TT-714 -- Employees: Breaking Up is Hard to Do. E-biz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, June 16, 2013, Issue No. 714


- What's New -- Employees: Breaking Up is Hard to Do
- News -- Kickstarter funded anime project exceeds goal by 1000%
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Furano, Hokkaido and Bokusui, Miyazaki
- News Credits

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The Nikkei stock index has seen some impressive gyrations over the last few weeks, and Thursday's 6% sell-off was additional proof that investors are not convinced that PM Abe is really committed to letting fly all 3 of his revitalization arrows, particularly the structural reform one. Near the top of the reforms list, just under deregulation and lowering corporate tax, is the need by employers for more "labor flexibility" -- code for the ability to fire people they no longer need. Economists reckon that 10% of employees (about 4.5m people) in Japanese companies are redundant, and if they could companies would let that many go in order to increase productivity.

So when the proposal, put forward by the LDP's own Industrial Competitiveness Council, was shelved last week, this provided investors with one more sign that the Abe government doesn't have the stomach to tackle reforms head on and therefore it's difficult to see how Abenomics will take root and grow. The worker flexibility proposal was of course just part of Abe's "growth Strategy" package, but it's one of the most visible parts. Either way, the package was deeply disappointing to investors -- particularly foreign funds, many of whom have been hoping that Abe would get it right and open up the opportunity for a multi-year bull run for the economy.

We suppose it is understandable that Abe doesn't want to make enemies of the labor unions and older workers, who are most likely to bear the brunt of mass lay-offs, especially just before an election. So there is still a chance the proposal will be revisited after July, and that companies will in fact get the chance to reconfigure themselves. Economists insist that to improve worker pay, which is a key requirement for Japan to break out of deflation, companies have to be given the chance to value their employees according to contribution not just body heat -- and thus initiate wage increases.

[Continued below...]

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[...Article continues]

The theory is that pay levels of sales staff and skilled employees will rise as companies try to retain them, while those of administration and manufacturing staff will fall. Unemployment will go up, but the costs of unemployment will be more than offset by employer competition for skilled workers. While we understand the logic, we also think the reasoning is a bit simplistic in that it disregards the average Japanese worker's concerns about job security and the unknown. Risk aversion a deeply ingrained cultural conditioning that will be hard to undo -- at least as hard as convincing the public that Abenomics will actually work.

Still, even when faced with cultural barriers, better conditions and pay can be strong incentives for labor mobility, as we have already seen in younger Japanese when they see their friends doing well in venture companies. If this were not so, then the Internet companies such as Rakuten wouldn't be doing so well in recruiting staff. Indeed, Mikitani is on record as saying he is not concerned with labor flexibility and instead wants other reforms prioritized, such as less market regulation. But we reckon he'd change his tune if he was stuck with an average worker age of 40+ and had 10% of employees making little or no contribution to the bottom line.

In the end, we think that Abe will have no choice but to make bring in legislation to improve labor flexibility, just as we think he has no choice but to cut corporate taxes dramatically. The question is whether he will make these changes while there is still momentum in the market, or if it will be a case of too little too late. Currently it is difficult, although not impossible, to fire excess or unnecessary workers, and companies have to go through significant hoops and costs to let go of someone.

As a short primer, there are 3-4 layers of law that bind employers to their staff: the Constitution, which guarantees the right to work; the Labor Law, which defines basic rules in the employment relationship, such as the treatment of women, overtime, etc; the Work Rules which all companies with 10 employees or more must have and which define the conditions of work at each particular company; and lastly, the labor contract, which is not legally necessary, but which most foreign and modernized firms have. Of these different layers, the labor contract is the weakest document, and generally its main purpose is to help outline the benefits the company is offering the employee over what might be considered standard conditions.

Once a company writes a job offer to a candidate, the offer is contractually binding and the company is legally required to hire the person. They then get 14 days to undo that commitment, after which severing the relationship will be overseen by the Labor Standards Inspection Office or the courts. Most companies have a probation period for new employees, however while this is a useful construct, it is also relatively meaningless in a legal sense. Companies have to make as much effort to let go of a probationary employee as they do a full time one.

The body that arbitrates most dismissal disputes is the Labor Standards Office, and there is one in every district in the country. By custom, the procedure for letting an employee go is to undertake a 3-month program of counselling, warning, then termination, with written notes from meetings, and clear two-way communication between the HR staff and the employee being terminated. Providing this procedure is followed, and providing the termination is for a "socially acceptable" reason (poor performance is the least good reason and difficult business conditions is one of the strongest) then the final issue will be the amount of salary paid out for termination.

The general rule of thumb at present is one month of salary for each year worked, although there are many cases where even newer employees have claimed in court 3 months or more and have successfully been awarded a substantial portion of their claim. As an employer one can never expect to "win" a dismissal dispute, imagining that a court action will be solved by paying the legally mandated amount of salary (one month). Instead, "winning" means paying something in between what you want to pay and what the dismissed employee is seeking.

Getting back to the labor flexibility issue, the biggest problem for Abe is of course the fact that before salaries go up, a lot of voters will be put out of work and who will be very unhappy with the LDP. According to the Bureau of Statistics, in 2011 there were 31.8m regular employees and 17.3m irregular ones. It will primarily be the regular employees who will be targeted, since they are the ones that can't be fired easily at present. 4.5m of them means about 15% of the regular work force would lose their jobs -- and that's probably not politically acceptable at the moment.

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+++ NEWS

- LCC's hurt JR West, fares being slashed
- 24-hour buses from December
- H.I.S. funds/runs new Thai charter airline
- Dating site employees had unusual jobs
- Kickstarter funded anime project exceeds goal by 1000%

=> LCC's hurt JR West, fares being slashed

JR West is taking action to counteract the inroads that the Low-cost Carriers are making on its rail business, by slashing Shinkansen fares by up to 35%. The LCCs offer faster, cheaper services, starting at around JPY5,000 from Osaka and JPY7,000 from Tokyo to Fukuoka -- something that JR struggles to compete with. From July 20th to September 30th, JR West and Kyushu Railway will discount one-way Osaka-Fukuoka fares from JPY18,320 to JPY12,500 and Osaka-Kagoshima fares from JPY21,600 to JPY14,000. ***Ed: Ahhh, nothing like free competition to make prices a bit more accessible to the ordinary person -- go LCCs!** (Source: TT commentary from, Jun 13, 2013)

=> 24-hour buses from December

One thing that has always struck us as strange in a 24-hour megalopolis like Tokyo is how the trains totally shut down around 01:00am or so. Although no doubt suburbanites deserve to get some sleep, and track maintenance is necessary, one train an hour would surely not disrupt things too much. Well now the metropolitan government has decided that at least it will start running some late night buses. Initially the buses will run between Shibuya and Roppongi -- not sure how useful that will be, but at least if the pilot works, then they are considering expanding the service. ***Ed: What they really need is several late night buses out to suburban termini, such as Kichijoi, Hachioji, Funabashi, Chiba, Yokohama, etc., with stops along the way.** (Source:, Jun 14, 2013)

=> H.I.S. funds/runs new Thai charter airline

Interesting to see Bobby Haque heading up the new airline that HIS has set up with a Thai company. The new charter airline is called Asia Atlantic Airlines, and will start flights between Bangkok and Narita next week. Great timing, considering the government is in the process of loosening up travel entry requirements for SE Asian nations. Asia Atlantic will start up with two aircraft, and expects to expand to 20 over the next 5 years. (Source: TT commentary from, Jun 14, 2013)

=> Dating site employees had unusual jobs

The Yomiuri is carrying a piece about a dating agency called Wingnet which had 170 part-time employees posing as dates for their customers. The "dates" would work hopeful customers for cash by posing as celebrities and agents. Flattered by the attention, customers, who could join for free, would then pay JPY200 per message received and JPY300 for each one they sent. There is no word on how much Wingnet scammed customers, but obviously enough to keep 170 people employed. (Source: TT commentary from, Jun 14, 2013)

