IntroductionJapan’s labor market has considerably improved over the past decade, recording low unemployment rate of about 3.1%. Although the country has had gradual advancements, the wage has remained stagnant for a number of years. In spite of these improvements, Japan still faces various severe labor issues such as labor shortages. According to Japan Institute for Labor Policy and Training, 2006, in the 1990s, after the ending of the bubble economy, the employment rate in non-regular employment has dramatically increased, and employment of such employees has been a major issue in the creation of the labor policies. In this paper, the labor policies and issues of aging population in Japan will be examined.

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Labor Market Situation
Reports produced by the Japan government shows that the population of workers in the country will increase to 44 million by the year 2060 (Miyamoto, 2016). The elderly population has played a significant role in the wage fall in Japan. The retirement age of the elderly workers is 63 years, but these retirees are entitled to their pension after attaining the age of 65. It gives the employees the opportunity to renegotiate their wages so that they can get a good pay before they retire. The retired employees are replaced by younger workers who are paid less. In a situation where the number of retirees is high, capital wage will decline dramatically, and this is what is happening in the Japan’s labor force. According to Rōdō Seisaku Kenkyū Kenshū Kikō 2016, about 7 million baby boomers are approaching the age of 60 and 62 and will soon retire.

Current Labor Policy
In the year 2012, the second Abe administration was created with the aim of facilitating an all-inclusive economic policy. Today, the administration is made up of three major parts including aggressive monetary erasing, elastic fiscal incentives, and structural. The administration is responsible for promoting change in the private sector. In this development plan, labor policy aims at promoting birth rate in the long run and addressing the current labor shortages. The current Japan policies aim at increasing productivity and employees’ reimbursement (Rōdō Seisaku Kenkyū Kenshū Kikō, 2016). To achieve this, these systems focuses on cutting down the number of working hours and also changing working techniques in an attempt to maximize the human resources. Reducing the number of working hours and diversifying the practical method will increase the quality of human resources. This will also create a work-life balance between work and social issues. These measures come out as the best ways to facilitate economic growth through the supply of right labor force.

In the year 2015, Japan Revitalization Strategy was created. The principal aim of this labor reform was to establish measures to manage labor shortages as the population reduces. Policy-wise, it involves plans and ways to maximize the human resource skills, knowledge and abilities. According to this policy, maximum utilization of employees can only be achieved through various means. First is the reduction of working hours so as to ensure quality (Rōdō Seisaku Kenkyū Kenshū Kikō, 2016). Second is by empowering women, the elderly and other minority group participations. Last but not least is to change the education and employment practice to empower workers for the future.

Market Preparedness for Retiring Population
Japan’s labor policy acknowledges the need for retirement for the elderly workers. The retirement-age system is considered an organizational program that assists organizations to think about long term employment for their employees. The age-system also plays a significant role in curbing the high employee cost of elderly employees given that the seniority-based wage in Japan is on the rise. Article 8 of the Act on Employment Stability for Older Persons clearly explains that employers shouldn’t authorize retirement below the age of 60. Article 9 makes it compulsory for the companies to make sure that employees’ jobs are secure until they attain the age of 65. Terminating one’s employment before he/she meets the recommended retirement age lacks a factual background and its irrational (Rōdō Seisaku Kenkyū Kenshū Kikō, 2016). However, Japan’s continuing employment system, built on seniority-based pay increase makes it rational as it satisfies the job security of employees until they attain a particular age.

Act 9 requires employers not to designate retirement of its employees until they attain the age of 65. This Act has raised a heated debate among policy makers and lawyers. The primary argument is that, to a large extent, the Act is not binding under private law. Article 8 defines it as a compulsory requirement for all employees, in private and public sectors, to retire at the age of 65. Its interpretation is that, requesting an employee aged 60 years and below to retire is unlawful and unacceptable (The Japan Institute for Labor Policy and Training, 2015). Article 9 is also essential under private law and can be used as a source of claim in an employment contract. From another approach, it is clear that article 9 only defines employers’ responsibility under public law without taking into consideration the private sector.

Japan’s labor policies have played an important role in preparing the labor market. To a greater extent, the policies have facilitated workforce involvement of the elderly workers through the seniority-based wage system reforms. This system ensures that the employee pay increases as they approach the retirement age (Miyamoto, 2016). The seniority-based pay system reforms have guided companies in raising the retirement requirement. The policies have also ensured that working hours are reduced to provide work-life balance. The policies further advocate for proper education so as to meet the future needs of the Japan’s economy (Miyamoto, 2016).

  • Japan Institute for Labour Policy and Training. (2006). Labor situation in Japan and its analysis. Tokyo: Japan Institute for Labour Policy and Training.
  • Miyamoto H. (2016). Reforming Japan’s labour market | East Asia Forum. Retrieved 10 March 2017, from
  • Rōdō Seisaku Kenkyū Kenshū Kikō. (2016). Labor situation in Japan and its analysis: General overview 2015/2016.
  • The Japan Institute for Labour Policy and Training. (2015). Labor situation in Japan and its analysis: Detailed exposition 2014/2015. Tokyo: The Japan Institute for Labour Policy and Training.