“Correcting Capitalism”: Changing Metrics and Meanings of Work among Japanese Employees

ABSTRACT

What have been the processes of economic restructuring occurring inside many Japanese corporations, and what neo-liberal techniques have been used on the ground since the 2000s? By placing Japanese neo-liberalism within the broader historical and socio-cultural dynamics of the ideology of “companyism” since the end of World War II, this article analyses the specific deployment of neo-liberal techniques in the Japanese workplace, and the evolving responses by both employees and management. It argues that while profit margins and efficiency were clear targets for neo-liberal reformers, the human cost of neo-liberal economising was more difficult to calculate and triggered unforeseen frictions and tensions in the workplace. As a result, corporate reforms have been mediated by the challenges emerging from various structural reforms. This article shows how both employees and management became more self-reflexive and new permutations of neo-liberal governance have emerged, highlighting both the continuities and changes in the meaning of work under the global permeation of neo-liberalism.

KEYWORDS:

• Neo-liberalism
• companyism
• capitalism
• work
• management-by-objectives
• Japan

The year 2013 was a watershed year in the Japanese political and economic world. It marked the advent of “Abenomics,” the combination of fiscal and labour reforms led by the Liberal Democratic Party’s Prime Minister Shinzo Abe (see Dobson 2017). The new logic of Abenomics has been characterised as both an intensification of neo-liberalism by Suzuki (2015) and a “post-neo-liberal” turn in Japanese capitalism by Tiberghien (2014). Corporate executives have been given new license to save their profits’ bottom line by deregulating labour and capital, while at the same time producing an increasingly harsh work environment marked by instability, insecurity and growing competitiveness among workers.

Indeed, Abe’s economic platform has been built on the foundation laid by many of his predecessors. The roots of the new economic policies advocated by Abe stretch back to the fundamental neo-liberal values of flexibility and competition promoted by previous prime ministers, including Nakasone (1982–1987), Hashimoto (1996–1998), Obuchi (1998–2000) and, most notably, Koizumi (2001–2006). Yet, the introduction of these neo-liberal values has not been without controversy. The best way of instituting these values has been a topic of intense debate in Japan and abroad, and the public reaction to the past two-and-a-half decades of economic reforms have been complex and contentious.

The current swing towards neo-liberal reforms since the 2000s is in many ways a new spin on older culturalist and neo-nationalist arguments. As Yoda (2006, 22–29) shows, since the 1990s Japan was simultaneously criticised for not being nationalistic enough for neo-nationalists and being too narrowly nationalistic (or insular and parochial) for neo-liberals. Both positions have supporters in the ruling Liberal Democratic Party and clashes between these groups have been partly responsible for the inchoate policy moves during the 1990s (see, for example, Lechevalier 2014, 157–161; Tiberghien 2014, 38–43). Differences aside, both these culturalist and neo-liberal advocates see the post-1990s as “Japan in crisis,” where the problems of the decade have come to represent “the site of an imploding national economic system, a disintegrating social order, and the virtual absence of ethical and competent leadership” (Yoda 2006, 22).

According to this binary characterisation, if “Old Japan” succeeded without relying on foreign labour or flexible part-time employment systems, Japan was stigmatised as an insular and exclusionist nation by outsiders. Likewise, if Japan were to discard these “Japanese ways” and create more room for flexible accumulation that may result in increased social inequality, critics both inside and outside of Japan would claim that this “New Japan” would lose its “Japaneseness” and become simply “neo-liberal.” At the same time, in the midst of the economic downturn in the 1990s, economically (neo)liberal places such as the US became examples of winners of global capitalism and competition as they were able to take risks and foster dynamic competition, transparency, accountability and entrepreneurial spirit (Vogel 2006). Thus, for both neo-liberal and culturalist advocates the socio-economic problems of the 1990s meant it was time for Japan to finally change (Tanaka 2002; Vogel 2006; Yoda 2006; see also MHLW 2011).¹

In this way Neo-liberal policies in Japan since the 1990s were meant to “correct” the post-bubble malaise of the Japanese economy and in the process reform society.² In practice, however, economic structures and social practices are not so easily manipulated. Despite the global similarities in the aims of reforms, the deployment of neo-liberalism in Japan must be understood against the historical trajectory through which the modern configuration of welfare, work and family emerged. To this end, this article examines the effects of neo-liberal restructuring through a socio-economic history from the ground up.

My argument is guided by a straightforward question: In the midst of what Tiberghien (2014, 27) called “the greatest overhaul of the Japanese capitalist system since [World War II],” what neo-liberal techniques have been used inside Japanese companies since the 2000s, and what are the experiences of workers undergoing these broader processes of economic restructuring in Japan? Since the bursting of Japan’s bubble economy in the 1990s there has been considerable research examining the impact of economic restructuring on corporate governance and on the Japanese economy by economists and political scientists, as well as anthropological and sociological research on Japanese large- and medium-sized corporations.³ These two perspectives provide important insights regarding the kinds of reforms implemented at many corporations. At the same time, we are left wondering about what these reforms have meant to workers and how workers have tackled such changes.

