Human resources

What’s going on in Japanese HR? – online seminar July 3 15:00-16:30 BST/10:00-11:30 EST

Human resource management in Japan has changed radically over the past decade. What does this mean if your company has employees in Japan, or your parent company is Japanese?

Join our online seminar (July 3 15:00-16:30 UK time/10:00-11:30 EST) to find out.

We’ll look at:

The JTC – Japanese Traditional Company – lifetime employment, seniority based promotion and the company union
The twice yearly bonus season
The Ice Age generation and the Yutori generation
Job gata/job-based hiring, job type system
Haizoku gacha – random assignments
Re-skilling
Black company, overtime and karoshi (death from overwork)
Hara hara – harassing about harassment
The end of the nomikai (after work drinks party)?
Taishoku daiko – proxy quitting
Remote work and hybrid working in Japan
Purpose

Note: Direct competitors of Japan Intercultural Consulting and their employees are not allowed to enroll in this seminar.

Participant numbers will be limited to 25 to ensure interactivity

We reserve the right to postpone or cancel the seminar should there not be sufficient participant numbers

For more content like this, subscribe to the free Rudlin Consulting Newsletter. 最新の在欧日系企業の状況については無料の月刊Rudlin Consulting ニューズレターにご登録ください。

Pernille Rudlin speaking on navigating workplace harassment and purpose at 24th September event in London

Pernille Rudlin will be speaking (in Japanese) on “Navigating Workplace Harassment and Purpose” on 24th September 2024 16:00 in London as part of a free HR seminar with Centre People and Lewis Silkin. You can use the QR code or email address as below to register.

Japanese companies positive on growth and profitability in Europe, Africa and Middle East, but facing labour shortages

JETRO’s 2023 global survey has been published but as always, in Japanese only. 7,632 Japanese companies responded during August – September 2023, from 82 countries and regions. An English translation will no doubt follow in due course, but for the time being, here are the key highlights as relate to the Europe, Middle East and Africa region:

The outlook for Japanese companies in Africa and the Middle East is more positive, compared to a deteriorating view of performance and predictions for profitability and growth for China, and also Hong Kong, Vietnam, South Korea and Singapore
Profit – Proportion of companies in the major economies of the EMEA region expecting to be profitable in the coming year:
1. South Africa 86%
2. UAE 76.5%
3. France 75.7%
4. Netherlands 72.6%
5. UK 71.4%
6. Germany 68.2%
Growth – Japanese companies in Europe are showing stronger than global average intention to expand. Japanese companies in South Africa particularly cited increased exports to neighbouring countries such as Zambia, Namibia and Congo. Japanese companies in Germany cited a number of reasons – increased exports to Central and Eastern Europe, Africa, Turkey, etc, the expansion of the EV market, growth of the semiconductor market within Europe and increased demand due to environmental regulations (large companies, chemical products, petroleum products). The percentage of companies expecting business to expand in the next 1 – 2 years:
1. South Africa 57.7%
2. Germany 54.9%
3. UAE 53%
4. France 51.4%
5. Netherlands 51.2%
6. UK 43.9%
Labour shortages – Over 50% of Japanese companies are facing human resource shortages. The proportion is particularly high in large manufacturing companies. Labour shortages are being faced by more than 60% of companies in North America and Europe. The issue is particularly acute in the Netherlands, the United States, Germany, and France.
Japanese companies in the EMEA region note that trying to recruit internally first or rotating staff within the region can help with hiring. For retention, offering the ability to work from home and ensuring a steadily increasing salary in line with inflation have helped with motivation.

The rise of the Japanese permanent resident in Europe

There were around a quarter of a million Japanese permanent residents living overseas in 1989, the first year of Heisei, just before Japan’s economic bubble burst. Now, as of 2022, there are over double (+126%) the number – 557,034. It has been a steady increase, with particularly strong growth in 2006-8 and 2013-2015.

The number of Japanese nationals on long term visas has also risen, but not to quite such an extent – from 340,000 to 751,000 (+120%) and since 2020 the number has dropped. Long term visa holders are likely to be corporate expatriates and students on longer courses, so this decrease could partly be explained by the pandemic, but there does not seem to be any sign of recovery by the end of 2022, even though the severity of the pandemic had faded by then.

Country by country, the picture is more patchy. The USA is still the biggest host of Japanese nationals (419,000) – nearly a third of the Japanese nationals overseas, but this has declined 6% since 2018. The number of Japanese nationals in China, the second largest host, has dropped 15% over the same period. The UK, 6th largest host, has 7% more Japanese nationals than in 2018 whereas Germany (8th) has 7% fewer Japanese nationals and France (10th) 8% fewer. Australia, Thailand and Canada (3rd, 4th and 5th respectively) have also seen increases.

