sufferedrather a lot. Looking back, however, embracingthe challenge of these research goals at that timeappears to have been beneficial for the subse-quent progress of my work, which I describebelow. I believe that I was extremely fortunate tobe able to begin my own research right at the time

    From Area Studies to Comparative Sociology

    Arita Shin

  • when standards of empirical research in SouthKorea itself were rapidly improving.

    Education and Social Stratification in SouthKorea

    Arita (2006) is my doctoral dissertation, revisedwith several additions and improvements. Thisbook stemmed from an interest in understandingthe factors that produce the conspicuously strongdesire among South Koreans to succeed in educa-tion. I conducted empirical research into theimpact an individual’s education has in determin-ing his or her social and economic status, andhow this impact has evolved over time. Closeanalysis of survey data yielded the followingobservations. First, even though the impact ofhigher education on income has decreased quitedramatically with the rapid expansion of access toeducation throughout South Korea, there hasbeen much less change in the influence of educa-tion on occupational status. In other words, thereis as much merit in attending university now asthere has ever been.

    One reason for this is that companies do notrequire an individual’s educational record to indi-cate any specific skills or job-related training, andinstead treat this record as an index of overall,potential ability. For this reason, in the hiringprocess employers do not apply absolute stan-dards of education but instead focus on relativelevels. In addition, because occupations differwidely in terms of prestige, the desire to obtainwhite-collar work further increases; this is anoth-er factor fueling the strong desire for educationalachievement in South Korea.

    A second observation is in spite of the govern-ment’s extensive efforts to create equality in edu-cational opportunities and to rapidly expandhigher education, the inequality of opportunityhas in fact not improved, and as a result, theopportunity for social mobility via education hasnot become any greater. At the same time, thegovernment’s education policies have created awidely held perception that abundant opportuni-ties exist to raise one’s status via the attainment ofeducation. The flip side of this view is a strongbelief that the factors causing social inequality

    currently are to be found at the level of the indi-vidual. This situation has arguably been createdby the South Koreans’ emphasis on egalitarianismin education and the resulting government poli-cies which regard the standardization of pre-uni-versity educational opportunities as equivalent toegalitarianism in education.

    Area Studies and the Comparative Perspective

    I think one could say that my research on SouthKorean society has always had a strong, thoughlatent, comparative angle. The initial reason Ibecame interested in South Korean society wasbecause I found it fascinating that while SouthKorea was similar in terms of social structure andpattern of industrialization to Japan in a numberof ways, when one looked closely, there wereactually many differences. Indeed, my previousresearch, including Arita (2006), was derivedfrom the questions, “how is South Korean societydifferent from Japanese society, and if so, why?”

    However, while pursuing research into Koreansociety in this vein, one thought continually float-ed to the surface and was difficult to dispel.Upon finding areas in which South Korea differsfrom Japan, my research almost always aims toanswer the question, “why is South Korea differ-ent from Japan?” But I have recently come to real-ize that the target of my comparison, Japanesesociety, is often the more idiosyncratic and thatasking the question “why is Japan different fromSouth Korea?” may bring me closer to the truth inmany cases.

    From these thoughts, I have gradually developedmy research from that which engages in animplicit comparison of Japanese and South Kore-an societies to a more explicit comparison. Ofcourse, in the past I have participated in collabo-rative research comparing Japan and SouthKorea’s education systems (Nakamura, Fujita,Arita 2002), and at a more informal level, I amoften placed in the position of “Japanese ambas-sador” when answering the various questions myKorean friends and acquaintances have aboutJapanese society. I believe that my progresstowards explicit comparison was probably aninevitable step for me as a researcher.

    Page 22 Social Science Japan September 2009

  • Japan’s Stratified Society Viewed Comparatively

    In Arita (2009), I use data obtained from the 2005Social Stratification and Social Mobility Survey tocompare the structure of social stratification inJapan, South Korea, and Taiwan. In this article, Itried to paint a picture of the characteristics of thesocial stratification system and social inequalitiesin each of these societies by examining how indi-vidual-level occupational conditions—such asoccupational category, employment status, firmsize and type of employment contract (“stan-dard” versus “non-standard” employment)—affected people’s income levels and “status identi-fication.”