=> Kickstarter funded anime project exceeds goal by 1000%

Perhaps ironic that while Cool Japan sits on JPY50bn, Japanese anime companies are needing to go to the USA and Kickstarter to get funding to launch new projects. Still, if it works, then all is well. The latest Japanese anime company to score big with Kickstarter is Anime Anime Japan Ltd., which with its internationalization project for the "Time of Eve" anime managed to handily surpass its original funding goal of US$18,000. In fact, the company has so far raised US$138,544 (as of Saturday) -- and they still have 7 days to go! ***Ed: We predict that with the success of this project, there will be many more Japanese firms looking to follow suit on Kickstarter. In fact, who needs "Cool Japan"? (Source: TT commentary from, Jun 11, 2013)

NOTE: Broken links
Some online news sources remove their articles after just a few days of posting them, thus breaking our links -- we apologize for the inconvenience.


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------------------ ICA Event - June 20 --------------------
Speaker: Jean-Denis Marx , Lawyer for Baker & McKenzie

Title: "Practical Japanese Labor Law Guide for Employees"
Details: Complete event details at
Date: Thursday, June 20th, 2013
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members)

Open to all. No sign ups at the door!!!!!!!
RSVP: RSVP by 5pm on Friday, June 14th. Venue is The Foreign Correspondents' Club of Japan.



In this section we run comments and corrections submitted by readers. We encourage you to spot our mistakes and amplify our points, by email, to

=> No corrections or comments this week.



=> Japan Rail in Furano, Hokkaido

I arrived in the region of Furano on a local train after transferring at Asahikawa Station. I had left Sapporo earlier in the morning and taken a rapid train for the first leg of my journey but now, I was on a slow route through the idyllic setting of the region made famous by rolling hills, snow-capped mountains and flowers in the summer.

My first stop was Nakafurano station, a smaller town that had a cycle shop that rented scooters. The shop was only a five minute walk from the station and soon enough I was on my moped exploring the natural beauty of Furano.

At the end of the afternoon I returned to drop off my bike and headed back to the train station. My ticket back to Sapporo left from Furano Station only, so I took a local train ten minutes into the larger town to get ready for the trip back home. I had been to the station earlier in the day with my scooter and visited the information and tourism center and picked up some very helpful English-language maps to ensure I wouldn’t get lost.

The station is relatively large, has a bicycle rental shop right beside it, as well as a number of taxi stalls and a bus terminal. It should be noted that the bus terminal offers a variety of short and long haul services and even more importantly (for foreign English-speaking tourists), the announcements for departing buses and the destinations they are serving is also provided in English over the loudspeakers. So you have no reason to miss your bus!

=> Bokusui Koen, Miyazaki

"Shiratori wa kanashikarazuya/Sora no awo, umi no ao nimo somazu/Tadayofu" (Is not a white bird forlorn? It melts neither into the sky blue nor into the sea blue. It flies and floats.) -Wakayama Bokusui, August 24, 1885 - September 17, 1928 (translation by Kisaragi Chiyo)

The poet Wakayama Bokusui was born and raised in a beautiful mountain village from which he journeyed far and wide in Japan and Korea writing Tanka poems about the natural wonders he saw on his travels. It is said that his heavy drinking, including (but not necessarily limited to) the earthy sweet potato shochu common to Miyazaki, was responsible for his early death. While there are museums honoring the poet here and there around Japan, this is where he was born and grew up, and many of his local fans no doubt believe his early memories live on in his poems. A number of his devotees, therefore, make the trip out here to see his birth home. Others visit to take in the view and breathe the fresh air.

Miyazaki is rich in such natural spots, and the further inland you go, the better you will be rewarded. Bokusui Park (Koen) is one jewel of an example. Bokusui’s house is inside the park, and you can catch a glimpse of the rooms from the outside. If you follow the steps behind the house, you will come to a small shrine and a stone slap with one of the writer’s poems. There is also a museum in the park, if you want to learn more about the poet. Across from the house is the rather expansive park with several viewing platforms to take in the scenery. Kids will enjoy the many slides and other contraptions built into the hills. One can take a picnic lunch and enjoy the surroundings, or have a soba lunch at a restaurant right in the park.



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