Thus, this article situates neo-liberal reforms within the broader historical and socio-cultural dynamics of the Japanese economy since the end of World War II, and analyses the specific deployment of and reactions to neo-liberal techniques in the workplace. The article draws on my fieldwork at corporate and social events at several large- and medium-sized companies during 22006-2009 and 2014-2016, where I came to know 120 employees who were experiencing various forms of restructuring and reforms. Of these, over the course of three research trips in 2007, 2009, and 2014 interviews were conducted with 59 men and women aged 24 to 70 years.⁴ Their positions ranged from managers to employees to former employees, from the fields of advertising, construction, electronics, public utilities, manufacturing, printing, publishing, and trading. Drawing on the experiences of these employees in the workplace and the management’s responses to ongoing changes, I analyse the impact of economic reforms and their unexpected consequences: the emergent forms of management in contemporary Japan.

The Birth of Companyism in Post-War Japan

Despite the conflicting views on the proper road to salvation of post-bubble Japan in the 1990s, the competing discourses among neo-liberal and neo-nationalist advocates both begin from the assumption that Japan was a homogeneous mass middle-class society that was under threat. This view itself is in fact a presentist myopia that ignores the tumultuous historical processes and economic and political turbulence that gave birth to “Japanese-style management” as well as competing views over the term “middle class” (see Gordon 1993; Matsunari et al. 1957). Thus, to understand how recent neo-liberal restructuring has affected Japanese society in the 2000s and 2010s, it is necessary to understand that the historical dynamics of the economy as well as the experiences of workers who worked under the post-war economy have been forged in and reshaped by Japan’s economic rise and fall in the last several decades.

Unlike many other states that have undergone radical political economic transformations under the expansion of capitalism, the concepts of marketisation and economic efficiency have long been embedded in Japan (see Howell 1995; Matsuo 2009; Smith 1988). Moreover, the “neo-liberal” path of outsourcing social services to the private sector also has a long history, especially in the post-war state’s project of relegating welfare responsibility to corporations and families (Borovoy and Ghodsee 2012; Shibata 2007).⁵ This took the form of a hard-won social contract between employers, employees and broader society which has profoundly shaped the path of post-war society.

The structure of modern employment emerged out of the intense struggles between labour unions and corporations under the political and economic turmoil and uncertainty of the twentieth century (Gordon 1998). Amidst the devastation and destitution of post-war Japan, workers and unions struggled against exploitative working conditions in order to fight for workers’ rights, often argued in the language of “humanistic rights” for workers to have a “living wage” and long-term employment security (Gordon 2008, 211; also see Morishima 1992). By the 1950s, workers and labour unions had successfully won various concessions from the corporate world, whereby “Japanese companies came to function as the most munificent providers of welfare in society” (Borovoy 2010, 62) – although this was also limited to male regular workers and their families, relegating female workers and non-regular workers to peripheral employment and family-centred welfare support (Osawa and Callon 1992; see also Tsurumi 1991). This system became known as “welfare corporatism” (Dore 1973). In this, corporations provided employees’ welfare, while the state remained “intimately bound up in the networks of co-ordination and allowing them to function effectively without…dominating them” (Tiberghien 2014, 31).

Crucial to the success of this system was the way that various social services and welfare functions were provided by corporations, which by extension tied workers and their families to specific corporations. As a result, corporate success and individual success became tightly tied, and since the 1960s, Japanese society has been characterised as a “corporate-centred society” marked by a particular social compromise between employers and employees, which has tied their interests together under the ideology of “companyism,” which provided long-term employment security and living wages (Barshay 2004, 148–155; Lechevalier 2014, 2; see also Takeuchi 1998).

Up until the 1990s, this “companyism” was maintained through the cultural discourse of Japan’s new modernity and the economic discourse of “Japanese management.” Achieving job security through long-term employment became the mainstream aspiration for many men and women as a key to achieving a stable life. However, the increasing pressures of globalisation and neo-liberal economic reforms since the 1990s have shaken the stable and secure lives and futures of workers, in the process transforming the very meaning of work for many.

Neo-Liberalism at Work: “Correcting” Japanese Capitalism

The ideology of neo-liberalism has been extraordinarily flexible in its actual forms and practices throughout the world over the past several decades. In many developing societies, neo-liberalism has been brandished as an ideological weapon to modernise the nation-state.⁶ In other societies, it has been invoked as a logic for exploiting global financialisation, such as in developed nations in Europe or North America.⁷ In all cases, the various “mutations” of neo-liberalism have transformed Keynesian-style regulated economies and welfare capitalism in the West via “roll-back” notions of market deregulation, while also guiding the “roll-out” strategies of public–private partnerships and strategic regulations in non-Western societies aimed at facilitating the continued expansion of global capital flows (Carroll 2012a, 354; Peck and Tickel 2002).

