Japan: Operating a Business

In this page: Legal Forms of Companies | The Active Population in Figures | Working Conditions | The Cost of Labour | Management of Human Resources

Legal Forms of Companies

Kabushiki Kaisha (KK): Public Limited Company: Number of partners: Minimum of one; or 400 if the company is listed on the Tokyo Stock Exchange. The minimum number of directors is three in a KK with a board of directors, or one for a KK without a board of directors; with no limitation on the number of shareholders.
Capital (max/min): Minimum JPY 1
Shareholders and liability: Limited to the amount of capital contributed
Godo Kaisha (GK): Limited Liability Company: Number of partners: Minimum one partner
Capital (max/min): Minimum JPY 1
Shareholders and liability: Limited to the amount of capital contributed
Goshi Kaisha (GK): Limited Partnership: Number of partners: Minimum of two partners
Two types of partners: active partners and sleeping partners
Capital (max/min): Minimum JPY 1
Shareholders and liability: Unlimited for the active partners; limited to the amount of capital contributed for the sleeping partners.
Gomei Kaisha (GK): General Partnership: Number of partners: Minimum of two partners
Capital (max/min): No minimum capital
Shareholders and liability: Unlimited

Business Setup Procedures

Setting Up a Company	Japan	OECD
Procedures (number)	8.00	5.21
Time (days)	11.10	9.47

Source: The World Bank - Doing Business, Latest data available.

The Competent Organisation: Administrative formalities must be carried out at the bureau of legal affairs of the Ministry of Justice.
For Further Information: Doing Business: Japan, learn about procedures to start a business in Japan
Trade Register

Financial Information Directories

Dun & Bradstreet - Worldwide directory with financial information on businesses

Japan Inc - Japan Business Directory

Kompass Japan - Business directory for Japan

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 Bankcruptcy law. Makes it possible to reach an agreement with 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

	2018	2019	2020
Labour Force	68,355,056	68,838,956	68,680,759

Source: International Labour Organization - ILOSTAT, Latest data available.

	2017	2018	2019
Total activity rate	77.76%	79.05%	79.82%
Men activity rate	85.78%	86.47%	86.65%
Women activity rate	69.49%	71.40%	72.77%

Source: International Labour Organization - ILOSTAT, Latest data available.

For Further Statistics: Statistical Survey Reports by the Japan Institute for Labour Policy and Training
Statistics Bureau (Ministry of Internal Affairs and Communications)

Working Conditions

Opening Hours
Legal Weekly Duration: While working conditions are set at 8 hours per day and 40 hours per week, employees frequently work 50 or 60 hours a week. Compared with the United States, the United Kingdom, France and Germany, Japanese employees consistently work the highest number of hours. Japan is also the country with the least annual vacation, including weekly rest days and vacation.
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 Labour and Minimum Age For Employment: 15 years
Informal Labour Market: Because of the flexible regulation of the labor market, informal labor is not developed.

The Cost of Labour

Pay

Minimum Wage: According to the Japanese government data, the minimum wage is 930 yen per hour in 2022, approximately 8.4 USD.
Average Wage: Average monthly wage of full-time workers : JPY 307,400, approximately USD 2.248 (Ministry of Health, Labour and Welfare, 2021)
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

Health insurance, nursing care insurance (for employees of ages 40 to 64), welfare pension insurance, unemployment insurance and workers' accident compensation insurance

Contributions

Contributions Paid By the Employer: Japan has four different kinds of insurance system which companies are legally obliged to take part in:

Workers' Accident Compensation Insurance: the maximum premium rate is 8.8% and the minimum is 0.25%. The employer bears the whole cost of premiums. 0.35% in cases of import and trade, and sales industries.
Employment Insurance: The insurance premium rate is 0.9%, the employer paying 0.6%.
Health Insurance and Nursing Care Insurance: general insurance premiums are 9.84%, the employer paying 4.92% (5.82% if aged 40 or over).
Employees' Pension Insurance: Insurance Contributions are 18.3%, the employer paying 9.15%.

For more information, visit the Japan External Trade Organization JETRO site.
Contributions Paid By the Employee:

Employment Insurance: The insurance premium rate is 0.9%, the employee paying 0.3%.
Health Insurance and Nursing Care Insurance: general insurance premiums are 9.84%, the employee paying 4.92% (5.82% if aged 40 or over).
Employees' Pension Insurance: Insurance Contributions are 18.3%, the employee paying 9.15%.

Competent Organization

Ministry of Health, Labour and Welfare

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: Work Japan
Jobs in Japan

The Contract

Type of Contract: Contracts determine if the employee is part of the regular or non-regular staff. Permanent employees form the regular staff and permanent contracts represent 65.4% of jobs in Japan. Among the non-regular staff, there are different types of contract: part-time workers, temporary workers, dispatched workers, fixed-term contract workers and entrusted employees (shokutaku). About 23% of jobs are non-regular jobs under part-time contracts. In the years following the Asian financial crisis, 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
Labour Laws: Japan Institute for Labour Policy and Training
ILO - Japan
Doing Business: Japan, to obtain a summary of labour regulations that apply to local entreprises

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: The majority of collective bargaining is conducted by local labour unions or work unit unions. These work unit unions account for 90% of unions in Japan. Federations do not control the actions or policies of unit unions and typically engage in political or public affairs activities. There are two major trade unions: the Industrial Trade Unions and the National centres (mainly JTUC- RENGO). Typically, JTUC-RENGO and management organisations (such as Nippon Keidanren, the Japan Business Federation) establish a venue for regular discussions. When the labour union and the management organisation share a policy opinion, a joint policy proposal is submitted to the Governmental Councils. Every year between March and April, unions launch their 'Spring Wage Offensive', known as Shunto.
Unionisation Rate: The unionisation rate was 18.5% in 2010 and has dropped over the years, especially in private sector SMEs and micro-enterprises.
Labour Unions: Nippon Keidanren
Regulation Bodies: The Japan Institute for Labour Policy and Training
Ministry of Health, Labour and Welfare
The Office of the International Labour Organisation in Japan

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