    The results of my analysis were that while theinfluence of individual occupational conditionshad similar effects on individual income and sta-tus identification across the three societies, the rel-ative importance of each condition differed. InTaiwan, the influence of occupational categorywas by far the most important, while in Japan(and also partially in South Korea) firm size andtype of employment contract also mattered. Fur-thermore, in the case of Japanese men, firm sizeand type of employment contract have significanteffects on status identification even when control-ling for individual income. I interpret this resultas stemming from the sheer number of benefitsenjoyed by “regular” employees of large firms inJapan, benefits that far surpass the individual’scurrent wage level, including opportunities for

    long-term, stable employment, seniority-basedwages, and promotion. The very nature of theJapanese labor market distributes these benefitsvery selectively, which itself gives rise to a wholenew dimension of social inequality.

    I have just joined the Institute of Social Science’sDivision of Comparative Contemporary Societiesand feel that this move is in line with the currentmovement of my interests, from area studies tocomparative sociology. I intend to continue myresearch on South Korean society and to use theresults gleaned from that research as a launchingpoint to try my hand at comparative sociology. Ihope to build bridges between area studies andsocial science through my work at the ISS.


    Arita, Shin. 2006. Education and Social Stratificationin South Korea: An Empirical Approach to the“School Credential” Society (in Japanese).Tokyo: University of Tokyo Press.

    Arita, Shin. 2009. “A Comparative Study of SocialStratification in East Asian Societies: TheReward Differences Between Occupationand Social Inequality” (in Japanese). Japan-ese Sociological Review 59: 663-680.

    Nakamura, Takayasu, Takeshi Fujita, and ShinArita. 2002. Comparative Sociology of Educa-tional Career, Selection and School: Education inJapan and Korea (in Japanese). Tokyo:Toyokan.

    Page 23Social Science Japan September 2009

  • Page 24 Social Science Japan September 2009

    ISS Research Report

    Kuroda Sachiko is an Associate Professor ofLabor Economics at the Institute of SocialScience, the University of Tokyo

    Institute of Social ScienceUniversity of TokyoHongo 7-3-1Bunkyo-ku, Tokyo [email protected]

    Today we live in an increasingly globalizedworld, where economies and financial marketsare becoming ever more interconnected by way ofdebt securitization. With this growing intercon-nectedness comes greater risk that the impact of anegative shock in one country will have a knock-on effect in others. The impact of the US financialcrisis that began with the subprime loan defaultsin the summer of 2007 spread throughout theworld, and at the time of the writing of this article(July 2009), many countries still find themselvesunable to emerge from recession. A housing bub-ble collapse followed by a financial crisis, baddebt issues, deflation and soaring unemployment―this pattern now common in many countriesclosely mirrors the “Lost Decade” that Japanexperienced in the 1990s. Given that it underwentthis painful situation prior to most other nations,

    Japan should offer many lessons about monetary,credit, fiscal and labor market policies. During thepast several years, I have focused on the transi-tions that the Japanese labor market underwentduring the long recession of the 1990s. In this arti-cle, I will introduce the body of my research toprovide a framework for what happened to theJapanese labor market during that decade.

    Deflation put Japan in a most agonizing positionin the 1990s. During the recession, the Bank ofJapan lowered money market rates to almost 0%,but the consumer price index did not respond.Inflation rates remained close to 0% through 1998,followed by a period of approximately 1% defla-tion. As prices fell year-on-year, it was clear thatthe economy would spiral into stagnation even ifthe Bank of Japan lowered its nominal interestrate to zero percent to spur investment and con-sumption. One of the major reasons why centralbanks fear deflation is this non-negativity con-straint on nominal interest rates. Another adverseeffect of deflation is known as downward nomi-nal wage rigidity. In general, this phenomenoncan be summarized as follows: Since people gen-erally use nominal values as yardsticks, they tendto be highly averse to nominal wage cuts so thateven during recessions when wage reductions arenecessary, downward wage adjustments are diffi-cult to implement.

    For example, if there is a certain level of inflationin a recession, a firm can lower personnel expen-ditures in real terms by keeping the rate of wageincreases below the inflation rate. In fact, duringthe two oil crises in the 1970s, trade unions andemployers in Japan collaborated to keep the rateof wage increases below the rate of inflation, andthus were able to avoid massive unemployment(the unemployment rate in Japan during the1970s peaked at 2.4% in September 1978). Howev-

    Wage Adjustments During Recessions: AnIntroduction to Japan’s Experiences

    Kuroda Sachiko

  • er, when inflation is zero or negative, firms cannotlower personnel expenditures without cuttingnominal wages. When people have a strong aver-sion to lower nominal wages, companies tend tobe reluctant to impose them for fear of harmingworkforce morale. Given this aversion, it has beenargued, the difficulty of adjusting nominal wagesdownward in deflationary periods leads to mas-sive unemployment. This is the story that manyeconomists have believed since the Great Depres-sion of the 1930s.

