COVER STORY • 1

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Roundtable with Yuri Okina, Kazuhiko Toyama, Prof. Kotaro Tsuru & Masakazu Toyoda

oundtable on Labor
Mobility & Human Capital
Investment

By Japan SPOTLIGHT
Participants: Yuri Okina, Chairperson, Japan Research InstituteKazuhiko Toyama, Chairman of IGPI Group, Industrial Growth Platform, Inc.
Kotaro Tsuru, Professor, Graduate School of Business & Commerce, Keio University
Moderated by Masakazu Toyoda, Chairman & CEO, Japan Economic Foundation (JEF)(Online Roundtable on Feb. 20, 2023)
Participants

Yuri Okina

Kazuhiko Toyama

Stagnant Economy & Employment System
in Japan
Toyoda: The Japanese economy has been stagnant for a very longtime – referred to as “the three lost decades”. There has been
increasingly strong criticism that this has prevented wages fromrising. For example, in the early 1990s the GDP per capita of Japanwas one of the highest in the world, but by 2021 it had fallen to 27th
in the world and closer to the lowest among the G7 nations. It was
not clear whether it was a macroeconomic or microeconomic issue.
One certain thing is that the wide range of policies adopted since thebeginning of the administration of late Prime Minister Shinzo Abe
have not necessarily been successful.
Recently, I think there has emerged an increasingly prevailing viewthat one important factor behind this stagnant Japanese economy
could be the limited capacity of the Japanese development model, as
characterized by lifetime employment and its seniority wage andpromotion system, which was dominant in the high-growth era, toadjust to the current low-growth economy. There seem to bestronger calls for labor market mobility as a key to achieving better
4 Japan SPOTLIGHT • May / June 2023

Prof. Kotaro Tsuru

Masakazu Toyoda

economic performance. Moreover, it is now being emphasized thathuman capital investment should not to be considered a cost but a
future profit-earning activity.
Today, we have three distinguished experts to discuss these twoissues of labor market mobility and human capital investment,
namely Ms. Yuri Okina, chairperson of the Japan Research Instituteand an expert on macroeconomic systems, Mr. Kotaro Tsuru,
professor of Keio University and expert on employment systems, andMr. Kazuhiko Toyama, chairman of Industrial Growth Platform Inc.
and expert on business and local economy restoration.
First of all, I would like to start discussions with the argument thatthe post-World War II Japanese economic development model with
its lifetime employment and seniority system has reached its limits.
Many companies in Japan today are changing their generalemployment system, in which new recruits become long-term
members of the organization, into job-specific employment, which
evaluates workers based on their skills and competence to replace
inefficient ones. Prof. Tsuru, will this become the new Japanese
economic development model? There may be concerns that it could
end up in increasing inequalities.
https://www.jef.or.jp/journal/

