Between the Stability of Employment and Market Flexibility: Employment Relations in the Post-bubble Japanese Economy

Abstract: The paper analyses the impact of changes made after the collapse of the asset inflated bubble economy to the Japanese employment system. The characteristic features of the traditional lifetime employment system have been presented together with their underlying rationality. It has been deeply rooted in the changes to the country’s post-war social system; especially the changes to the family model and the mismatch between the education and the needs of the labour market. The lifetime employment has not been the sole source of the country’s economic success nor has it been the sole reason of its post-bubble failure. But it provided much needed employment stability (and to some extent also an income stability). Attempted liberalisation of the allegedly too rigid system by lifting restrictions on one section of non-regular employment (dispatched workers category) failed to enhance the flexibility of the traditional employment while producing undesirable macroeconomic consequences