Japan’s ratio of non-regular workers has increased since the 1990s, following a policy recommendation from the Japan Federation of Employers’ Associations.

Thirty years ago, in 1994, Japan’s ratio of non-regular workers was 20.3%. By 2023, that figure had ballooned to 37.1%. Non-regular workers not only have less certainty about their future earnings, but their wages are also stagnant, leading such workers to become increasingly anxious about their future.

Japan’s Liberal Democratic Party (LDP), which has been in power essentially for decades, has a history of accepting corporate donations. It is no coincidence that policymakers have bowed to the wishes of the business world, which wants to reduce labor costs.

The increase in non-regular employment started with a 1995 report published by the Japan Federation of Employers’ Associations (Nikkeiren, merged with Keidanren in 2002).

The report’s title was “Japanese-style Management in the New Era: Directions and Specific Measures to Take On.”

LDP Headquarters in the Nagata-cho neighborhood of Tokyo’s Chiyoda City. Photo by Makoto Watanabe.

In 1995, Japanese corporations were suffering from an economic slump following the collapse of the country’s bubble economy and the appreciation of the yen. The exchange rate with the US dollar had reached 70 yen to 1 dollar.

In its report “Japanese-style Management in the New Era,” Nikkeiren advocated for the introduction of what it called an “employment portfolio.” In order to avoid business risks associated with rising labor costs, it proposed dividing said portfolio into three groups: “utilization of long-term accumulated capacity,” “utilization of advanced professional skills,” and “employment flexibility.”

Among these, “employment flexibility” referred to non-regular employees such as contract and dispatch workers. Takeo Naruse, at the time a Nikkeiren executive director and who had helped develop the report, reflected on the topic in a 2010 publication titled “An Oral History of Japanese-style Management in the New Era” (Keio University Press).

“We had a sense of crisis that if we didn’t somehow lower costs, Japan’s economy might really have ceased functioning,” Naruse wrote.

“It’s difficult to hire regular employees without providing seniority-based wages, so I think there was the feeling that we should be utilizing ‘employment flexibility’ as much as possible. That’s probably why companies jumped at the idea.”

However, Naruse had not predicted how the situation would develop.

“According to our estimates, about 20% of the workforce doesn’t have to work that hard: That includes seasonal workers, housewives, students, and those past retirement age.”

“If non-regular employees make up 20% of the workforce, those people would basically be fine if they were let go during a recession. Now that non-regular employees make up 35% of the workforce, that’s 15% whose livelihoods might be in trouble. I have to say, this was something we didn’t anticipate. It’s an unfortunate lack of foresight on our part.”

What action did the LDP take following the Nikkeiren recommendations?

Although the LDP lost power for the first time in 1993, they regained control the following year in a coalition with the Japan Socialist Party and the New Party Sakigake. In 1995, the year “Japanese-style Management in the New Era” was published, the Cabinet decided to review the scope of work covered by worker dispatching businesses.

In 1996, Japan’s Worker Dispatching Act was revised, increasing from 16 to 26 the number of types of jobs for which companies could fill positions with dispatch workers.

Top 50 companies by donations to the National Political Association (recipient of donations for the LDP) in 1995

	Company name	Total(JPY)
1	TOYOTA MOTOR	45,400,000
2	Tokai Bank	42,910,000
3	Sanwa Bank	42,910,000
4	Sumitomo Bank	42,910,000
5	Asahi Bank	42,910,000
6	Sakura Bank	42,910,000
7	Dai-Ichi Kangyo	42,910,000
8	Tokyo Bank	42,910,000
9	Industrial Bank of Japan	42,910,000
10	Long-Term Credit Bank of Japan	42,910,000
11	Fuji Bank	42,910,000
12	Mitsubishi Bank	42,910,000
13	Nippon Credit Bank	42,840,000
14	Hokkaido Takushoku Bank	42,480,000
15	NEC	40,000,000
16	Nippon Life Insurance Company	34,100,000
17	Nippon Steel Corporation	30,000,000
18	TOSHIBA	26,220,000
19	Hitachi	26,220,000
20	Suntory	25,036,000
21	NISSAN MOTOR	25,000,000
22	Fujitsu Limited	25,000,000
23	Dai-Ichi Life Holdings	24,300,000
24	Matsushita Electric Industrial	23,820,000
25	Kumagai Gumi	22,420,000
26	Mitsubishi Motors	22,250,000
27	SUMITOMO LIFE INSURANCE	21,700,000
28	Tokio Marine & Nichido Fire Insurance	21,600,000
29	Honda Motor	21,000,000
30	Sony	20,000,000
31	Sumitomo Trust Bank	19,680,000
32	Mitsui Trust Bank	19,680,000
33	Mitsubishi Trust Bank	19,680,000
34	YasudaTrust Bank	19,680,000
35	Mitsubishi Heavy Industries	19,080,000
36	HOYA CORPORATION	18,500,000
37	Isuzu Motor	17,950,000
38	Daiwa Bank	17,830,000
39	Toyo Trust Bank	17,394,000
40	SUZUKI MOTOR	17,080,000
41	OBAYASHI CORPORATION	16,578,000
42	Shimizu Corporation	16,578,000
43	Taisei Corporation	16,578,000
44	Sato Kogyo	16,450,000
45	Mitsubishi Electric	16,100,000
46	TAKENAKA CORPORATION	16,078,000
47	Yasuda Fire and Marine Insurance	15,600,000
48	Fujita Corporation	15,578,000
49	SANKI	15,000,000
50	Meiji Life Insurance Company	14,600,000

Note: Amounts do not include contributions by group companies or subsidiaries

(Originally published on September 27, 2024.)

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