Tsuru: The importance of labor market mobility has been unchanged
since we took the first step in employment system reform in
discussions on regulatory reform under the Abe administration.
Thinking about the impact of the labor force on economic growth,
the continuing decline in the population will naturally mean ashrinking of the quantitative contribution of the labor force togrowth. In this light, it is said that we will need to raise its qualitative
contribution and for this purpose human capital management has
been considered crucial. We will also need to expand an individual
worker’s capacity and skills in tandem with this.
We must not forget about another possible positive impact oflabor mobility, that is, labor productivity being enhanced byrelocations and resources being transferred to high laborproductivity sectors. With closer matching between workers andtheir job type through improved labor mobility, both laborproductivity and economic growth would be encouraged.
Many economists say that raising labor mobility would always lead
to better economic performance and Japanese dismissal regulations
could prevent labor mobility. But there seem to be fewer who talkabout solutions specifically. I believe we should address thissensitive issue carefully.
On the effect of labor relocation on economic growth, among
many different analyses, looking at data on economic growth byindustrial sector or firm, we see rather less impact on economic
growth since the 2000s. In international comparisons as well, its
impact in Japan is today less than in the United States. In addition,
looking at an individual company’s labor mobility by turnover or midcareer recruitment, raising labor mobility a little more is expected toenhance a company’s business performance but raising it too much
could be detrimental to the company’s performance, according to myeconometric analysis.
I think what we need to do to improve our labor market situation is
to change the general employment system that developed in the
postwar era into a job-specific employment system. In my definition,
job-specific employment is one which sets no limits on working
duties, venues or hours. Japanese permanent workers are working
under the general employment system without limits on any of thesethree conditions. Such a traditional employment system in Japan has
resulted in high and stable economic growth, but with this condition
starting to collapse, it cannot be maintained. The Japanese generalemployment system has worked very well with progressive
innovation to improve quality. But when more disruptive innovationis needed, could the majority of a homogenous workforce under thissystem initiate such innovation?
I also believe that the Japanese seniority-based salary and generalemployment systems are closely connected, and that this prevents
labor mobility, since a salary would likely decrease with a change injob-specific employment. So I think what is most important for
raising labor mobility is to adopt job-specific employment instead ofgeneral employment.
On income inequality, I think there are two main reasons for this.
One is that with too robust Japanese general employment, Japanesecompanies have firmly protected the job specifics of middle-aged
and elderly workers but have failed to raise their wages. The other isthat they have been trying to employ non-permanent workers asmuch as possible instead of permanent ones to save on personnel
costs. This has resulted in the income gap between permanent andnon-permanent workers. So I think income inequality in Japan has
been caused by Japanese general employment as well. The nextquestion is how to reform general employment into job-specificemployment.
Toyoda: A question for Ms. Okina. Innovation and increased
productivity are needed in the Japanese economy. To achieve this,labor mobility is allegedly needed. But in reality, there are very few
people in Japan changing their jobs, though many workers are nothappy with their current job. There must be many people in Japan
concerned about a possible decline in their wages in a moremobilized labor market. One of the reasons for such concern is thewage gap between permanent and non-permanent workers. Do you
think this should be corrected? Saying that the same wages should
to be applied to the same job-specific workers is fine, but in reality
there is a distinct difference in wages between permanent and nonpermanent workers. What do you think about this situation?
Okina: Looking at Japan’s economic growth potential, it has been flator a little downward these past 10 years. Since around 2013, thanks
to Abenomics, more women and elderly people have joined the labor
force, which raised labor input a little and supported growthpotential. Nonetheless, with a continuous decline in productivity
growth, Japan’s potential growth rate is only 0.6 %, with productivity
growth at around 0.5%. This shows a severe reality compared with
30 years ago when the potential growth rate was around 4% and the
productivity growth rate was around 2%.
In international comparisons of labor productivity amongdeveloped nations, not only the rate of increase but also its level isextremely low, indeed almost the lowest. Such stagnant laborproductivity has resulted in the stagnant wages of today and thewage difference between Japan and other developed nations isenormous. Therefore, with such a low level of wages, large Japanesecompanies cannot recruit competent workers overseas in the global
competition for competent human resources. This is another reason
for Japan’s stagnant economy due to its lifetime and generalemployment.
In addition, non-permanent employees are today drasticallyincreasing, but investment in these human resources is not making
good progress. This is another big issue.
Productivity growth is significantly affected by a changing
business environment. Hereafter, industrial structural changes
triggered by GX or DX will affect it in our great revolutionary period.
On such occasions, without a system promoting the smooth transferof labor into high-growth potential sectors, overall productivity willremain in an extremely serious situation. Failing to achieve labormobility by transforming general and lifetime employment will be a
Japan SPOTLIGHT • May / June 2023

5

serious bottleneck for Japanese economic growth.
There may be psychological issues here, such as concerns aboutjob-specific changes impeding labor mobility, but also I believe there
are institutional issues affecting people’s behavior and preventing
employees from changing job-specifics. The government’s providingof a safety net is not working in favor of promotion of labor mobility,
and once you fail, you cannot start the next step.
The labor market in Japan is in a situation where a match-up
between labor capacity and businesses striving for competency is
not easily achieved. Retirement allowances are greater, the more
years employees have worked for the same company. The Japanese
tax system works in favor of such a retirement allowance system. An
employee who quits job-specific employment for his or her own
reasons will lose the provision of unemployment benefits for a shortperiod. This is another institutional hindrance to job-specific changes
or starting up new businesses. I think changing such systems is very
important.
Though the legal institution of “the same salary for the same
specific job” has been gradually introduced from FY 2020, the latest
data still show around a 600-yen per hour wage difference between
permanent and non-permanent workers. It is extremely importantthat we rigorously check corporate wage payments to prove “thesame salary for the same specific job” principle is being strictly
implemented equally among non-permanent employees who want tobe permanent, along with provision of reskilling opportunities.
At this moment, non-permanent workers’ wages are increasing
due to labor demand. But with insufficient social insurance for them,
they have concerns about the future and the risk of dismissal. Such
concerns directly lead to a lower birthrate. We should reform a social
insurance system that fails to meet the needs of an increasing
number of people pursuing diversified working styles, and create a
new one that meets a wide range of needs.
Toyoda: Do you think the Japanese government is aware of the needto reform the social insurance system and is working on it?
Okina: Discussions have already started, but what needs to be
examined from now on is how it should cover non-permanent
workers, freelance workers and other workers pursuing a diversified
work style.
Toyoda: Mr. Toyama, do you think the countermeasures to deal withbusiness stagnancy and business restoration will contribute to labormobility? In recent media reports, the news of the dismissal of
100,000 IT engineers in the US technology industry was considered
positive rather than negative. This is because there has been a steadydemand for technology experts in the environment sector that has
never been fulfilled due to their being in the IT business, but withthese dismissals many of them will be able to join the environment
sector. Could you tell us your story about business restoration andlabor mobility?

