An Insider's comments on Japan's high tech business world

* * * * * * * * TERRIE’S TAKE – BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.

General Edition Sunday, Nov 26, 2017, Issue No. 924

– What’s New — 9 Useful Things to Know About Terminating Staff in Japan
– News — Do your laundry at FamilyMart
– Upcoming Events
– Corrections/Feedback
– Travel Picks — Cycling in Nara, Sake in Hiroshima-ken
– News Credits

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9 Useful Things to Know About Terminating Staff in Japan

Following on from our article in TT-922 about how to deal with difficult
terminations of employees that didn’t work out, we have received a
number of reader requests asking us to explain the labor laws as they
relate to the hiring and firing process. Japan’s labor laws, like
China’s and France’s, are exceeding complex and are fundamentally
designed to protect the national ideals of the right to work and keeping
the general population employed. It’s our belief that in Japan at least,
the reason for encouraging continuous employment, even meaningless
employment, is that it reduces the likelihood of unemployed people
dropping out of society’s control (and turning to crime).

As a disclaimer, please remember that national laws change all the time,
and some of the advice proffered below may become dated. Always be sure
to get professional advice from an HR paralegal (a “Sharoshi”) or
alternatively a regular lawyer. Sharoshi are labor law, social
insurance, pension and Human Resources (HR) specialists, used to the ins
and outs of the HR regulatory environment. Sharoshi also happen to be
about 70% cheaper than regular lawyers and are often much quicker
because of the familiarity with the paperwork involved. Nothing wrong
with law firms of course.

Perhaps the first thing to know about the Japanese labor law is that
there is essentially four layers of rules and rights, and each layer
takes precedence over the one below. At that top is the nation’s
Constitution, which enshrines the right to work, then the Labor
Standards Act and several related labor laws which define the broad
rules and obligations (mostly for employers). Thirdly, there are each
company’s work rules or collective bargaining agreements (if there is a
union), then fourthly at the bottom of the heap the employment contract.

It usually comes as a big surprise to foreign company managers to learn
that their employment contracts are the weakest document in their legal
arsenal and which can be shredded by the rights offered by the superior
regulatory layers. We don’t need to go into detail about the laws
offered by each layer, because you can learn these the following list:

* [An overview of labor and outsourcing laws]
* [JETRO’s guide to labor rules when setting up a
new company in Japan]
* [Good series of articles by local lawyer]

Instead, let’s run through a check list of some of the more important
implications of the 4 layers that you need to be aware of as a manager
or company owner.

1. Since the nation’s constitution guarantees the right to work, while
you can include non-compete clauses in your labor contracts you can
never expect them to be enforceable if the employee decides to take you
to court. Some companies include those non-compete clauses anyway,
because they hope that most employees will read and obey their contracts
out of a sense of duty. But our take is that once you know non-compete
clauses are not enforceable, it is morally better to remove them.

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2. An alternative to non-compete clauses, to limit the damage of a
valuable employee being scooped up by a competitor, is to word your
non-disclosure clauses to restrict the ability of that departing
employee using company secrets and inventions (including reuse of
software code and documents). This is legal, although practically
speaking it’s pretty hard to prove that someone reused your Intellectual
Property (IP), such as customer lists. Nonetheless, this workaround can
become more viable if you centralize your IP and documentation, and
carefully log any access to them.

3. Once you make an employment offer, you can’t undo that contract
without risk of having to pay a separation allowance, even if the
candidate hasn’t started yet. So don’t make any offer, verbal or
written, until you’re sure you are ready to bring the person on. BTW, it
is not illegal for the candidate to do a concealed recording – so always
imagine the other person is recording what you are saying and what you
say is binding.

4. As mentioned above, the company Work Rules are inferior to the Labor
Standards law layer. Many foreign companies don’t even know what Work
Rules are, let alone how to write them – so this is one area you really
need to employ a Sharoshi or regular attorney for. Essentially the Work
Rules are comparable to a collective bargaining agreement, such as you
would have with a union, and this is why they are compulsory for
companies employing 10 or more workers. It’s also why the Work Rules are
supposed to be displayed in a public place in the office.

Our advice is to get your Work Rules in place as soon as possible after
establishment and NOT to wait until the tenth employee is hired. The
reason for this is that it is FAR easier to negotiate with 1-2 early
employees than it is with 10 or more different employees, each of whom
may have their own idea of what is fair in the way the company treats
them. In fact, if you don’t negotiate with those 10+ people carefully
and things subsequently get out of hand, you could wind up with a
belligerent new in-house union on your hands – and be assured that
Japanese unions can be just as demanding as their counterparts abroad.

