Labor Relations and Labor Law in Japan

This article discusses the relationship between Japanese labor law and employment customs, building on this rationalistic understanding of the Japanese employment customs. Our basic conclusion is as follows. The Japanese employment custom developed naturally through an agreement among the members of Japanese employment society and attained efficient economic performance up till the 1990s. During the time, the Japanese labor law mainly worked toward setting the stage for private bargaining and respected its agreement instead of enforcing the desirable result directly through legal regulations. Through this indirect approach toward labor relations in Japan, at least part of the Japanese labor law made a highly positive contribution to the attainment of economic efficiency innate in Japanese labor relations. After the 1990s, when the long-run stagnation occurred in Japanese economy, the merit of the Japanese employment custom diminished and needed reform. At this stage, the Japanese labor law has taken the stance of directly regulating the economy, particularly in the area of employment protection and working hours regulation. Due to this mismatched regulatory approach toward Japanese employment relations, the Japanese labor law has become one important factor that hindered the performance of the Japanese economy