The Japanese employment system in transition

In the post-bubble era, Japan is going through major structural upheavals and the relevance of the five perspectives presented here on the implications of these changes for the Japanese employment system can hardly be overstated. The institutions and practices of the Japanese employment system are closely linked to the Japanese model of skill formation, human resource management and innovation. The relevance of "lifetime employment" for the accumulation and preservation of knowledge within companies has been documented for example in comparative studies on the Japanese and US semiconductor industries. The knowledge sharing, problem solving capacities and high commitment of Japanese employees are very much enhanced by the late selection characteristics as implied by "seniority" based promotion schemes. If the skills, the innovative capacities and the commitment of Japanese employees have been so much supported by the salient features of the Japanese employment system, it is essential to see what is happening to the latter when reflecting on the future of the former. This is the prime purpose of this article. Each of the following sections looks at specific changes in the economic environment, that are challenging the further viability of "traditional" human resource management practices: In particular, the first section looks at the rapid aging of the work force as a key "domestic" factor, while the second section looks at the implications of Japanese internationalisation in the post-bubble era and, especially, the "hollowing out" of the industrial system due to increasing competitive pressures from low labor cost countries. Adaptations necessitated by these challenges have already transformed the Japanese employment system and will continue to do so, as is discussed in the third section. It is not difficult to guess that this will have repercussions on the process of knowledge creation and transfer in the Japanese economy and the final section therefore looks specifically at the changes to the Human Resource Management system in the Japanese Innovation System.