Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Employment in Japan - statistics & facts
While Japan鈥檚 working-age population has been shrinking for decades, the number of people in the labor force has been on the rise due to the increased labor market participation of women and older people. Despite the labor force鈥檚 expansion and a rising number of foreign workers, Japanese businesses are struggling with a severe labor shortage that has led to record wage increases in the past years. Japan鈥檚 labor market has traditionally been defined by distinct features such as life-long employment and seniority-based compensation that are thought to hinder the competitiveness of Japanese companies and job mobility. Labor market reforms proposed in 2023 aim to address these issues.
Despite long working hours, labor productivity in Japan is the lowest among the Group of Seven (G7) nations. To increase the competitiveness of Japanese companies and alleviate labor shortages, the government proposed reforms to the Japanese labor market in 2023.
In 2023, former Prime Minister Kishida proposed a "three-pronged set of labor market reforms" as part of a set of policies envisioning a new form of capitalism. The proposal included three pillars: promoting workers鈥 reskilling, facilitating and removing barriers to labor market mobility, and introducing job-based pay. The policies aim to use the skills of the workforce more efficiently and incentivize job changes to address the chronic labor shortage experienced by businesses, which is likely to intensify as the population continues to age and shrink.
Status of employment in Japan
Japan鈥檚 labor force rose to a record high of around 69.6 million in 2024, which can be attributed to a growing number of women and senior adults joining the labor force. The employment rate stood at 61.7 percent, and the unemployment rate declined to 2.5 percent, the lowest in decades. The comparatively low unemployment rate is mainly due to a general labor shortage as a direct consequence of Japan鈥檚 super-aged demographic and shrinking working-age population. This shortage, in turn, has supported record wage rises in the past years. Average wages of full-time workers in Japan rose by 3.8 percent in 2024, and the first round of 鈥淪hunt艒鈥 spring wage negotiations between trade unions and management indicated a similar trend for 2025.Despite long working hours, labor productivity in Japan is the lowest among the Group of Seven (G7) nations. To increase the competitiveness of Japanese companies and alleviate labor shortages, the government proposed reforms to the Japanese labor market in 2023.
Characteristics of Japan鈥檚 labor market and proposed reforms
Japan鈥檚 labor market is known for a set of traditional employment practices that emerged during the post-war period of rapid economic growth, when it served the needs of workers and employers alike. These include seniority-based compensation (鈥淣enk艒 joretsu鈥), lifetime employment (鈥淪h奴shin koy艒鈥), a membership-based recruitment and employment system, and the simultaneous recruitment of new graduates (鈥淪hinsotsu-ikkatsu-saiy艒鈥). Another common feature of the Japanese labor market is the dualism between regular and non-regular employment in a system that favors standard permanent employment. Although some of these practices have eroded over time, they are still present and have an impact on the flexibility of Japan鈥檚 labor market.In 2023, former Prime Minister Kishida proposed a "three-pronged set of labor market reforms" as part of a set of policies envisioning a new form of capitalism. The proposal included three pillars: promoting workers鈥 reskilling, facilitating and removing barriers to labor market mobility, and introducing job-based pay. The policies aim to use the skills of the workforce more efficiently and incentivize job changes to address the chronic labor shortage experienced by businesses, which is likely to intensify as the population continues to age and shrink.
