In Japan, labor crunch pushes businesses to reform

In Japan, labor crunch pushes businesses to reform

TOKYO – Don Quijote and Uniqlo, two of Japan’s best-known mass-market retailers, aren’t waiting for the government’s new growth policies due later this month before implementing their own labor reforms.


TOKYO – Don Quijote and Uniqlo, two of Japan’s best-known mass-market retailers, aren’t waiting for the government’s new growth policies due later this month before implementing their own labor reforms.

While many labor-intensive businesses face a shortage of low-wage workers as Japan’s economy perks up, discount chain Don Quijote Holdings is drawing five times more job seekers since it bucked tradition and eased application requirements.

Fast Retailing , operator of Uniqlo casual clothing shops, is making many of its part-time workers into full-timers, at greater cost, to retain staff and boost productivity.

While some companies are coping by revamping practices established over decades of deflation, and perhaps hiking wages or raising productivity, others are having to curb operations or even shut down as staff become harder to find and to keep.

This worsening labor crunch could bring a reckoning for the recovery led by Prime Minister Shinzo Abe’s reflationary policies, with bottlenecks either forcing a breakthrough to a more efficient economy, or leaving the country mired in stagflation as companies’ costs rise and growth falters.

“The key is whether Japan can stimulate corporate investments to raise productivity,” said Yasuo Yamamoto, a senior economist at Mizuho Research Institute.

Growth bottlenecks, he said, could be a necessary step to transform Japan into an inflation-minded economy, weeding out businesses that exploit cheap labor and replacing them with more productive companies.

A draft of the government’s new growth plan obtained by Reuters this week includes calls on companies to offer more flexible options for full-time employment – similar to Uniqlo’s measures – to expand opportunities for women, and would create skill assessment standards to make it easier to change jobs.

But the draft plan, which is expected to be revised before it’s unveiled, lacks details on key reforms that companies have long sought, such as a corporate tax cut and exemptions for certain workers from limits on working hours.

“There’s a gap emerging between what companies view as necessary to boost business opportunities and the policies the government is offering,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.


One company struggling under the low-wage, low-margin model is Watami Co , a nationwide chain of Japanese-style pubs that will close about 60 less profitable locations, or 10 percent of the total, in the year to next March in part because it can no longer afford to hire enough part-timers to properly serve its clientele.

Hiring costs such as job advertisements have jumped to around 9,000 yen ($88.46) per part-timer, three times what it paid in October 2012 before Abe took power, as workers become harder to find. The average hourly part-time wage has risen to more than 1,090 yen from about 1,030 yen in the same period.

The job market is tightening, with April data showing 108 jobs available for every 100 job seekers, the highest ratio in nearly eight years, according to government figures released last week.

Some companies are responding by rethinking their hiring and workplace practices to draw more workers and increase their productivity.

After Don Quijote in March stopped requiring candidates to submit standard Japanese resume forms, which many find intimidating because of the detailed sections on educational background, job applications soared, said hiring manager Hiromasa Yoshimura.

The company is also automating the printing of product information signs that guide customers through rows of shelves packed with merchandise from toilet paper to Rolex watches.

Uniqlo, Asia’s largest apparel chain, aims to boost the expertise and productivity of its workforce while curbing staff turnover by creating 16,000 new full-time positions, many likely to be filled by existing part-timers.

The jobs will be more flexible on transfers, a key issue for many women who would be reluctant to relocate away from their families.

While the job security and benefits extended to full-timers will mean higher costs for the company at least in the short term, it felt compelled to change as competition heats up to recruit workers, spokesman Keiji Furukawa said.

Uniqlo aims to boost full-timers to around 30-40 percent of its in-store staff from 10-20 percent now, and eventually to about half, Furukawa said. It also hopes the full-timers’ sales and merchandise expertise will help boost revenue per worker and per store.

While Don Quijote and Uniqlo, whose shares have both outperformed the Nikkei benchmark <.n225> since an Abenomics-inspired rally began in late 2012, push ahead with changes, many others are reluctant to invest in boosting productivity and attracting workers.

“Many firms, particularly small ones, remain cautious about expanding capacity and hiring more as they doubt that the boom times will last very long,” said Masashi Seki, a manager at private credit research agency Tokyo Shoko Research. REUTERS


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: