Structure of the Japanese Job Market
The Japanese job market can broadly be broken down into two large sections: The fresh graduate market and the mid-career market.
Mid-career job market
Out of the two, the mid-career market in virtually the same as the job market in most countries outside of Japan. Job listings in this market contain a list of skills and requirements, and candidates are selected based on their work experience and practical abilities.
Fresh graduate job market
The fresh graduate market, on the other hand, is relatively unique to Japan. As the name implies, it’s a market exclusively aimed at recent university graduates. Traditionally, Japanese companies simultaneously recruit a number of fresh graduates at once and then train them on the job.
In addition to students that graduate from university in any given year, students that graduated 2-3 years prior also fall under the scope of this part of Japan’s job market. They are usually referred to as “secondary freshers” (第二新卒, dai-ni shinsotsu).
Characteristics of the fresh graduate job market
In comparison to the mid-career market, the fresh graduate market features relatively low requirements for practical skills and work experience. Instead, companies focus on factors like communicational skills, the ability to work in a team, and willingness to learn. It is expected that the new graduate will “take root” in the company and continue to work there long-term (offsetting the costs that went into training them on the job).
In the past, the majority of new university graduates would continue to work at their first company until retirement. This is known as the “lifetime employment system.” Ever since the end of the so-called bubble era in the early 1990s, this system is slowly dissolving. Mid-career job changes are getting more and more common.
The Japanese Job Market in 2021
The current state of Japan’s job market is heavily influenced by the overall decrease of Japan’s native population.
The current Japanese job market favors job seekers. Especially experienced veterans and those in engineering professions are able to choose from a wide variety of jobs. On the other hand, many companies are struggling to find workers that fit their requirements.
In 2019, before the start of the Covid-19 pandemic, the average job selection rate in Japan was at 1.6. This means that there were around 1.6 open positions for every applicant. Considering that selection rates are typically assumed to fall between 0 and 1, this is already an indicator of Japan’s current labor shortage.
However, in specific industries and for specific job types, selection rates were even higher. Below, there are some examples from the job listing website provider doda.
Selection rate by industry (December 2019)
- Medical: 2.63
- Manufacturing: 2.31
- Services (Education, Consulting, Hospitality etc.): 3.66
- IT/Communications: 8.84
Selection rate by job type (December 2019)
- Creative (Designer, Concept Artist, etc.): 2.10
- Engineering (Electronics/Machinery): 5.27
- Highly-skilled Professional: 8.43*
- Engineering (IT/Communications): 11.36
*The job type “highly-skilled professional” encompassed professions such as medical doctors, pharmacists, lawyers, and other university graduates with a considerable amount of work experience whose annual income exceeds 10 million JPY (~90,000 USD)
In the wake of the Covid-19 pandemic, many companies decreased or halted their recruiting activities. As a result, selection rates decreased across the board. However, the rates of industries and professions that were starved of workers before Covid-19 are still high in 2021. For example, there were around 8 open job listings for each IT engineering applicant in January 2021.
As the impact of the pandemic decreases, job market conditions are expected to return to their late-2019 levels and maybe even exceed them. The engineering professions and industries, headed by IT, face high international pressure. They have to find skilled candidates to hold their ground against the global competition.
In 2019, the average unemployment rate in Japan was at 2.4%. This result put Japan at 1st place (lowest unemployment rate) of all the G7 members and into the global top 25. In 2020, unemployment increased slightly to 2.8% as a result of the Covid-19 pandemic. However, as compared to international standards, it was still very low.
According to the Japan Institute of Labour Policy and Training, in 2019, unemployment was highest in the “miscellaneous services” industry (1.9%). Finance and insurance took the second place (1.8%), and manufacturing and real estate came in third (both 1.7%).
Compared to companies in the US or in European countries, companies in Japan tend to be less aggressive with employee dismissals. This too can be seen as a result of the “lifetime employment” system. Employees that don’t perform well tend to be assigned unattractive positions within the company and are indirectly encouraged to quit on their own.
However, even Japanese companies sometimes go through large-scale layoffs. Layoffs are usually a result of corporate restructurings that occur due to shifts in the larger economy. The 2008-09 financial crisis (known as the “Lehman Shock” in Japan) is such an example.
Job changes in Japan are becoming more common but are still occur in larger intervals than in the US or European countries.