6 Japan SPOTLIGHT • May / June 2023

Toyama: Working in the real world, I find there is an enormous gap
between what the media talks about and actual business. Regarding
business restoration, I do not think labor is so rigid in Japan anddifficult to transfer. I think Japan is probably one of the best places
for restructuring in the world. In particular, since the start of thesecond Abe administration, if you ask for 500 applicants forvoluntary retirement you will get more than 1,000 applicants. In thecase of companies in need of business restoration, more than half ofthe employees working for such companies would give up
continuing to work for them. When seeking voluntary retirement withgood conditions, there will be many more applicants than expected
and many competent workers will apply. This is why Japan is in
general a country with a labor shortage.
In this regard, I do not think changes in dismissal regulations will
be important. In Japan, even the labor unions are ready to cooperatewith companies on restructuring, which often surprises Americans
and other non-Japanese. Japan has extremely high labor mobility interms of business restoration. In Japan, labor mobility may be anissue among large companies’ permanent employees, but apart fromthat the Japanese labor market is rather mobile.
For example, most of the employees of a bus transportationcompany are drivers and are working in job-specific employment.
Their labor mobility is high. At this moment, as the Covid pandemic
comes nearer to ending, 90% of the demand for bus transportation
has returned to the pre-pandemic level. We see now in this situationa serious shortage of bus drivers, but it is much more expensive toemploy freelance drivers using their own cars in service than an
employed company driver. The labor market for drivers is mobile andtheir wages rise in accordance with demand and supply, as with all
markets in Japan. If the market principle works in a mobile market,
wages will always increase.
A tighter labor market is going to be brought about by aging anddeclining birth rate. With general employment, the cost of switchinglabor becomes extraordinarily high and that makes it difficult for anindividual as well as a company to achieve labor mobility. In thissystem, in terms of the structure of a work contract, a permanent
employee in a company does not need to have any skill set otherthan being a permanent member of the company.
When we work on supporting a person’s job-specific change, whatembarrasses us most is that half of the skill sets of those we arehelping are connected to human relations within their company.
Separated from such relations, the value of those people’s working
skills would be lost and their salary lowered.
General employment works well in the industrial sectors where
progressive efforts to improve the quality of products amonghomogenous colleagues in a moderate transformation process leads
to enhancing the competitiveness of the whole company. In the higheconomic growth era in Japan, this was effective in most of the mass
production industries in Japan. However, at this moment, this does
not work at all in sectors like electronics. Arguments about ethics
and ideology concerning this issue are useless; this happened after
the 1990s during the disruptive innovation era when the speed of anindustry’s transformation exposed the failings of the generalemployment system.
This can be explained by the following figurative story. A company
needs to set up its own football team but has always done only
baseball. In general employment, they only have employees who play
baseball, and the coach and manager know only about baseball.
Would there be any young employees who could start playing
football, if they are told to do so by their boss? Something like thishappened to electronics, and Japanese electronics companies havebeen defeated by GAFA.
With the emergence of Chat GPT, I think this disruptive technology
could achieve unprecedented social transformation, such as mostjob-specific vacancies at call centers being lost. Specific jobs at callcenters are mostly for non-permanent labor and they will be gone.
This would be a drastic change in the labor market. Some Japaneseindustrial people may worry about the survival of the traditional
Japanese industrial model under GX, but I do not. Most likely, I
suspect a brand-new company that we have never heard of or a US
or European company purchasing such a company through M&A will
dominate GX in Japan. Insisting on general employment will not
result in winning in GX.
In this regard I fully agree with both Mr. Tsuru and Ms. Okina on
the need for job-specific employment to be expanded in Japan. I
would not say that sectors successful with general employment must
be changed as well. Let them carry on as they do now. But so many
legal systems and business customs, including retirement benefits
and support systems for victims of unfair dismissal, encourage
workers to remain in the same company. These institutions
constitute a whole social system in Japan that evidently favors
general employment rather than job-specific employment, andpermanent workers rather than non-permanent ones, as theauthentic employment system and this enforces most labor to be
kept within this system. This works to the disadvantage of female
employment and lowers the productivity of Japanese labor. We mustneutralize all these systems that work against alternative ways of
employment. Otherwise, productivity and wages will not rise, andnor will the birth rate.

