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Japan: the rising specter of
unemployment
By Hussain Khan
TOKYO - Higher labor costs, yen appreciation
resulting in the outsourcing of production facilities
and growing computerization all point to a long-term
structural increase in Japan's jobless. Due to heavy
losses in labor-intensive sectors, companies are
planning further outsourcing of their production
facilities to countries where labor costs are much
lower.
It is difficult to describe how profound
these changes are in Japanese society. They are breaking
down a system of lifetime security for the low-paid but
loyal sarariman (salaryman) of legend, whose antecedents
sociologists trace back to the samurai system in which a
warrior class dedicated their lives to their feudal
lords. In modern society, the Japanese company has
served as the locus of social stability for the
sarariman, with loyalty to the firm resembling earlier
fealty to nobles. Today, as outsourcing continues and
jobs go overseas, the essential nature of the country’s
work force and its values are being challenged in an
unprecedented way. The office lady, who joined her
equally inefficient sarariman colleague in the work
force, is also likely to be a victim of the aggressive
rationalization of Japan's notoriously disorganized
office operations.
Japan's seasonally adjusted
unemployment rate stood at 5.1 percent in August, the
lowest level since the 5 percent posted in August 2001,
according to a report released by the Ministry of Public
Management, Home Affairs, Posts and Telecommunications.
That means that during the last two years, employment
has not improved. Rather it has deteriorated. The number
of part-time workers fell for the first time in 20
months, while the total of all people who worked during
the month also dropped 100,000 from a year before to
63.61 million, the first negative growth in four months,
indicating that the nation's employment situation
remains bleak. The number of employed people decreased
by 160,000 year on year to 53.47 million.
The
number of people out of work due to corporate
restructuring and other reasons related to their
employers totaled 970,000. This was the first time since
January 2002 that the figure had fallen below 1 million,
an indication that corporate restructuring may have run
its course. But this optimism over a drop of mere 3
percent in one month is not justified after 1 million
have been unemployed for the last 20 months.
The
weakening dollar and the stronger yen had not taken
their toll as the Bank of Japan heavily intervened in
the currency market. But after John Snow, the United
States Treasury Secretary, criticized Japanese exchange
rate intervention in a congressional committee in
Washington, the yen rose as high 107 yen to US$1,
breaking the psychological barrier of 108 yen.
Speculation is for a trend toward 105 yen and more yen
appreciation shortly.
Under such a scenario, the
pressure is increasing for further corporate
restructuring, and with it further job losses. The
one-month drop of 3 percent and the 20-month old trend
averaging more than 1 million unemployed can be expected
to resume with greater force as long the yen continues
to appreciate, since a lot of export-related
corporations have started fresh plans to outsource their
production facilities, especially in the electrical
white goods sector.
Even apart from the pressure
of yen appreciation, corporate restructuring is
continuing, with no signs of abating. Although the
banking sector has been the main beneficiary of the
recent stock market rise, some banks like the Resona
Group expect to cut employees, with the group dismissing
some 4,000 employees,reducing its staff from 19,000 to
15,000 by March 2005 in a bid to complete its revised
restructuring program two years ahead of schedule.
A draft of Resona's new restructuring plan also
calls for reducing outstanding loans to smaller
businesses at fiscal year-end next March by 1 trillion
yen on the year as an attempt to shift its focus from
quantity to quality. The draft fails to set the schedule
for repaying public funds, foreseeing that the group's
profits will remain flat from fiscal 2004 through fiscal
2006. It also calls for skipping all dividend payouts
through fiscal 2004, including those to the government.
The latest plan by the banking group, which is
effectively under the government's control, is expected
to be finalized by the end of next month for submission
to the Financial Services Agency.
This is a
revised version of the business reconstruction plan
crafted in June after the government decided to inject
about 2 trillion yen of taxpayer's money into the group.
Under the updated plan, Resona group is to also reduce
its number of branches to 495 by the end of fiscal 2004,
20 more than called for under the current plan. With
these aggressive restructuring efforts, the group's
expenses as of the end of March 2005 are projected at 90
billion yen less than those of two years earlier. The
ratio of labor and property costs to gross operating
profit is to be slashed to 52 percent from 59 percent as
well.
