Japan: Operating a Business

Legal Forms of Companies | The Active Population in Figures | Working Conditions | The Cost of Labor | Management of Human Resources

Legal Forms of Companies

Types of Companies and Capital (Max/Min)	Number of Partners/Shareholders and Liability
Kabushiki Kaisha (KK), Public limited company. Minimum JPY 1	No minimum Limited to the amount of capital contributed
Yugen Kaisha , Limited liability company Minimum JPY 1	At least one Limited to the amount of capital contributed
Goshi Kaisha, Limited partnership Minimum JPY 2	At least two. 2 types of partners: active partners and sleeping partners. Unlimited for the active partners Limited to the amount of capital contributed for the sleeping partners .
Gomei Kaisha, General partnership. No minimum capital	At least one Unlimited

Enterprises Federation: Japan Small and Medium Enterprise Management Consultants Association (J-SMECA)
Small and Medium Enterprise Information of Japan
Tokyo Metropolitan Small Business Promotion Agency
Search a Company or a Financial Report: Japan Company Info

Business Setup Procedures

Setting Up a Company	Japan	OECD
Procedures (number)	8.00	5.60
Time (days)	23.00	13.80

Source: Doing Business.

For Further Information: Consult Doing Business Website, to know about procedures to start a Business in Japan.
Trade Register
The Competent Organization: The administrative formalities must be carried out at the bureau of legal affairs of the Ministry of Justice.

Recovery Procedures

Principle: The insolvency of a company does not lead immediately to bankruptcy or liquidation. Recovery procedures are different according to the type of company.
For further information, click here.
Minimum Debt-to-Capital Ratio Triggering Liquidation: None
Bankruptcy Laws: The law on bankruptcy (Hasan Ho)
The law on special liquidation (Tokubetsu Seisan) which depend on the Commercial Code.
Reorganization and Rehabilitation Laws: Compulsory composition (Kyosei Wagi) under Bancruptcy law. It makes it possible to have recourse to an agreement between creditors.
Civil rehabilitation (Minji Saisei) under Civil Rehabilitation law
Company Rehabilitation (Kaisha Seiri) under Commercial Code
Corporate Reorganization law (Kaisha Kosei Ho), law n°172 of 1952

The Active Population in Figures

	2010
Labor Force	65,700,000

Source: CIA - The world factbook

	2009	2010
Total activity rate	-	59.50%
Men activity rate	71.80%	-
Women activity rate	47.90%	-

Source: UN - United Nations

Employed Persons, by Occupation (% of Total Labor Force)	2005
Professional and technical workers	14.7%
Administrative and managerial workers	3.0%
Clerical and related workers	19.6%
Sales workers	14.0%
Protective service and other service workers	11.9%
Agricultural, forestry and fishery workers	4.4%
Transport and communication workers	3.2%
Mining workers	0.1%
Craftsmen and manufacturing and construction workers	22.3%
Laborers	5.7%
Total	100.0%

Source: Japan Statistics Office

For Further Statistics: The statistics of the Japan Institute for Labor Policy and Training
The statistics of the National Statistics Office

Working Conditions

Opening Hours
Legal Weekly Duration: 8 hours per day and 40 hours per week
But employees frequently work 50 or 60 hours a week. Compared with the United States, the United Kingdom, France and Germany, Japanese employees work the most (in hours worked in industry).
It is also the country with the least annual vacation (weekly rest day and paid holidays included).
Maximum Duration: 10 hours per day and 52 hours per week
Night Hours: 10 pm until 5 am

Working Rest Day: According to the labor standard law, employees should have one day off for every week of work, or alternatively, 4 days off for every 4 weeks of work.
There is no particular law establishing certain days of the week as days off or making national holidays days off. This is generally determined by the company. In general, Saturday and Sunday are not working days, but this is not the case in all companies.
Paid Annual Vacation: Only for employees who have been employed more than six months and showed up for work more than 80% of the time.
10-20 days of annual paid vacation per year, depending on how long one has worked.
Retirement Age: Age 65 with a minimum of 25 years of contributions. An early pension is payable between ages 60 and 64
Child Labor and Minimum Age For Employment: 15 years
Informal Labor Market: Because of the flexible regulation of the labor market, informal labor is not developped.

