Recession hits Japan, but layoffs are rare

In the dog-eat-dog world of capitalism, free-market nations let the natural forces of supply and demand determine what is produced and consumed.

But that's not what's happening in the land of the rising sun. The financial crisis and accompanying lack of demand has forced Japan's economy into it's worst contraction since 1955, with GDP declining at a 15.2 percent annualized rate in Q1, The Washington Post (WPO) reported Wednesday. And yet a smaller portion of Japan's workers have lost their jobs in Japan than in the United States. How is this possible?

The reason is that lifetime employment is alive and well in Japan, The New York Times (NYT) reported Wednesday, with the government playing a large role in maintaining the practice.

One example: When sales at machinery maker Shinano Kohyo in central Japan plummeted 70 percent late last year, the company started dispatching idle workers to sweep the streets and pick up trash in the wider community, while remaining on the company's payroll, The Timesreported.

By national law, employers can cut workers' hours but must pay at least 60 percent of their hourly wages during that time. The government has budgeted 60 billion yen or about $624 million in 2009 to reimburse corporations for half those payments.

The export-dependent Japanese economy's 2008 GDP totaled $4.35 trillion in purchasing power parity terms, with per capita income of $34,200, according to data compiled by the U.S. Central Intelligence Agency.

The Postreported that in recent years there has been an uptrend in temporary workers, which Japanese companies are allowed to lay off, but companies have not shed full-time employees in any substantive way, despite the pronounced recession.

Economic Analysis: This highlights the wide variation in economic systems among market economies. Japan's culture is much more unified than the U.S.'s and in many ways this facilitates public policy formation. Also, historically Japan's citizens faced social and culture pressures to commit and remain with one company, although greater movement has been allowed in recent decades. In return, Japan's government and corporations have forged a partnership that heretofore has dramatically limited the number of full-time employees laid off during recessions; it remains to be seen whether the system will survive this pronounced recession.

While it also remains an open question how much the United States will upgrade its inadequate social safety net to address the mass dislocation caused by globalization and the recession, one fact is certain: the U.S. is not competing against "pure" capitalist systems and economies that let only market forces determine the fate of corporations, jobs, and national unemployment rates.

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