Human Capital Investment
Toyoda: The three of you agreed that the traditional employment
system needs to be corrected to raise labor mobility. On this issue, a
key must surely be human capital investment. Ms. Okina is warningin her papers that the level of human capital investment in Japan is
the lowest among developed nations. Companies are concerned
about the high possibility of their human capital investment during
increased labor mobility resulting in their employees’ transfer toother companies. So they do not seem to be highly motivated andworry about their human capital investment being a waste. Whatabout other nations? With high labor mobility, will there be lesshuman capital investment? Companies may not have an incentive forhuman capital investment in non-permanent employees. Does theclassification of permanent and non-permanent employees hinder
human capital investment?
Okina: Prof. Miyagawa at Gakushuin University and others made aninternational comparison of data on intangible asset investments
such as data processing, IT software services and intellectual
property rights in 2020. It showed that Japan and Germany are thelowest among the developed countries. Above all, Japan’s score isoverwhelmingly the worst in the domains of human capital
investment and capacity for organizational reform. In this regard, I
think low human capital investment level has affected Japan’scompetitiveness and productivity. The quality of labor made a rather
high contribution to productivity growth until the 1970s, but now its
contribution has become zero. In this light as well, I think efforts toenhance human competency will become extremely important.
Human capital investment will be necessary at all levels for all
people. Japan in particular has been ignoring until now the need forreskilling for data- and digital-related work.
This is commonly true of all sectors. In the case of job-specificemployment, we need to define all the necessary skills for a certain
specific job, and applicants for that job among a company’s
employees and from outside the company must be prepared to do it
and there must be investment in human capital to meet the skill
requirements for that job. This process could result in higher labormobility. A company should provide reskilling opportunities for
employees. This should be done not only to improve the value of thecompany but also to lead to an increase in wages and careerdevelopment for the employees. I think companies should introduce
job-specific employment as best they can and at the same time
provide a reskilling program for their employees.
Providing reskilling opportunities should be a means of retaining
those employees. If a company succeeds in convincing its
employees that their wages match their capabilities produced by its
reskilling program, their engagement with the company’s mission
and their incentive to work hard would be strengthened and would
lead to a rise in productivity. And if a company’s reputation for its
good contribution to employees and its simultaneous growth areuniversally acknowledged, it would be able to attract high-quality
human resources.
For example, AT&T did such reskilling and succeeded in attracting
competent human resources.
Also, in Northern European nations, job-specific changing iscommon and the goal is to transfer labor from low-productivity
sectors to higher ones. This is why their economic growth andproductivity continue to increase, enabling them to overcome
recession. Japan is expected to move in the same direction. In
Northern European nations, labor unions and employers are working
together on the smooth transfer of workers and reskilling. Japaneselabor unions must also change their mindset.
The classification of permanent and non-permanent employees isproblematic. We must think about this issue from a lifelong
perspective. Both women and men must occasionally work for only aJapan SPOTLIGHT • May / June 2023

7

short time due to family commitments. We must give up thismindset of measuring work performance by hours and insteadchoose the best work-life balance from a lifelong perspective andemploy people who want to be permanent employees as permanent
ones. This is how we can make the diversity of a work-life balancecommonly accepted by society.
Toyoda: The idea you mentioned that reskilling must be aimed
simply at retention of workers does not seem to be prevalent among
Japanese companies. A question for Mr. Toyama. You are giving
MBA lectures at university. What do you think about the relations
between business restoration and human capital investment? In yourview, in Japan how well does human capital investment achieve its
goal and what role does this play?
Toyama: When I studied the MBA program at Stanford University in
1990, Japanese companies seemed to have sent most of theiremployees to US universities for MBA or other programs. They
invested more in human resources then than they do now. But whenthose employees who earned MBAs after a couple of years’ study at
US universities came back to Japan to restart working for theirmother companies, they were told by their bosses to “forget about
what you learned in MBA programs”. This was because thecompanies’ sources of competitiveness were not especiallymanagement skills but progressive efforts for product quality
improvement at production sites, namely Total Quality Control (TQC)
and the Toyota Production System (TPS), as general employment
with lifetime employment and seniority wage and promotion systems
were predominant.
What we learned in MBA programs in the US was about strong
leadership and taking the initiative in directing management
strategies. However, we were all still very young, around 30 years
old, and we could not be head of a division after coming back to ourJapanese companies with their robust seniority systems. So we weretold that we should conceal what we learned in our MBA programsfor the next three decades until we became the president of ourcompanies, as we would become unpopular if advocating for arevolutionary business strategy among our Japanese colleagues,
who were used to only progressive process improvement undermuch less creative leadership. As a result, many MBA holders quit
job-specific employment in response to these words. Thinking about
why companies would be afraid of such employees leaving, as
mentioned in my story of baseball and football, it is because
Japanese business people have never thought in any logic but that of
baseball. If you aim to maintain the competitiveness of a company
only with baseball logic, you will have to invest in human resources
to win a football game or a breakdance. And assuming that demandfor baseball is decreasing, you would not be able to retain yourhuman resources. If you live in a situation where the external labormarket functions well without any barriers to job-specific changes,
the more competent workers will move to a company where they canplay football or breakdance. This is simply natural.
8 Japan SPOTLIGHT • May / June 2023