    After the Great Depression, however, inflationbecame the norm in almost every industrializednation, and thus most countries did not experi-ence deflation. As a result, until recently therewas no opportunity to examine whether or notwages could be effectively adjusted in a deflation-ary atmosphere, making it almost impossible toquantify the extent to which deflation wouldaffect any given country’s economy. From econo-mists’ perspective, Japan’s experience with adeflationary economy in the 1990s was a uniqueopportunity to test if what economists havebelieved for nearly seventy years was correct ornot.

    How difficult was it to actually lower wages inJapan during the 1990s? I would now like tointroduce the findings of a series of my researchcoauthored with Yamamoto Isamu (Kuroda andYamamoto 2003a, 2003b, 2003c, 2005, 2007). First,we found that during the years 1993 (immediate-ly after the bubble burst) to 1998, it was certainlydifficult to lower wages and that unemploymentrates rose during that time. In particular, weshowed that downward rigidity was greater forregular monthly wages than for annual incomesincluding bonuses. This finding suggests thatdownward rigidity exists in nominal wages, ashas been suspected since the 1930s. However, oursecond finding revealed that as the economyworsened from 1998 onwards, wage levelsbecame relatively flexible, mainly through bonusreductions. This suggests that downward nomi-nal wage rigidity is not a permanent phenomenonand that in extremely serious economic situations,people can accept wage cuts. Despite the fact thatthe recession lasted more than ten years, Japan’sunemployment rate was at most 5.5% in 2002,which is extremely low compared to unemploy-

    ment rates in many European countries. One pos-sible interpretation is that the progressive wageadjustments achieved primarily by cutting bonus-es were able to stave off massive unemployment.It can be supposed that the “work sharing” gener-ated by flexible bonus adjustments allowed Japanto keep employment insecurity to a minimum.One plausible reason why consumption did notlag too much after the recession deepened at theend of the 1990s is the fact that, if nothing else,massive unemployment was avoided by cuttingwages.

    In January 2002, Japan finally entered a period ofeconomic recovery. According to statistics, thesixty-nine months from this point until the econo-my slowed in October 2007 was the longest peri-od of economic prosperity in Japan, surpassingeven the boom years of 1966-1970. However, mostJapanese did not share in this prosperity, and theeconomic recovery was seen as weak. One dis-tinct feature of this period was that consumptionstalled because scheduled monthly wage increas-es were meager when compared to past periodsof economic recovery. The reason behind this eco-nomic recovery without wage increases may havebeen the impact of the downward nominal wagerigidity that Japan experienced in the 1990s. Withthe economy liable to lose its footing at anymoment, firms may have chosen not to increaseregular monthly wages but instead to supplementwages with bonuses which can be lowered at anytime. This amounts to a change in companies’wage adjustment mechanisms. In fact, afterJapan’s economy went into recession again inSeptember 2007 due to the US financial crisis,macro-level average annual incomes fell quicklyinto negative territory by the end of 2007. Oncecan infer that the speed at which wage cuts occurafter entering a recession is now much quickerthan it was in the 1990s.

    One more feature of the economic recovery thatbegan in 2002 was that the number of fixed-termcontract workers increased while the number ofregular employees changed relatively little. Since,in practice, it is difficult to dismiss regularemployees as soon as the economy sours in Japan,it may be that companies were preparing for thepossibility of another recession by hiring fixed-term workers. It is said that the expansion of

    Page 25Social Science Japan September 2009

  • fixed-term employment has quickened the paceof employment adjustments since 2000. In light ofthe developments observed in this decade and thehard lessons learned from Japan’s long recessionof the 1990s, it seems that firms’ adjustment sys-tems may be changing so that both workers andwages can be speedily adjusted. A project for mein the near future will be to assess these conjec-tures in quantitative terms.