5. Despite the Labor Standards law and the Work Rules, there are times
when a company has to take drastic action to survive, including firing
people, reducing salaries, increasing work hours, changing days of
leave, etc. Although you may not emerge from a legal action unscathed,
the Japanese authorities (the courts, the Labor Standards Bureau, and
others) do understand the need to survive and will be less harsh so long
as your company management have shown good faith even as you might be
forced to breach some parts of the social contract.

6. “Good faith” almost always means following a set of Japanese-relevant
norms for dismissals, such as a 3-month improve-or-release program. In
such a program you start with documentation of the problem and
management-employee counseling (1 month), then a formal written warning
and further counseling (1 month), then finally a month’s notice or one
month’s pay in lieu of advice notice. Now, for sure the law specifies
that you need only give one month’s notice or offer 30 days payment in
lieu, but in reality the courts expect you to show that you followed a
process that made the dismissal inevitable despite efforts to the
contrary. They will penalize you otherwise.

7. Firing long-term employees is indeed more difficult than for recent
recruits, because the courts consider the following factors as decision
points on the size of the severance package: i) duration of employment
(especially of more than 2-3 years), ii) prospect for re-employment
somewhere else, iii) who was at fault and to what extent (both parties
are usually considered at fault), iv) what the employee is being paid,
v) the number and nature of the employee’s family dependents and health
condition, and as mentioned before, vi) the solvency of the company. For
an employee who is going to be particularly disadvantaged as a result of
dismissal (per the points just mentioned), as a rule of thumb you will
wind up paying them one month’s severance for every year of employment.

8. Foreign managers often get confused about social insurance (shakai
hoken) and when to pay it. The rules say that social insurance is
payable for all employees for an incorporated company. If you have an
un-incorporated company (meaning it’s not registered and you run it
privately out of your home) then you pay social insurance once you get
to five employees. People who are not employees, but rather who are free
agents who work partly for you and partly for someone else, are in more
of a grey zone and may or may not have to come under the company social
insurance program. The litmus test on this is basically whether the
person works for anyone else for more than 20% of their time, or away
from your designated place of work for more than 20% of their time.

9. Directors and sometimes senior managers are not considered employees
(although in the courts sometimes senior managers are – another grey
zone) and so are not subject to the same rules and regulations as
regular employees. This includes the rules relating to overtime, right
to holidays, etc.

So perhaps contrary to what you’ve heard, firing people is possible in
Japan, but it’s messy. As an employer or manager, you will emerge in
better shape from any challenges to your actions by making sure that you
have followed the norms, have good documentation from the start of a
person’s employment, and that you have demonstrated sincerity in trying
to resolve a person’s problems before resorting to firing them.

In fact, it’s not a bad system and while it costs a bit more to go
through this more structured remediation process, the upside is that
it’s fair for all parties, gives non-performers a chance to turn things
around, and instills in your stronger employees the confidence to be
loyal and to support you when/if the going gets tough.

…The information janitors/


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+++ NEWS

– Do your laundry at FamilyMart
– Japan bottom of list for immigrant appeal
– New missile tie up with UK
– Kirobo, Toyota’s answer to Alexa?
– Maglev Shinkansen is really happening

=> Do your laundry at FamilyMart

Probably a logical move beyond merely accepting dry cleaning drop-offs,
the FamilyMart convenience store chain is about to start a coin-operated
laundry service at more than 500 of its 30,000+ stores around Japan. If
this concept boggles the imagination, given how small Japanese
convenience stores are, you will not be surprised to learn that rather
than put the laundry machines into the actual retail areas, the company
is instead planning to convert parking spaces outside. The first
location will open next year. ***Ed: It’s obvious to us that convenience
store chains will gradually morph into mini department stores, but with
service counters instead of goods. Car servicing next? OEM tie-ups with
specialist operators who can outsource the expertise?** (Source: TT
commentary from, Nov 24, 2017)

=> Japan bottom of list for immigrant appeal

A newly released skilled-immigrant report, the 2017 IMD World Talent
Ranking, lists countries on the basis of their attractiveness to
incoming foreign workers. In it, Japan is dead last (no. 11) of the 11
Asian countries represented – after Indonesia, Thailand, and Malaysia.
On the global list it’s no. 51 out of 63 countries. In Asia, Singapore
was no. 1 and Hong Kong no. 2. Language and difficult business practices
were named as the main reasons for Japan’s low rankings. ***Ed: The new
global assets tax rules on expat businesspeople living here are
certainly not going to help make Japan any more attractive for top
managers. You know, the ones who will employ all those foreign skilled
workers the government wants to encourage to move here…?** (Source: TT
commentary from, Nov 21, 2017)