The banks are not alone in their
restructuring plans. Sanyo is emblematic of the new and
unsettling Japan. In the electrical goods manufacturing
sector, as a part of its effort to provide secure
employment, Sanyo continued to produce white goods at
its domestic plants. But with the white goods business
unlikely to stop bleeding red ink in the immediate
future, Sanyo has decided to downsize its operations in
Hyogo Prefecture and another in Shiga prefecture. The
Hyogo plant is to cease production of vacuum cleaners,
massage chairs and all other products by year-end and
focus on research and development. The Shiga plant is
scheduled to stop making microwave ovens, washing
machines and double-tub washing machines by the end of
this fiscal year.
As a result, sales from
domestic production are expected to account for about 20
percent of the firm's overall home appliance sales, down
sharply from the current 60 percent. Sanyo intends to
reduce employees at the two plants from the current
1,250 to around 900 by April 2004 through relocations to
other divisions and transfers to subcontractors. The
company plans to maintain its product lineup by
outsourcing production at the two plants to outside
firms and transferring it to overseas factories. Sanyo's
home appliance division recorded a 10.5 billion yen
operating loss on a consolidated basis for the fiscal
year ended March 31, making it the only one of the
firm's six divisions to be in the red.
Other
companies in the same or related sectors like Futjitsu
and Hitachi have also announced losses. Like Sanyo,
these companies also must reduce employees to meet their
restructuring goals. Fujitsu, the major computer maker,
said that it posted a consolidated net loss of 58.5
billion yen for the fiscal first half ended September
30, mainly due to money-losing operations in the
computer software service division caused by a general
decline in information technology investment among
corporate clients.
Profit from the software
division, the firm's core operation, declined by more
than 40 percent. The manufacturing sectors for
electronics parts and for information and
telecommunications stayed in the red despite cost
reduction efforts, according to company officials. The
company reported a special profit of 34.4 billion yen,
mainly from sales of its stockholding in Fanuc Ltd, the
major industrial robot maker, but the gain was not
enough to offset the net loss.
As for Hitachi,
growing losses from a hard-disk drive business it
acquired the previous year were the main contributor to
a 5 percent fall in consolidated net profit to 5.3
billion yen in the fiscal first half, even after Hitachi
sold portions of its stock in affiliate Nitto Denko
Corp, which generated a special profit of more than 90
billion yen. Hitachi officials said that an increase in
pension payments and other factors reduced operating
profit by 67 percent to 20.2 billion yen.
Hitachi’s heavy and industrial machinery
division also suffered a decline in profit due to
cutbacks in investment, mainly among electric power
companies. Earnings from refrigerators, washing machines
and other household appliances were also weak because
Japan experienced an unusually cool summer. Unlike Sharp
Corp and Matsushita Electric Industrial Co, neither
Fujitsu nor Hitachi is a major player in the
fast-growing digital home appliances sector, which is
another factor for their poor performance.
The
effect of computerization on employment cannot be
neglected. On the second day of the Nikkei Global
Management Forum, Scott McNealy, chairman and chief
executive officer of US computer firm Sun Microsystems
Inc, said information technology will bring about
drastic changes in the corporate world. Since the spread
of IT will render obsolete conventional ways of working,
personnel ability and corporate activities, companies
will have to adapt to the changes, for example, by
reorganizing their employment structure, he said.
McNealy pointed out that companies can enjoy the
benefits of a ubiquitous computing environment such as
improved productivity and the need for less office
space. The Sun executive noted that companies also need
to accept the negative aspects of IT, such as changes in
working conditions and increases in corporate
bankruptcies as the natural consequences of a
computerized society. He said that although governments
tend to try to stop such changes, companies should be
forward-looking.
That means that if Japan's
companies are to become more competitive, the job cuts
will continue, changing long-held standards of Japanese
society. Those changes are bound to be painful for a
society not used to pain.
(Copyright 2003 Asia
Times Online Co, Ltd. All rights reserved. Please
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