In this sense, human capital investment would naturally be a key
to the retention of human resources. With an increasingly welldeveloped labor market, mobility is significantly enhanced, and inorder to retain competent human resources you will need to raisesalaries as well. Managers who worry about competent and skillful
employees quitting are not qualified to run a company today.
At this moment, many young people are quitting job-specificemployment easily, especially the more competent ones. The
Japanese labor market is now seeing polarization. There is high labormobility among the extremely competent students. They move froma large company to a consulting company or a start-up company.
High labor mobility is seen among non-permanent employees aswell. But there is a highly rigid labor market between those two, andwith this market prevailing among existing large companies andlarge industries, unfortunately Japan as a whole nation is gradually
declining.
Meanwhile, as in the reality of business restoration, we are facing
labor shortages in general. This is true of management as well andthere is a strong demand for well-trained human resources inmanagement. There are lots of potential human resources amonglarge companies, so if they adopt job-specific employment, labormobility among industries or large companies and SMEs will beraised and the overall productivity of Japanese industries will beraised as well.
Strangely enough, while we are running seriously short of humanresources among local service industries with job-specificemployment, the large companies in Tokyo business districts arealways restructuring. In other words, in large companies withgeneral employment, there are always excess human resourcesamong the middle-aged and elderly. With the emergence of Chat
GPT, there will certainly be more excess labor. This is how we see avery distorted labor market in Japan.
Labor shortages made it difficult to achieve business restoration,
as I mentioned. Restructuring would not be a solution for it. We needto build up a system with labor mobility under which each company
pursues human capital investment, and unless we have job-specificemployment we cannot achieve it. In this situation, if we seriously
pursue job-specific employment, there will be a big opportunity for
the Japanese economy. I believe that now, right after the serious
stage of the pandemic is over, is the best time to achieve a largescale reform of the labor market. Above all, business leaders mustchange their attitudes and those who insist on old-style thinking
must be replaced. With such reforms, Japan would be reborn with amuch improved business performance.
Toyoda: Three or four decades ago, large companies, especiallylarge banks, sent many employees abroad to study. But now there
are very few. The number of people going abroad to study fromJapan has become much lower than those from China, and fromSouth Korea as well. I am worried that young Japanese people arelosing their ability to be “international”. What do you think about this,given that human capital investment would be good for retaininghuman resources? Many of the employees sent from Japanesecompanies did not return to their companies, or as you said thecompanies told them to forget about what they learned abroad.
Toyama: The easy answer to that question is that companies should
not treat such employees merely as rank-and-file workers. With
general employment, this happens. Japanese corporate culture inmany organizations like government offices and banks would notallow a 30-year-old person with an MBA to be the boss of 50-yearold employees. In this culture, those with MBAs would quit, and thecompanies, having seen many such employees quitting, say they will
give up their human capital investment programs for study abroad.
They are not even aware of being wrong, and I think such companies
or industries should disappear.
Meanwhile, consulting businesses are more active in sending
employees overseas to study with a money loan system. This issame as in the US and Europe. They send more and more employees
overseas with loans and the employees do not have to return themoney if they stay in the company for three years after returningfrom abroad. Our consulting business believes that three years stayin the company after studying abroad would be good enough for acontribution to the business. This is how our consulting business, on
the premise of mobility, approaches human capital investment. In theend, there will be many people with good potential joining acompany actively engaged in human capital investment. Without
making this virtuous cycle between labor mobility and human capital
investment, the more competent workers would be more likely toswitch from specific jobs, as the skill set is changing as time goes by
and each specific job becomes more based on expertise.
Meanwhile, traditional Japanese management pursues slavery. It
is used to the concept that your social status is fixed as a company’s
permanent employee and job-specific changes are out of thequestion. This Japanese “common sense” is wrong. We work in a
flexible manner and do different specific jobs in different places in
our life. We meet and work together temporarily in many places. Thisis the world’s common sense. Young people in Japan will not follow
Japanese common sense. We must change our mindset.
For example, we are now running a bus transportation company inlocal Japanese regions and around 5,000 employees are working forthis company. We have also been purchasing a variety of local
companies through M&A. Most of our management teams of thosecompanies used to work for big Japanese companies such as trading
houses, banks and various manufacturing firms. Their ages varyfrom the 30’s to the 60’s and all moved from those big companies,
including the Certified Public Accountant (CPA). If they had remainedat those companies, they would be rank-and-file employees, but inour companies they could be a president even while still in their 30’s.
This is how a traditional Japanese company wastes humanresources.
Toyoda: A question for Prof. Tsuru. You also argue that the value ofa company lies in human resources and intangible assets. Whathuman capital investment, including studying abroad, do you thinkshould be pursued? I think large companies would like to retain
human resources, while they cannot step into job-specificemployment without assuming labor mobility.
Tsuru: I fully agree with both Ms. Okina and Mr. Toyama. I think“autonomy of career” is the main reason why we need to pursue jobspecific employment. With general employment, an employee’s life isin the hands of his or her organization, and not his or her own. Thereused to be a consensus between the company and its employees that
nothing would be to their disadvantage regarding salary andpromotion. But today it is not necessarily the case anymore, as our
economy has been in low growth for many years.
It is extremely difficult for a large Japanese company’s
management in charge of personnel affairs to secure “autonomy ofcareer” for an employee. They would have to start in-house
recruitment. But without this, labor mobility cannot be achieved. I
believe reskilling is indispensable to ensure “autonomy of career”. It
is often said that there are general skills and company-specific skills.
A company cannot pay for a reskilling program for general skills in
the US or Japan, as it would be a waste of money if the employees
enrolled in it quit afterwards. An individual employee must pay for it.
But a company can pay for a reskilling program for a companyspecific skill, as this skill would only be used for the company.
In Japan, the main reskilling programs are on-the-job-specificones. The company-initiated training programs are not fordeveloping an expert’s skill but for improving the skills of an alreadygood employee. Reskilling is not done uniformly, as what is needed
as a skill for each individual naturally differs among employees.
Reskilling is limited to each specific job and thus, unless career
autonomy is secured, we can have very little meaningful discussion
about it.
Looking at examples of many companies’ reskilling programs, I
find the cafeteria method interesting. This gives employees a choice
between all kinds of reskilling programs where they can learn about
general skills – even those that prompt concern on the company side
about employees changing job-specifics after learning those skills.
Employees can choose freely whatever they want by considering
their future career path and what skills are needed for it. Somepeople leave their companies with those general skills. But such agood opportunity for retraining and capacity-building attracts more
people to these companies. Traditional Japanese companies do nothave such ideas. But companies that appreciate the need for career
autonomy and an individual employee’s capacity for development
and how to raise innovative human resources have already taken a
step into a new stage.
The Japanese government does not understand this point very
well. It is still thinking about policies on general employment and has
wasted expenditure on training that has nothing to do with career
autonomy. We must make reskilling programs that enable employees
to choose for the sake of their career autonomy.