Japanese employees stay with one company for 12.4 years on average (men around 14 years, women around 10 years). In comparison, employees in the US change jobs roughly every 4 years – three times as much as in Japan!
The reason for this discrepancy, again, lies within the traditional system of “lifetime employment.” Under lifetime employment, salary was strongly tied to seniority. Employees would receive higher salaries with every year they stayed at the company, incentivizing them not to leave and join the competition.
Under the seniority-based salary system, changing jobs mid-career meant having to accept considerable pay cuts. After switching jobs, employees had to start over “from the bottom of the ladder” at their new workplace. Needless to say, this was another factor that heavily discouraged job changes.
As the “lifetime employment” dissipates, job changes are gaining more prominence in the public sphere. Japan’s demographic development and a job market that favors job seekers are big factors as well. However, official numbers are not yet showing huge changes. Between 2015 and 2019, the job change rate only increased by 0.5% (from 4.7% to 5.2%).
Foreign Workers in Japan
In 2019, around 1.650.000 non-nationals were working in Japan – around 1.3% of the country’s total population. Out of all of these workers, around 20% are residing in Japan on a regular working visa. The remaining 80% are a mix of permanent residents (e.g. spouses of Japanese nationals), international students with special working permissions, and interns.
All in all, foreigners still make up a relatively small fraction of Japan’s workforce. However, between 2018 and 2019 alone, the total number of foreign workers increased by almost 14%. Between 2019 and 2020, despite growth slowing down, the total number still increased by 3%.
When analyzed by nationality, people from East and Southeast Asia make up the majority of Japan’s foreign workforce. Together, people from China, South Korea, the Philippines, Vietnam, Indonesia and Nepal make up around 75% of non-nationals working in Japan.
Around one in three foreigners in Japan works in Tokyo. Aside from the capital, the majority either works in other metropolitan regions like Nagoya or Osaka, or Tokyo’s neighboring prefectures.
The data on employment by industry shows that around 30% of foreigners are employed in manufacturing, followed by “Services” (16.1%) and Wholesale / Retail (12.8%). “Services” is a relatively broad category, encompassing workplaces such as restaurants, hotels, private English education schools, consulting, advertising/marketing, internet service providers, some software developers, and others.
Companies that are especially open to foreign candidates fall into two categories:
- Companies where expert knowledge of a foreign language is a highly-requested skill
- Companies that are facing difficulties filling their positions with Japanese nationals
A typical example of the first category are private English conversation schools, commonly referred to as Eikaiwa. In the second category, the most prominent employers are IT- and Internet-related companies such as system or software developers as well as web marketing service providers.
Aside from these two typical examples, foreigners can also find work in sales, international consulting/training, export/import and logistics, translation and interpreting, and tourism and hospitality.
When searching for a job, many foreigners first think of international companies with branch offices in Japan. However, you should keep in mind that a company being “foreign” or “international” doesn’t automatically make it a good fit for non-Japanese applicants.
What impacts “foreigner-friendlyness” most are the everyday responsibilities at the positions you aim for. As a rule of thumb, jobs that require frequent and complex communication with Japanese colleagues or are customer/client-facing are considerably harder to get for non-Japanese applicants due to the language barrier.
Requirements for mid-career job seekers
Job listings for mid-career applicants are relatively similar to those you can find in other countries. Depending on the position, most of them ask for 2-5 years of work experience in a specific field, as well as experience with tools commonly used in the industry.
Japanese requirements vary from company to company. In general, Japanese becomes less and less necessary the closer the job is to the management level (especially at foreign-owned companies).
Requirements for fresh graduates
According to a survey by human resources company DISCO, the top three requested skills from fresh graduates in 2020 were as follows (multiple answers were possible):
- Japanese Skills (49.6%)
- General Communication Skills (40.5%)
- Technical Knowledge (38.8%)
Companies that use Japanese for internal communication mostly require Japanese skills equivalent to JLPT N2 and higher. The same 2020 DISCO survey showed that around 75% of companies asked for “advanced business level” or “native-equivalent” Japanese by the time the foreign employee started working at the company.
The exception, again, are highly sought-after candidates like programmers, software developers, or other engineers with an education in background in Computer Science or other relevant majors.
Some companies only ask for N4 or N3 level for technical/engineering positions, and some are even OK with no initial Japanese skills at all. Be aware though that these conditions are only offered by a small minority of employers in Japan.