By city, Los Angeles, Bangkok, New York, Shanghai, London, Singapore, Sydney, Vancouver, Honolulu and Hong Kong are the 10 largest hosts. San Francisco has dropped out of the top 10 and been replaced by Honolulu.

Breaking it down by visa category shows that overall in Europe the number of Japanese nationals in the 17 biggest hosts rose 17% from 2012 to 2022 to over 216,000. But the driver behind this has been the number of nationals who are permanent residents. This rose 80% from 2012 to 2022 to over 90,000 people, with a particularly marked increase 2021-2. The number of people on long term visas in Europe has actually fallen by 13%, to 126,000.

The UK has the largest number of Japanese permanent residents – 27,179 – up 77% on 2012. Germany has nearly double the number of Japanese permanent residents it had in 2012 – to 17,496. France is the third largest host with 12,572 permanent residents, up 95% on a decade ago. Belgium has tripled the number of permanent residents and Austria doubled it.

It is hard to know what the drivers are behind Japanese taking up permanent residency in Europe. Obviously one factor is marriage to a local person and having a family. The stereotypical view would be of a Japanese woman marrying a European man – often after having come to Europe to study and work, having perhaps despaired of the traditional education, career and marriage prospects available to women in Japan. There does seem to be an element of that in that there are 1.6 Japanese women permanent residents for every man, up from 1.1 in 1989.

The ratio of permanent to long term residents in the UK and Germany is around 2:3, whereas in the USA it is around 50/50. In Australia and New Zealand is more like 3:2. In Brazil and Argentina over 90% of residents are permanent.

Permanent residency may also be the only available option if a Japanese person wants to stay in their new home country, but does not want to lose their Japanese citizenship. As this editorial in the Asahi newspaper explains, it has long been a source of contention in Japan that dual citizenship has not been permitted. The eight plaintiffs in a recent court case who wanted to contest this said that they took up citizenship of another country in order to maintain their business in that country, or to take public office.

Japan does seem out of step with the majority of countries in the world – 70% of countries allow multiple citizenship. It is also an open secret that many Japanese nationals abroad do actually have dual or multiple citizenships, as there is no mechanism for the Japanese authorities to become aware of this. The data above comes from the Japanese Ministry of Foreign Affairs, and is dependent on Japanese nationals registering with their local embassy. It is only when inheritance, tax and other matters have to be dealt with that multiple citizenship comes out in the open as issue. The true number of Japanese nationals (current and former) in Europe is likely to be much larger.

The charts below attempt to show the different trends in the main countries in Europe which host Japanese nationals. There are some obvious anomalies, which may be explained by changes in citizenship laws and visa regulations in each European country. It’s also notable that Switzerland has long been a major host of Japanese permanent residents whereas, by contrast, the Netherlands would seem to be much more of a corporate expatriate destination.

Japanese employees see promotion to manager as a “punishment game”

Nikkei Business magazine has just run a series on how Japanese employees are becoming very reluctant to be promoted to manager, seeing it as a “punishment game”. Comedy shows on Japanese TV often involve a “punishment game” (罰ゲーム batsu gehmu) where after a bet or a game like scissors paper stone*, the winner inflicts some kind of punishment – like a slap, or eating something disgusting – on the loser.

This reluctance to be promoted to management has been noted for at least two decades now, as the compensation for management level jobs has become less based on seniority increments and more on performance and job content. At the same time, the declining population means there are fewer people below to delegate to and many of the younger generation do not want responsibilities delegated to them.

Playing managers

Japanese managers have felt they have to be “playing managers” a term taken from baseball, meaning that a person has both to manage the team, but also be a high performing player in the team. The strain of doing this is obvious – Nikkei Business cited one woman General Manager who quit because she also had to be a manager of multiple teams, coaching younger inexperienced people, as well as look after her children and parents.

Another issue is that being promoted to manager may now mean you have to manage people older than you – something that was taboo under old seniority based systems. According to the Nikkei Business introduction, the stress of this meant one man left his successful career at a Japanese traditional company to join a foreign owned company, where age related status was not such an issue.

Why over half would turn down promotion

These anecdotes are backed up by a survey by Musashino University of 340 management candidates under 40, which showed that over half (52%) of respondents would turn down a promotion to manager. Other research quoted by Nikkei Business shows that whereas in 1981 a general manager could earn more than double the total take home pay of a non-management employee, it is now less than double. This may be due to higher salaries to retain younger, digitally skilled employees.