Japan SPOTLIGHT • May / June 2023

9

Toyoda: This cafeteria method sounds very interesting. Are suchreskilling programs increasing in Europe and the US?
Tsuru: No, they employ people with such skills in the US and Europe.
It is a very typical Japanese idea to develop skills after joining acompany. Traditionally, Japanese companies recruit people without
any skills, and so they need training. In the old days, Japanesecompanies had a long-term perspective on capacity building. But
they have lost this now and their human resource development
quality is much lower, I think. In the US and Europe, someone withan MBA can work at a managerial level from the beginning of theircareer. It is assumed that they already have the qualifications to be a
manager. Those with such special skills will pursue a different career
path from those without.

Strengthened Labor Mobility & Local
Economy Restoration
Toyoda: Would raising labor mobility or consolidating human capital
investment also be desirable in terms of local economy restorationand supporting start-ups? Or what do you think is lacking in Japan inthese two areas? The Japanese government currently seems to be
making great efforts to support start-ups. What do you think will benecessary to avoid Japan being a Tokyo- and Osaka-oriented nation
as a result of these government policies?
Toyama: I have been working on start-up support mainly at the
University of Tokyo for 25 years, starting with founding the first
Technology Licensing Organization (TLO) in Japan. So far,
unfortunately, these start-ups have been Tokyo-oriented, but startups have now become the first choice of specific jobs among
graduates from the University of Tokyo and Keio University. They
want to start up a business even while at university if they can findgood seeds during their student days. And if they can’t find suchseeds while studying, they get job-specific employment tentatively at
consulting companies or thinktanks or government offices and thenwhenever they find good seeds for a start-up, they quit. This is often
seen now among young people in Japan. So even in Japan we see anecosystem of start-ups growing, like that at Stanford 30 years ago,
as there is a small market of experts who have founded ventures.
They are not particularly insisting on working in Tokyo. They are
rather liberal people. I think it is important to expand such a labormarket. It is also important to diversify the university intake withmore foreign students on campus to join the Japanese students.
Looking at the Asian and global political economy at this moment,
Japan is an attractive nation and it will be important to create venues
in prestigious universities such as the University of Tokyo, Waseda
University, Keio University and the Tokyo Institute of Technology
where liberal and confident diversified talents can come together,and then expand this to universities throughout Japan. This will be
critical in expanding the start-up movement today.
One more thing that should not be ignored is that a start-up is still
10 Japan SPOTLIGHT • May / June 2023

