View from Tokyo: Redundancy beast stalks Japan

DON'T look now, but the unthinkable may be about to happen in Japan - job losses.

The very idea of being out of a job is close to heresy in Japan's work-centred society. It is a matter of justifiable pride for the country's meticulous bureaucrats that they have never allowed Japan to fall into the malaise of mass unemployment that has ravaged the US and Europe for the past 20 years.

But times are hard even in Japan, and after cutting back on every other conceivable expense Japanese companies are now looking into the face of the beast. The Ministry of Labour is so concerned that it is conducting a survey of industrial associations - particularly the heavy employers in the car, electronics and construction industries - to gauge their 'employment adjustment plans' as they are euphemistically called.

The last time the ministry conducted a similar survey was 10 years ago as Japan was struggling to get over the last oil price shock and unemployment threatened to reach 3 per cent.

In July, the latest month for which figures are available, the unemployment rate was 2.2 per cent, up 0.1 per cent since the beginning of the year. On the surface such a small increase seems little to worry about.

But the ministry has also been watching closely the ratio of job offers to job seekers. For four years this has been over one, meaning that there were more jobs on offer than people looking for work. But this ratio has been coming down steadily and economists now predict that the August figures will show for the first time that the ratio has dipped below one.

'They watch the ratio because it is an early indication of slackness in the labour market,' said Mathew Berlow, economist for Credit Lyonnais in Tokyo. 'It shows when companies are no longer hiring. The next step is to begin firing.'

It is, of course, highly unlikely that there will be a sudden spate of massive lay-offs. Mr Berlow predicted that unemployment will not go above 2.5 per cent this year, and even the Ministry of Labour's nightmare level of 3 per cent is hardly a disaster by international standards. But the principle of avoiding unemployment is particularly important to Japan's economic system as a whole.

The degree of trust that workers have in their employers that they will not be fired at the first sign of declining profits avoids the union-management confrontations of the West and allows companies to negotiate modest pay rises and flexible working conditions when necessary.

It is not that Japanese companies do not know how to fire people. They are showing no hesitation in laying off employees overseas, particularly in Europe, where banks and securities companies are closing offices as quickly as they opened them five years ago at the height of the economic boom.

But at home in Japan the bigger companies at least will go to extraordinary lengths to avoid laying people off. Many have set up subsidiaries in different lines of business to absorb workers no longer needed in their old jobs, often paying substantial retraining costs. The jobs may not be as challenging or quite as well paid - a favourite manoeuvre is to transfer people from manufacturing jobs into the vast distribution sector, which soaks up huge amounts of manpower in this service-conscious society.

But the stigma of laying off workers is avoided. 'Unemployment may not be high, but there is a huge amount of under-employment at the moment,' Mr Berlow said.

A number of Japan's best-known companies have none the less broken ranks by announcing publicly that they will reduce their workforces in response to the slowing economy. However, these companies have said they will try to shed the jobs by a natural process of attrition and reduced hiring.

In the consumer electronics sector Hitachi has 'temporarily' laid off more than 2,000 workers for two months from factories making video equipment. Victor has said it will shed 2,400 jobs. Nomura Securities plans to cut its staff by 2,000, and Sanyo Securities will let go 1,000 employees because of the steep decline in trading on the Tokyo stock market.

Nissan, Japan's second-largest car company, has said it will cut its numbers by 4,000 and Toyota is reducing the number of shifts for individual wokers in some factories. The car industry is being particularly badly hit - figures out this week showed output falling by 12.7 per cent in August, the largest monthly drop since 1974.

Real pain has already started to set in lower down in the employment order among the myriad small supplier companies that hire people according to the size of their order books from the larger companies on which they rely. The 'jobs for life' philosophy does not apply at this level, where traditionally employees have floated in and out, sometimes working part-time, enjoying bonuses in economic booms and tightening their belts when business is slow.

At the very bottom of the heap are the illegal foreign labourers, whose numbers are not even included in the official statistics. They come from South-east Asia and the Middle East, do dirty or repetitive work that many Japanese would now look down on, and because they are not on working visas they are virtually unprotected against unscrupulous employers.

Support groups for these foreigners say that many are being summarily fired, sometimes with back pay owed to them, because of the economic downturn.

Whether more lay-offs will begin creeping up the employment ladder depends on how quickly the Japanese economy can recover. Already companies have drastically pared down expense accounts - no more business class tickets on flights, subways instead of taxis in Tokyo, strict ceilings on entertainment budgets - to spread around the feeling of austerity from top management to ordinary salespeople.

Paid overtime has been slashed and half-year bonuses, paid in June and December, have been cut. On average this year's summer bonus was down by 1 per cent, allowing for inflation, compared with last year.

Gradually companies are running through all their options for reducing personnel costs. The spectre of the redundancy beast is looming.

(Photograph omitted)