Other research shows that the average age of appointment to team leader in Japan is around 38 years old, whereas in the USA it is 34 and in India, China and Thailand it is around 29 or 30. The average age for becoming general manager in Japan is 44, 37 in the USA, 32 in Thailand and just under 30 for China and India. There is also a higher mortality rate amongst Japanese managers compared to European managers.

The legacy of the lost three decades

Japan ranks 43rd in the world in IMD’s World Talent Ranking – which looks at “investment and development” “appeal” and “readiness”- a legacy of the days when managers only had “on the job training”. Switzerland ranks 1st, again, Germany 12th, USA is 15th and the UK has dropped to its lowest ranking since 2019, of 35th – which is where Japan was in 2019. Unsurprisingly, given the inward looking nature of the past “lost three decades“, Japan scores particularly low on international experience and senior management competence.

Nikkei Business says Japanese companies have become wine glass shaped – top heavy with people in their late 50s and 60s, with more people in their 20s and 30s at the base, putting the squeeze on the fewer people who are the “stem”, in the middle management roles in their 40s and early 50s.

The solution is empowerment

Nikkei Business points to some solutions arising from the research, for example that senior managers should not be top down and directive in their style, and to allow their team to have more say and influence in decision making.

It seems to me that there should be less emphasis on quantifiable performance, when deciding how to compensate managers, and more emphasis on job content and qualitative targets, such as developing and motivating employees. This is something that is beginning to happen at some companies (Hitachi, Panasonic Industry and Ricoh are specifically mentioned in the series), who are moving to the “job gata” system, where job content is more clearly defined and employees are meant to take more control over their own career paths and development.

At Japan Intercultural Consulting, our training on agile project management explicitly states that managers should not be “playing managers” but instead focus on supporting the team by providing resources and removing barriers to productivity – a management style known as “servant leadership”.

*Wikipedia calls the game “rock paper scissors” – apparently that’s the more common name in the USA. Perhaps we should all call it jankenpon, the Japanese name. It came to the West from Japan, who, in turn, got it from China.

What is behind the 30% drop since 2016 in Japanese corporate expatriates?

Mitsubishi Electric’s introduction of a system that will allow employees to work virtually in one country, while being based in another was described as an “evening scoop” by the Nikkei newspaper. The Nikkei then went on to position it as being aimed at employees based outside Japan, who can then work in Japan headquarters, thereby enabling Japan HQ to exert a more centripetal force on the rest of the world.

I am not quite sure how much of a scoop this really is, as I already experienced a similar system, along with many other members of “Global” when I worked at Fujitsu in the UK ten years ago – I had an international role but my salary, tax and benefits were all paid as if I was a UK based employee. The UK operation was compensated for this by Japan headquarters.

The solution to Japan’s demographic crisis?

My second doubt about this is whether this is really the solution for Japan’s demographic crisis. Japan needs immigrant workers because of its declining birth rate, in addition to which Japanese companies often talk about the importance of cultural diversity in their corporate headquarters, but nobody seems to want the hassle of actually allowing foreigners into the country to live. Only very specific categories of jobs can add value entirely through remote working – no surprises that Pasona, a Japanese staffing services company, has an offering to cover remote work from overseas – for foreign IT workers. If the aim is to add value to headquarters’ decision making and creativity through diversity, then some face to face, daily interaction is going to be needed.

When I first saw the Nikkei headline, I thought Mitsubishi Electric’s new system was going to be for Japanese managers who need to manage overseas subsidiaries, but would rather do it remotely, than uproot their families to move abroad for five years or go solo or tanshinfunin, as it is known in Japanese. Expatriation is costly for the employer too. This is mentioned in the article, but as a secondary aim.

Or increasing localization?

Many other Japanese companies may be adopting similar systems, or just relying more on local managers to run things – as we noted in a previous article. As a consequence, there has been a 30% drop in the number of Japanese corporate expatriates since 2015/6, according to Toyo Keizai. North America had the smallest drop in numbers (-24%) and Oceania the highest (-43%). The numbers of Japanese corporate expatriates in Europe fell 27% since 2015/6, and the total is about half that of North America. The decline set in before the pandemic, but certainly seems to have been accelerated by the inability to move people around the world, and the discovery that it was possible to oversee, if not hands-on manage, overseas operations remotely.

Toyo Keizai’s data on corporate expatriates relies on self reporting through their surveys, so undoubtedly underreports the true number of expatriates. It is at least a consistent data set, with few anomalies, so the trend seems clear. It only records 6 Japanese expatriates for Mitsubishi Electric in Europe and Africa, and another 7 in the Middle East – the former seems very low.