regarded as a marginal existence by those in the large businessestablishment. They still believe large companies are the mainstream
and tend to consider start-ups as “people doing something unusual”.
Yet it is the start-ups that have been driving economic growth inEurope and the US for the past 30 or 40 years, and so start-ups havenow become a mega-industry. It is common sense that start-ups are
the main engine of growth in our age of disruptive innovation, so forlarge enterprises to grow, a start-up’s new technology would be thebiggest engine for them.
In Japan, however, the government has committed the stupid
mistake of supporting existing pharmaceutical makers to develop a
vaccine for Covid-19. Pfizer’s vaccine was not developed by itself: it
was the German venture BioNTech that developed the vaccine andPfizer applied it for general use. BioNTech was founded by aGerman-Turkish immigrant couple and the technology itself wasinvented by Dr. Kariko Katalin, who was born in Hungary and moved
to the US. In this light, I think it is better to stop providing finance forlarge companies. The current boom in Japanese start-ups will be avery important development for economic growth and Japanese
universities may as well strengthen their efforts to raise humanresources for start-ups. It would be better if we made education on
start-ups an obligatory subject in liberal arts course at universities.
On the issue of local economies, there has been no lifetime
employment in local labor markets for a long time, since there were
no industries assuming general employment in local economies.
There are instead many job-specific employment opportunities inlocal economies that need to be restored. Tourism is based on jobspecific employment and health care and caregiving are also a typeof job-specific employment. These are the core industries in local
economies and this trend cannot be reversed.
In this regard, young people in local Japan regions have alreadystarted building their career paths on their own. They cannot
maintain their lives by continuing to work for a single company and it
is common for them to have a side business, and also many are
working in agriculture as well as their principal specific job. The
Japanese education system seems to fail to adapt to this reality.
Professional training or junior high-school, senior high-school anduniversity education are all part of a system for educating students tojoin companies with general employment. We should change a largepart of education in Japan into technology college education,corresponding to community colleges in the US and professional andvocational universities in Germany. Good local universities and inparticular private ones are mostly shifting to become such schools
and we should encourage this further and provide a variety ofrecurrent education to create local societies where young people
without much interest in working in Tokyo can enjoy their life.
In local Japanese economies there are many middle-scalecompanies and SMEs and it would be rather difficult to expect themto invest much in human resources development. It would be betterto have human resources investment with public support, as humanresources are a kind of public commons and we had better think
about strengthening it as a whole society.

The government may as well stop its subsidies for companies
investing in education like reskilling. With these subsidies,
enterprises would always fail to catch up with changes in industries,
because they would have an existing industry bias. Therefore, wemust have a system of subsidizing an individual directly or providing
options for everyone. With subsidies for an automobile company, themoney should not be used for investment in education for
individuals but for reform of the existing model of the automobile
industry. In the US and especially in Europe, subsidizing individual
workers is the trend. This is crucial for local economy restorationand particularly important for the tourism industry. The number of
employees in the automobile sector and in the tourism sector arealmost the same in Japan. The Japanese tourism industry currently
does seem to be providing a minimum wage for the labor market,
but if we can achieve a middle-class income in the tourism industry
it would herald a real transformation.
Employment in the automobile sector in Japan will definitely
decline. If the tourism industry can absorb this decrease inemployment and workers in this sector earn wages close to those in
the automobile sector, the Japanese economy will be whollychanged. This is what happened in Europe. The tourism sector there
is providing middle-class employment. In particular, in Switzerland
and Austria tourism is evidently a high-income industry. They have
many professional schools for experts in tourism, even graduate
schools. Graduates from these graduate schools can earn theequivalent of around 20 million yen in the tourism sector. Japan isvery rich in touristic resources and boosting tourism would be asolution for the restoration of our economy.
Toyoda: I would like to ask Prof. Tsuru about the role of provincial
universities in promoting start-ups to help restore local economies,
as well as the role of human capital investment and what is mostneeded for such investment.
Tsuru: I think it would be extremely difficult to achieve fundamental
reform of a university compared with other institutions. Universities
are exactly the opposite of a world dominated by generalemployment. Each professor is an independent business owner andthey do as they like. When any of them exercises a veto in decisionmaking, nothing can be achieved. So I think it would be difficult foruniversities to respond quickly to any developments in society atlarge. There would be no need for it.
Young people in Japan today, even if they do not start up abusiness, are more interested in consulting businesses or otherventures than large enterprises. Although the Japanese education
system is good for producing well-behaved people in a large
traditional company, people who are not well suited to that system
are the ones leading the ventures. The current Japanese education
system at all levels – elementary school, junior high-school, seniorhigh-school, and universities – does not aim at producing suchpeople. It is true, though, that for students in humanities as well,some Japanese companies have started job-specific recruitment andin some mega-banks professional recruitment has also started forcollege graduates. As this process continues, I guess students’
thinking about job-specific employment will gradually change.
Toyoda: A question for Ms. Okina. I think the one merit of thepandemic is that remote working has become fixed as a businesspractice. Will this lead to local economy restoration or start-up
support, and will it also encourage more women to work?
Okina: Around 30% of the nation’s workers have been forced to stay
and work at home. Most of them have been drastically changing theirthoughts about work styles and work-life balance. They are now
fundamentally skeptical about the utility of their previous work style,such as commuting by crowded train every day, and have come toacknowledge the importance of work-life balance after having
worked with their spouses in raising their children or doing domestic
chores. A hybrid style of working remotely and working at the officehas now become customary and a more flexible working style is now
considered important. Companies failing to provide such a working
style are losing their attractiveness. Consequently we now have a bigchange in our business world, and it is important not to reverse thedirection of such progress.
This must of course contribute to the restoration of local
economies and we now have more business opportunities online andmore online education opportunities, so we can both work and rest
simultaneously at home. This is how an increasing number of people
living in regional towns are engaged in a wide range of work.
Meanwhile, it is also possible to help local companies as a sidebusiness while living in Tokyo. People in their 40’s or 50’s working
for a large company who could not fully take advantage of theirpotential capacity are now given an opportunity to use it with thehelp of DX. This has enormous implications. The moment has finallycome to think about how to take advantage of DX for the restorationof local economies in alliance with universities, business firms andlocal governments.
Working at home could have certainly a positive impact on startups or working women, and this is good news for people obliged tostay at home to raise children or support their family or who wish
they could do housework and office work at the same time. There are
an increasing number of women engaged in regional start-ups, but
start-ups by women still account for only 34% of all start-ups. Of
this figure, incorporated ones account for 14% , and in terms ofprocured capital, only 2% of the companies have women as top
management. This is how women initiating start-ups are facing
challenges such as limited access to funds and lack of a supportive
community.
However, young people, in particular women, are very keen on
resolving social issues and they have their own unique ideas. I think
it is a very good idea for women to take a leading role in start-up
businesses. Young people are flexible in their thinking and working,and more of them can become role models.