    Kuroda, Sachiko and Isamu Yamamoto. 2003a.“Are Japanese Nominal Wages Downward-ly Rigid? (Part I): Examinations of NominalWage Change Distributions,” Monetary andEconomic Studies, 21 (2), Institute for Mone-tary and Economic Studies, Bank of Japan.pp.1-29.

    ―――――, and ―――――. 2003b. “Are JapaneseNominal Wages Downwardly Rigid? (PartII): Examinations using a Friction Model”,Monetary and Economic Studies, 21 (2), Insti-

    tute for Monetary and Economic Studies,Bank of Japan. pp.31-68

    ―――――, and ―――――. 2003c. “The Impact ofDownward Nominal Wage Rigidity on theUnemployment Rate: Quantitative Evidencefrom Japan”, Monetary and Economic Studies,21 (4), Institute for Monetary and EconomicStudies, Bank of Japan. pp.57-85.

    ―――――, and ―――――. 2005. “Wage Fluctua-tions in Japan after the Bursting of the Bub-ble Economy: Downward Nominal WageRigidity, Payroll, and the UnemploymentRate”, Monetary and Economic Studies, 23 (2),Institute for Monetary and Economic Stud-ies, Bank of Japan. pp.1-29.

    ―――――, and ―――――. 2007. “Why Are Nom-inal Wages Downwardly Rigid, but Less Soin Japan? An Explanation Based on Behav-ioral Economics and Labor Market/Macro-economic Differences,” Monetary and Econom-ic Studies, Institute for Monetary and Eco-nomic Studies, Bank of Japan. Vol.25, No.2,November. pp.45-88.

    Page 26 Social Science Japan September 2009

  • Page 27Social Science Japan September 2009

    Greetings from Visiting Professor

    Jack G. Clarke Chair in Far East Legal Studiesand Professor of AnthropologyLaw School, Cornell University

    A global search is now on for new regulatory par-adigms and approaches for global financial mar-kets, both public and private. As a visiting pro-fessor at the Institute for Social Science, I havebeen completing a book entitled Collateral Knowl-edge: Public and Private Governance in the GlobalFinancial Markets, that examines this questionthrough a cultural lens: what kinds of social andpolitical institutions give markets legitimacy andencourage market participants, professionals andregulators to be hopeful—proactive, risk-taking,and embracing of change? Part of my answer isthat lawyers and financial experts already have attheir disposal the tools and methods they need tocreate a healthy global market, if only they couldrecognize them, and more systematically replicatethem in public and private regulatory practice.

    What my research shows is that legitimacy andhopefulness in the markets are quotidian things—the stuff of ordinary decisions and routine day today work that collectively add up to large scaleconsequences. In particular, I have found that cer-

    tain legal and financial techniques and heuristics,which are so fundamental to what lawyers andtraders do that they usually go entirely unno-ticed, nevertheless have very profound but large-ly undervalued implications quite apart from thecontent of legal norms, agreements or rules thatwe normally imagine as the outputs of legalwork.

    In the regulation of global derivatives markets,legal expertise turns out to be surprisinglyresilient in times of crisis. Legal expertise has notsuffered the crisis of legitimacy that now engulfs,for example, quantitative modeling of financialrisk on the one hand or government fiscal policyon the other. If we wish to construct better marketgovernance regimes, we might look to what holdstogether when all else collapses, and ask why.

    Take, for example, how collateral is used to han-dle market risk. Collateral is a legal tool and doc-trine for managing future uncertainty, but for thelawyers who manage collateral on a daily basis, itis a set of legal problems that demand solutions.For example, what rights does a collateral holderhave in the interim between the time the collater-al is posted and the time when the parties closeout their positions? And what obligations doesthe collateral holder have, i.e., how must the col-lateral be maintained and accounted for?

    The legal details are too complex to summarizehere. But what they add up to is that through astandardized contract, the parties simply agree toact as if the holder of the collateral already hasclear and complete rights. Now this fiction ofcourse raises all kinds of secondary problems andquestions—will this agreement actually beenforceable? What law applies? And so on. Andat each stage, the trick is the same: more fictions.The parties simply assert, and expect, that the

    Hope in Legal Method: A New Approach toRegulatory Reform

    Annelise Riles

  • experts’ legal opinion that the agreement isenforceable controls, or that the law of X jurisdic-tion applies and that this law will uphold theirobligations.

    Outsiders to financial law often ask, why wouldmarket participants believe in something so bla-tantly fictional? The answer is that they don’t, atleast in the trad