=> New missile tie up with UK

The newly assertive stance by Tokyo to export weapons technology took a
big step forward this week, with the signing between Mitsubishi Electric
and European armaments maker MBDA to jointly develop a new version of
MBDA’s Meteor missile system. Mitsubishi will be contributing a new
long-range, high-accuracy radar system, which can be retrofitted on to
the F-35 stealth fighter. The first testing of the new missile will
begin in 2023. ***Ed: What’s the bet that the Mitsubishi system will
come pre-installed on Japan’s soon-to-be-completed ramjet missiles?**
(Source: TT commentary from, Nov 24, 2017)

=> Kirobo, Toyota’s answer to Alexa?

No one ever accused the Japanese of having pretensions in the home
digital assistant market, and so Google’s Assistant and Amazon’s Alexa
launched here in Japan last month and earlier this month respectively
without any local competition to speak of. Yes, there have been several
3D avatar products offered locally in the last 12 months, but these are
so feature-poor and expensive, few consumers have been able to buy one.
But now Toyota has launched a car robot that it describes as a driver
assistant, offering suggestions based on the driver’s mood, such as:
places to visit, routes, and music. The Kirobo Mini of course responds
to voice commands and has a built-in emotion engine. It can also wobble,
gesture, blink, and speak. The Kirobo Mini costs about JPY90,000 and
comes with an app to talk and communicate. ***Ed: Unfortunately this
looks like a cheap holding product while Toyota decides how it should
move forward with car automation. One wonders how long Toyota will wait
before getting serious – especially with recent developments at Tesla
(not to mention Google).** (Source: TT commentary from, Nov 25, 2017)

=> Maglev Shinkansen is really happening

It’s hard to imagine why the Japanese government is so fixated on
wasting JPY9trn (about US$80bn) on the upcoming Chuo Shinkansen magnetic
levitation (maglev) high-speed train line between Tokyo and Nagoya
initially, then on to Osaka. Obviously it’s a prestige thing, because
the deadline for the new line to come into commission appears to be 3
years from now – meaning on or just before the 2020 Olympics.
Regardless, JR Tokai has just showed off to the press its new
underground construction site at the Shinagawa Shinkansen station, where
the Maglev station will be one story below the current Shinkansen
platforms. ***Ed: Crazy to see that JR Tokai reckons it will pay the
Tokyo-Nagoya line construction cost itself, financed through bank loans
(no doubt through the DBJ – the government’s own bank) and corporate
bonds (financed by BoJ perhaps?).**

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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No events this week.


None this week.



=> Cycling Nara
Make your own way on two wheels

Part of the charm of visiting the ancient capital of Nara is to slow
down to the pace of life here. When you let go of the stresses of urban
life and breathe in the fresh air from the surrounding mountains and tea
plantations, you can sense the peace and tranquility of the old houses
and gardens that dot this city.

Being a compact place with relatively car free streets arranged in a
grid like pattern, Nara is an ideal place to get around by bicycle, with
many stores also stocking children’s and electric bicycles. While the
main street of Naramachi can be crowded, cycling the back streets afford
glimpses into the old machiya townhouses in a relaxed manner.

Whether you come here by design or accident, chances are you will ride
past Naramachi Karakuri Toy Museum, a townhouse with lattice wood
details and white stone walls in the kura or warehouse style from the
Edo Period. Built in 1823, it usually draws a small crowd, chatting or
peering inside the tatami rooms. Drop in to discover the joys of
hand-made mechanical toys from the last century.

=> Saijo Sake, Hiroshima-ken

Saijo, not to be confused with the same-name town in Ehime, is about a
40-minute train ride from Hiroshima City and is the site of the Saijo
Sake Festival, an annual event held on the second weekend of October.
The town of Saijo is renowned for its production of quality sake and has
eight breweries each with their own red brick chimney towering over the
town. Seven of the breweries are located within walking distance from
the train station within the town’s historic district. As it was during
the festival weekend, the streets were filled with excitement, food
stalls, music, and of course overflowing amounts of sake.

While the atmosphere of the festival itself was exciting enough, you
cannot go to Saijo without actually doing a brewery tour. My friend
recommended me to visit Kamotsuru Brewery, a brewery with a long history
that dates back to the Edo Period where it was said to be the sake of
choice for the feudal lords. It is notable across Japan for its high
quality and traditional brewing methods, leading them to win gold medals
year after year in national sake competitions. It is so famous that when
Prime Minister Abe hosted former U.S. President Obama during his visit
to Japan, it was the sake of choice for their meal.



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