Japan SPOTLIGHT • May / June 2023

11

Final Words
Toyoda: Lastly, I would like each of you to give your final words on
what you would most want to emphasize.
Tsuru: Without breaking the solid Japanese employment system andgeneral employment, the wide range of economic challenges facing
Japan cannot be resolved. Reskilling and raising labor mobility, as
the Japanese government is promoting, cannot be achieved without
the realization of job-specific employment. I would also recommend
promoting work on side businesses. This should also be achieved on
the premises of job-specific employment and career autonomy. The
government must do its utmost to realize this, but the key is achange in business management and labor union policies.
Both management and labor unions advocate for the current
unbound permanent employee system or general employment. With
the introduction of job-specific employment, for management, theexisting simplified personnel policy decision should be given up. For
labor unions, though there may be many who enjoy a more
comfortable working environment with it, they do not like taking any
risk with any member’s specific job. In return for keeping theexisting employment system, they would not ask for any rise inwages. This has continued for several decades and has been binding
the whole Japanese economy.
In talking about employment of senior people until the age of 70,
whether they stay in the same company or go out of it, there would
be nothing but job-specific employment for them. So we must
introduce job-specific employment at an earlier stage of life. As
society is aging, our economy will hit a stumbling block if we do notconvert our employment system into a job-specific one. Thispressure from the aging of society in Japan could be a trigger for
fundamental reform.
Okina: First, we must introduce more creativity and the capacity for
problem solving in the early stages of education at elementary
schools or junior high schools. This should lead to entrepreneurship.
Correcting our uniform education system and uniform humanresources management would lead to the creation of added value.
My second point is that we must have an employment system inwhich individuals can choose from a variety of options for theirworking life until around 70 years old. With reskilling or recurrent
education in this employment system, we could overhaul our
existing seniority system and achieve high labor mobility. That would
lead to the restoration of the Japanese economy.
Lastly, we should build up a safety net for non-permanent
employees so that they can have opportunities for reskilling and get
better job-specific employment.
Toyama: More than 150 years have passed since the Meiji
Restoration in 1867. At the beginning of our modernization, we
pursued a wealthy state and strong military. The pursuit of a strong
military led to failure in World War II, but pursuit of a wealthy state
12 Japan SPOTLIGHT • May / June 2023

has been continuing. In our industrialization in this pursuit, we
adopted a system in which men were bound to their companies aspermanent employees and their lifetime security was assured until
retirement age as long as they were bound to it and their wives werebound to home. This was the standard model in which progressive
product reform was conducted stably and which worked particularly
well in the Showa period.
This model, however, has recently reached its limits. There is aperfect mismatch with the current Japanese social and industrial
structure. This is the fundamental reason behind our three decadesof depression. Without changing the old system, Japan will haveanother three lost decades. It is now that we must start thinking
seriously about reforming it.
Meanwhile, people are living around 30 years more after
retirement in our now aging society. To ensure a happy life for ourelderly people, we must take advantage of the current labor shortage
and take the opportunity to introduce job-specific-type employment
replacing general employment that does not cover people beyond
retirement age. Without leaving this general employment systembehind, we cannot achieve renewal of our industries or businesscorporations. Our safety net has been dependent on companies andhomes up to now. With the collapse of this dependency, there could
be a risk of social collapse in Japan, and this is why we may havebeen trying to avoid drastic reform. But our productivity has notbeen rising and wages have been decreasing. The percentage ofpermanent employees covered by general employment has been
declining and the percentage of unionized labor is now less than
20%, meaning around 80% of the nation are now not covered by theold system. Therefore, as the authentic majority are the people
outside permanent general employment, politically speaking thenation must change direction to include individuals in the safety net,without depending upon intermediary organizations or homes. This
would be possible for the first time with the introduction of jobspecific employment. Now is our opportunity for socialtransformation.
Toyoda: Thank you all so much and we sincerely hope you areplaying leadership roles in our social reform. We are happy tosupport your initiatives.

Written by Naoyuki Haraoka, editor-in-chief of Japan SPOTLIGHT, with theassistance of TapeRewrite Corporation.