Mitsubishi Electric operates in more than 40 countries around the world, with overseas sales accounting for 50% of consolidated sales and 40% of consolidated employees (approximately 146,000). 11% of its sales and around 9,500 (6.5%) of its employees are in the Europe, Middle East and Africa region. We had to estimate the 9,500 figure ourselves, as Mitsubishi Electric does not disclose regional breakdowns of its employees. If remote working across country borders really becomes dominant, at least at managerial rather than shopfloor level, then such data will become increasingly meaningless anyway.

Breaking it down for EMEA

Looking at the Toyo Keizai data for individual countries in Europe and the Middle East shows that the only country to show any positive growth in Japanese corporate expatriate numbers since 2016 is the United Arab Emirates. The fall in Japanese expats in the Netherlands (-19%) was not as steep as elsewhere in EMEA (-27% average, -26% for UK, -40% for Belgium ) and seems to be recovering a bit since the pandemic. The number of expats in Germany also fell by only 17% since 2016, having grown and surpassed the UK in 2019/20, but falling steeply since the pandemic began, with no signs of recovery yet.

A second winter of discontent for Britain

Britain is going through another “winter of discontent”, of multiple strikes. The description comes from a soliloquy in Shakespeare’s Richard III and has been used whenever social or political unrest coincides with dark, cold, wet British winters.

I remember the last, most famous “winter of discontent”, of 1978/9, when there were widespread strikes against government imposed wage restrictions. It was a year or so after my family returned from five years in Japan. Britain felt very inconvenient and full of conflict after the smooth-running life we had in Japan.

One of the positive impacts that Japanese companies such as Nissan and Toyota had on the UK in the 1980s was to introduce multi-skilling and one company union representation in return for more secure jobs with better working conditions. Many other companies adopted these practices and for decades we had far fewer strikes and disputes.

It feels like we have regressed back to the 1970s. This time the disputes are primarily about pay but also changes to working practices, and a worry that these will lead (or have led) to worsening working conditions and insecure employment.

For example, the rail union is concerned that driver-only trains, where the driver has to operate the doors as well as drive the train, will lead to compulsory redundancies. The rail management are saying that there will still be staff on the train, but they will be able to focus more on passenger safety and ticket inspection, if they do not have to operate the doors as well.

I recently travelled into London on an airport bus (because the trains were on strike) and observed the driver of the bus having to load everyone’s suitcases, check everyone’s tickets and then drive the bus. All tickets had a QR code, but he was checking them manually. Although the digital ticketing system could tell him where passengers were going and where passengers needed to be picked up, he still double-checked our itineraries with us. It seemed to me he was having to do too much, without supporting technology, so missed the fact that one passenger had booked a different bus, and he also placed some of the suitcases in the wrong part of the luggage hold.

A recent exposé of the UK warehouse of a large online fashion chain revealed similar problems. Employees had a heavy monitor strapped to their wrists telling them where they had to go next. The monitor would also alert managers when an employee was not hitting their targets. Yet the employees were having to walk the equivalent of a half marathon during a gruelling 12-hour shift. This is despite the fact that there are robots which can do a similar job, as I saw in a vast Honda warehouse in Belgium, nearly 30 years’ ago.

British technology investment has been very short term, focused on cutting labour costs rather than looking at how technology can be used to improve people’s working lives. I hope Japan’s digital transformation fares better, and that again Britain can learn from it.

This article by Pernille Rudlin first appeared in Japanese in the Teikoku Databank News in January 2023

Japanese with foreign MBAs are beginning to change corporate Japan

One swallow does not make a summer, and I am not entirely convinced by Nikkei Business’s assertion that there is an upcoming group of Japanese who did MBAs overseas in the 1990s and 2000s and are now taking over and changing corporate Japan.

The examples cited are:

Minato Koji (University of South California Business School MBA 2003), formerly of Oracle Japan, who was headhunted for a CEO position at Itoki, an office furniture manufacturer
Takahashi Hidehito (Columbia MBA 1992), President of Resonac Holdings (formerly Showa Denko)
Matsuoka Yoko (known as Yoky) who is founder of Yohana, a Panasonic subsidiary – who hasn’t got an MBA, but went out to the USA when younger, to become a tennis pro.

Nikkei Business characterises them as familiar with technology, having learned Western-style management through study abroad, including an understanding of how to take risks, and having had the experience of putting this knowledge into practice at foreign-affiliated companies.

