Professor Yukiko Fukagawa, Waseda UniversityMaeil  Business

Japan is no longer run by the salaryman

The saying goes, causes and effects merry-go-round.

Back in the Lee Myung-bak administration(2008-2012), comparing the economic competitiveness between Japan and Korea was a popular game.What the Japanese industry watchers would point out as their self-diagnosed weakness was the so-called “6 Heavy Burdens(六重苦)”: Overvalued yen due to the lopsided balance-of-payments; high corporate taxes; inflexibility within the labor market; high electricity bills; legal restrictions hindering innovations in agriculture and medical sectors; and finally, delayed FTA negotiations which aggravate export conditions.

But alas, the Japanese 6 Heavy Burdens have finally crossed the channel and landed on Korea.

First off, sustaining the current rate of relatively lower corporate tax seems difficult. A mixture of rising social welfare costs ㅡ since the Korean population is aging faster than Japan’sㅡ and the prospects of higher added-value tax will soon become a dire problem to tackle. A number of manufacturing corporationsㅡsuch as Hyundai motorsㅡ have still not resolved their qualms with labor unions; KEPCO’s debt level has reached to a critical point. Even with upcoming FTAs with more partners, overvalued won in the light of cheaper yen and dollar under this trend of quantitative easing will slowly deteriorate Korea’s long-dependent export-oriented growth.

This does not mean Japan will suddenly strike back at Korea. Reality check: from heavy industries such as petrochemicals, steel, and shipbuilding to semiconductors and smartphones, the rising competitor to Korea Inc. in the economics of scale is none other than China.

Turning our attention to the labor markets in Japan, recent college graduates are no longer anxiously queuing at the limited posts in large corporations and the government like the way Korean graduates do before Samsung.

Japanese college graduates are no longer anxiously queuing at large corporations and the government like the way Korean graduates do before Samsung.

The start-up fever is booming among the best and brightest graduates in Japan. The ambitious JAPAN-is-BACK campaign includes a broad set of deregulation aiming to create larger market for innovations; banks and senior employers providing more risk-leverage; and appointing ‘special strategic zones’ to actively promote start-up businesses by foreigners. Venture and small local businesses are specifically targeted for such benefits, not the traditional zaibatsu-types.

What Korea should really pay attention toㅡgiven that it is scoring the highest among the OECD members in terms of work hours, suicide rates, low fertility rates, and elderly povertyㅡ is Japan’s latest policy to maximize the labor power from women and the elderly. The impact of aging population and mass retirement is a lot more urgent to Koreans because, as a smaller and more volatile society, they can afford less time to adjust to such a large, society-wide burden. Actions must be taken immediately. Studies have shown that workplace flexibility greatly advances female participation in the labor market among the developed nations, and it even has a positive correlation to avoiding the low-fertility problem.

Though a little late, Japan has also introduced similar policies to enhance female participation in workplaces. It abolished tax incentives for full-time housekeepers; portfolio reports are required to record the rate of female employees of the respective companies. Lastly, Japan aims to volume up the number of female CEOs and corporate leaders to at least 30% of all executive positions by 2020.

For a more incentive-driven measure, several firms have introduced the health care point system, in which the employee healthcare coverage receives extra points for elderly and female workers, as well as their managers who actively hired them.

The focal point of labor policy has already shifted from ‘creating labor’ to ‘changing labor’. If it were not for the ever more hardened Japan-Korea diplomatic tensions, many Japanese companies would have been willing to hire a large number of young competitive Koreans.

Of course, it will only be a rough bet to predict exactly what kind of start-ups will spring out  and how the Japanese work culture and conditions will turn out due to these changes. In the end, it is the private sector, the market, who responds to those governmental stimuli. Korea needs to see through this, and undergo similar healthy reforms for its future.

As a side note, hopefully the two nations will continue to seek for a cooperative economic ties instead of being entrapped in trauma from the tragic pastㅡ it is time to change.



Founder, editor-in-chief

  • Byunghun Yoo

    if this is going to open up my personal chances to get hired in Japan, guess it’s beneficial?

  • zainichi

    why not send the old competitive Koreans to work in japan instead of the young ones 🙂

    • Byunghun Yoo

      both Japan and Korea is suffering from the aging population, so I am not too sure if the Japanese would like to see more old people flooding in haha