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Japan’s plans to implement more employee-friendly laws are set to prove painful for many companies, with half saying labor costs will rise and two-thirds considering ways to lift productivity to offset the impact of the reforms, a Reuters poll showed.
Graphic: Japan Inc braces for employee-friendly labor reform – tmsnrt.rs/2pIv0Xj
Prime Minister Shinzo Abe’s government last month endorsed an action plan for sweeping reforms of employment practices, including caps on overtime and better pay for part-time and contract workers.
The proposals, which may come into effect from 2019, will only add to strains already being felt as firms grapple with a deepening labor shortage due to a rapidly aging population. That said, more pressure to boost productivity is seen as long overdue and could boost growth in the long-term.
“Coming on top of labor shortages, Abe’s plan will cause declines in sales and profits. We have done what we can in terms of streamlining, ” wrote a manager at a machinery maker, one of the nine percent of firms which saw a considerable jump in labor costs.
The Reuters Corporate survey, conducted April 4-17, showed 41 percent saw costs rising somewhat, while 38 percent expect no change and 11 percent forecast that labor costs will decrease.
The impact of Japan’s labor shortage is already pressuring earnings at some firms, and at others, management has found it no longer has the bargaining power it used to have as failure to reward employees sufficiently can result in less staff.
Convenience store chain Lawson Inc (2651. T) last week forecast its first decline in annual profit in 15 years, due in part to investments in new technology that will help it cope with fewer workers.
And this week, delivery service firm Yamato Holdings Co (9064.

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