Another example is Morimoto Masaru, now chairman of Showa Aircraft, who gained an MBA at Harvard in 1993 when he was working at Sumitomo Trust Bank. He says that in the 1990s, around 20 people a year were sent to study abroad from Sumitomo Trust Bank. “Large companies were competing to see who could send students.” Students studying abroad surged in the 1990s, reaching 83,000 in 2004.

As I was working in Japan in the 1990s (and was sponsored by my Japanese company, the first ever non-Japanese, to do an MBA at INSEAD, in 1997) I saw this for myself. The issue then was that companies did not know what to do with their newly minted MBAs when they returned. Corporate finance, or maybe send them to the USA, was the usual offer – MBAs were jokingly known as Managing Business in America. Many of the MBAs became frustrated and joined foreign companies – which is exactly what Morimoto (Club Med, Coca Cola), Minato (Sun Microsystems, Oracle), Matsuoka (Google) and Takahashi (GE, GKN) all did.

I do agree, however, that it would be positive for Japanese companies if more Japanese employees and young people studied abroad – so long as Japanese companies can work out what to do with them afterwards – perhaps the new job-type systems will help with this. The Japanese government has just announced that it wants the numbers studying abroad to reach 100,000 a year by 2027. This was achieved before, but even in 2019, before the pandemic hit, there were only 77,953 Japanese students abroad, compared to the record high of 115,146 in 2018.

“Job type system” not the cure-all for Japanese employee engagement

Fast Retailing (Uniqlo) has caused quite a stir in Japan by announcing that it will raise salaries by up to 40%. It claims this is in order to bring the Japanese salaries more into line with what Uniqlo is paying staff overseas, so that staff can be transferred to and from Japan HQ more easily. Japanese companies have been under pressure from the government for some time to increase salaries and this seems to some extent a typically punchy move by Fast Retailing CEO and founder Yanai-san, who has always favoured being provocative and going against the mainstream.

As any global compensation expert will tell you, it’s not quite as simple as paying people the same for the same job around the world, given the very different living standards and cost of living. Nonetheless, if Japanese companies want to introduce the “job type” system, where the compensation is defined by a job description, rather than a seniority based generalist track with no job description, which has been the tradition in Japan, they are going to have to consider some kind of parity in remuneration, to make it attractive and easy for their employees to move around the world.

As Dr Kawai Kaoru, workplace health scientist, has pointed out in a recent article for Nikkei Business, the reality of the uptake of the “job type system” has not lived up to the media hype. The same names keep coming up – Hitachi, Fujitsu, Astellas, KDDI, Mitsubishi Chemical, Shiseido and Kagome. According to Dr Kawai’s research “an overwhelming number of companies said they had no plans to introduce a job-based system.”

Those who are introducing a job type system are expecting it to re-energise their staff, improving autonomy, empowerment and engagement. Kawai cautions against seeing the job type system as being a cure-all for employee motivation. Her worry is that too much emphasis on the individual may ignore the fact that what really energises employees in their work is a sense of interdependency – that other people rely on them and they can rely on others, in order to get things done.

She points out that the five factors needed for high employee engagement (which I have seen appear in many an employee engagement survey) are

Sufficient resources to do the job
Discretionary power to make decisions, get things done
Being recognised and rewarded for good work
Fairness – being respected and able to express opinions, regardless of age, gender, nationality etc.
Community – that staff members help each other and trust each other

Japanese companies have always been strong on the last point – Dr Kawai and I are both hoping it is not lost in the quest for a more global standard.

Who’s getting the biggest pay rises in Japanese companies in Europe?

If you’re in Hungary, Poland or Romania and you’re working in construction or engineering or in IT for a Japanese company, you’re in luck.

According to a survey by JETRO of Japanese companies in Europe, of the 857 organisations who responded, employees in Romania, Hungary and Poland are seeing pay rises of well over 7.5% to 8.5%, whereas employees in Western European countries such as Italy, Finland and Sweden are getting less than 3%. Those countries with the largest numbers of Japanese companies – Germany, UK, France – are seeing pay rises ranging between 3.5 to 4.5%.

The top three sectors with the highest pay rises were:

2022/23: Construction/Plant/Engineering (6.25%), Communication/IT/Software/Information system/Digital services (5.95%), Rubber products (5.87%)
2023/24: Other manufacturing industries (7.50%), Non-banking financial institutions (7.17%), Non-ferrous metals (6.00%)

These seem to be indicators of where demand is the strongest and therefore competition for employees. We’ve heard quite a few cases of Japanese companies expanding in Romania recently, not only in manufacturing but also IT services and logistics. Hungary has been a hotspot for a while now, particularly in automotive manufacturing.

Last updated by Pernille Rudlin at 2025-06-05.

Category: Human resources