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No. 11 — March 19, 1999

 

Feature Article

TRENDS IN JAPAN'S CORPORATE PENSION SYSTEM by Hiroyuki Takahashi

Summary

The Japanese management model seems to have run into hard times. Indeed, in the aftermath of the "bubble economy," many companies are struggling to survive. In the process, they are challenging business practices that once were accepted without question. One such area now under scrutiny is the Japanese wage system. Long considered perhaps the defining characteristic of the Japanese work place, the compensation system is being studied carefully by Japanese companies that are looking for ways to restructure.

This report looks at one component of wage-system reform: changes to Japan's corporate pension system. In 1997, Japanese companies began to examine this aspect of employee compensation. Reform of the corporate pension structure — an essential part of Japan's so-called lifetime employment and seniority-based compensation system — heralds a paradigm shift in Japan's employment model.

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Weekly Review

SHRINKAGE OF JAPAN'S ECONOMY CONTINUED UNABATED IN LATE 1998 by Douglas Ostrom

Japan's economy experienced its worst year since World War II in 1998, capped by an unexpectedly large drop in the final quarter. Ironically, the Economic Planning Agency followed this grim March 12 news with a March 16 assessment of economic conditions that analysts read as upbeat. Such an interpretation, however, carries the risk of getting too far out in front of actual economic developments or even EPA's own evaluation.

 

BANKS GO HAT IN HAND TO TOKYO by Jon Choy

The Financial Reconstruction Commission formally approved plans March 12 to infuse 15 big banks with nearly ¥7.5 trillion ($62.5 billion at ¥120=$1.00) in public funds, marking a major step toward cleaning up Japan's nonperforming-asset crisis (see JEI Report No. 7B, February 19, 1999). The public assistance comes at a price, however. Not only did the banks have to prepare detailed cost-cutting and restructuring plans, but they also will have Tokyo watching their every move — both in its traditional role as regulator and in its new position as interested shareholder. Government officials and bank executives are patting themselves on the back for the completion of this phase of the banking industry workout. More than a few analysts warn, however, that further steps are needed to resolve completely the bad-loan problem hobbling the Japanese economy.

 

JAPAN, UNITED STATES CONCUR ON NORTH KOREAN POLICY; DISAGREE ON TIMING by Barbara Wanner

The pace of efforts by Japan, the United States and South Korea to develop a coordinated policy response toward North Korea has picked up recently amid reports that the closed, Stalinist country is contemplating another ballistic missile test. Former Secretary of Defense William Perry, the White House's special policy coordinator on North Korea, said at the March 10 close of a two-day swing through Tokyo that Japan and the United States share a "similar assessment of the situation and of the need to stand shoulder-to-shoulder [in devising] a comprehensive approach" that prevents Pyongyang from developing nuclear weapons. These remarks echoed what Foreign Minister Masahiko Komura had said a month earlier in Seoul when he met with South Korean President Kim Dae Jung to explore North Korean policy coordination and other issues (see JEI Report No. 7B, February 19, 1999).

 

JAPAN, CONINUES CRISIS AID FOR EAST ASIA by Marc Castellano

In an ongoing effort to provide help for struggling East Asian economies, Tokyo recently took steps to advance a number of already outlined aid programs and facilities. The government peppered late February and the first half of March with several announcements that carried good news to the tune of more than ¥600 billion ($5 billion at ¥120=$1.00) for Malaysia, Thailand, the Philippines and Indonesia as well as for the rest of East Asia.

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