The Cost of Labor

Pay

Minimum Wage: There are three types of minimum wage:
- Local minimum wage
- Local industry-specific minimum wage- national industry
- Specific minimum wage.
The prefectures set the amount of local minimum wages. Minimum wages (general and industry-specific) set by the prefectures are around JPY 668 per hour.
Average Wage: Average annual gross earnings in Japon is JPY 2,899,413 (USD 30,000).
Other Forms of Pay
Pay For Overtime: 25% more than regular wages
Pay For Rest Days Worked: 35% more than regular wages
Pay For Night Hours: 25% more than regular wages
Pay For Overtime at Night: 50% more than regular wages

Social Security Costs

The Areas Covered: Medical insurance (government-managed health insurance) 7.43% (standard salary monthly portion 8.5%, bonus portion 0.8%)
Pension insurance (employees’ pension) 13.58% (standard salary monthly portion 17.35%, bonus portion 1%)
Unemployment insurance 1.15%
Contributions: Contributions Paid By the Employer: 10.89%
Contributions Paid By the Employee: 11.27%
Competent Organization: Social Insurance Agency

Management of Human Resources

Recruitment

Method of Recruitment: The recruitment process takes place more and more via internet. Selection is made on the basis of a job interview.
Recruitment Agencies: There are three types:
-Public Employment Offices
-Private Employment Agencies
-Labor Dispatch Business.
Recruitment Websites: Hellowork (government-run employment agency, website exclusively in Japanese)
Jobs in Japan

The Contract

Type of Contract: In Japan, the contract determines if the employee is part of the regular or non-regular staff. Permanent employees form the regular staff. Among the non-regular staff, there are different types of contract: part-time workers, temporary workers, dispatched workers, fixed-term contract workers, entrusted employees (shokutaku).
Permanent contracts represent 65.4% of job total. 23% of jobs are non-regular jobs under part-time contracts.
Because of the economic recession which set in during the 1990’s, recourse to part-time jobs has developed considerably.

Breach of Contracts
Retirement: It can take several forms : general resignation, resignation for one’s own convenience, resignation by agreement, resignation by employee’s request, voluntary retirement.
Dismissals: Neither prohibited, nor controlled.
The Labor Standards Act prohibits only two dismissal cases:
1) during a period of leave for an injury at the workplace or illness, and during the 30 days following, as well as
2) for women, during the period of leave for pregnancy and delivery and during the 30 days following.
Other Possible Methods: Collective dismissals (possible for economic reasons)
Disciplinary dismissals
Resignation
Labor Laws: Japan Institute for Labor Policy and Training
A summary of labor law on the Japanlaw website

Dispute Settlement

Conciliation Process

Cases of Dispute: Dismissal (26.1%), poor working conditions (14%), harassment (8.9%), conflict over retirement (7.2%)
Legal Framework: Three-step system :
1. resolution, “information provision and consultation” at the consultation service
2. “advice and guidance” by the head of the labor bureau
3. “conciliation” by the Dispute Reconciliation Council
Procedure: Act on Promoting the Resolution of Individual Labor Disputes, which was enacted in 2001

Judicial Structures

Legal Framework: standard civil procedures
Competent Legal Body: District courts
Labor tribunal system composed of a judge (labor tribunal judge) and labor-management experts (labor tribunal lay members)

Social Partners

Social Dialogue and Involvement of Social Partners: 90% of unions are Company unions. Company unions (one per company) exist inside the Company to discuss working conditions.
Labor unions are organized cross-corporate organizations. The elements of claims made by the labor unions are then a basis for claims by the Company unions.
There are two types of labor unions: the Industrial Trade Unions and the National centers (mainly Rengo, the Japanese Trade Union Confederation).
Rengo and management organizations such as Nippon Keidanren (Japan Business Federation) have established a venue for regular discussions. For issues on which they share the same opinion, a joint policy proposal is duly submitted to the central government, especially at the Governmental Councils created for this. Every year between March and April, the unions launch an offensive on wages; it is known as Shunto, the spring wage offensive.
Unionization Rate: 18.7% in 2005.
The rate is constantly dropping with a reduction registered especially in the private sector, in SMEs and micro-enterprises.
Unions: Nippon Keidanren
Rengo
Regulation Bodies: The Labor situation in Japan, Institute for Labor Policy and Training
Ministry of Health, Labor and Welfare
The representation of the International Labor Organization in Japan

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