Japan’s case offers an interesting twist. Until the 1990s the Japanese economy had been very much a fortress against the global pressures by Western states, multinational corporations and transnational institutions to find new markets and avenues for capital throughout the world. Japanese bureaucrats and business leaders had resisted the “market deepening” strategies that had penetrated many societies around the world (see Carroll 2012b, 379–380; Lim and Jang 2006, 449–451). Yet by the late 1990s the seemingly inescapable force of neo-liberalism as an ideology of global capitalism as well as a tool for local political-economic reform and control penetrated the Japanese political and economic spheres.

As with many societies, neo-liberal policies were deployed as technocratic tools of corporate governance reform, and they also became weapons of social critique aimed at remaking workers and reshaping their workways in line with new political economic views of Japanese capitalism. Rather than creating new capitalist systems or exploiting the internal logic of existing ones, neo-liberal policies threatened to cut the very social and economic supports of Japan’s capitalist system. Moreover, many other states strategically deploy neo-liberal governing practices as “exceptional” ways of taking advantage of existing capitalist systems to get an edge in the global economy (see Ong 2006). In many ways post-war Japanese capitalism itself had been seen as “exceptional” by neo-liberal advocates in Japan, and so neo-liberalism has been deployed to help “correct” those exceptional characteristics of the Japanese economy.⁸

The advent of neo-liberal policies in Japan dates back to the mid-1980s, but until the 1990s they had been implemented in more-or-less piecemeal and unsystematic ways. Before the 1990s, the need for a neo-liberal-type of flexibility was not widely promoted, except by a few economists and business leaders who aimed to take advantage of global market opportunities. Railing against the post-war system as a feudalistic hold over of “Old Japan,” these proponents struggled for political and economic control throughout the 1980s, but their influence was mitigated by factional politics and “political arbitrage between divergent interests and political strategy” (Tiberghien 2014, 33). However, following years of economic and political stagnation after the end of the bubble economy in the early 1990s, support grew for a more thorough-going restructuring of the economy. Neo-liberal reform began in earnest under the Hashimoto and Obuchi administrations, building on the earlier neo-liberalist moves towards privatisation of the railways, telecommunications and other industries implemented under Prime Minister Nakasone in the 1980s. Viewed in this light, the financial deregulation and government reform during the Hashimoto and Obuchi administrations were not radical breaks with an “Old Japan” but products of longer-standing political economic developments (Tiberghien 2014, 40–43). These neo-liberal moves continued under Prime Minister Koizumi in the early 2000s who took the most radical approach to labour deregulation, privatisation and other structural reforms, representing the cresting of a wave aimed at fostering market-based “efficiency” and “productivity” while reducing government deficits.

Echoing neo-liberal reforms in the US and the UK, the Koizumi administration aimed to transfer a range of “inefficient” public services to private sector businesses. To cut personnel costs, firms began taking advantage of the declining influence of unions and labour regulations became a target of reform (Imai 2011, 167–169; see also Watanabe 2014). The goal was to facilitate labour market flexibility by breaking the internal labour market in Japan (see Keizer 2010, 156–167). Neo-liberal economic reforms employed a novel frame of reference – flexibility – for institutions and management to justify and legitimate their restructuring. To promote flexibility, “Deregulation Committees” were established. These were specially appointed cabinet committees made up of high-level executives representing major employers. Members tended to advocate for radical labour reforms, and as most of these committees had no representative from labour groups, employers were given increased influence in policy making while also marginalizing unions (Watanabe 2015, 514). Deregulation Committees pressured the government to implement deregulatory practices including deregulating non-regular employment and discretionary work (sairyō rōdō) for regular employees. Corporations thus “attempted to reduce the scope of employment practices related to regular employment such as lifetime employment and seniority pay so that they could reduce personnel costs and increase wage flexibility” (Watanabe 2014, 64).

As support for restructuring increased, both neo-liberal advocates and individual corporations questioned the so-called Japanese management system that had marked post-war corporate governance. They aimed to replace “Japanese-style management practices” with “American-style management practices”: a euphemism for flexible short-term employment, rapid evaluation/promotion and specialised career paths. They intended to focus on short-term provisioning through performance-based pay as a way to eliminate corporations’ expensive long-term employee provisioning and “livelihood wages,” commonly known as life-time employment and seniority wage systems.

New university graduates and middle-ranked managers were hardest hit by these reforms, as companies instituted hiring freezes for new recruits and found ways of reducing personnel costs for older employees (Genda and Rebick 2000, 87). In particular, middle-aged employees who had attained relatively high salaries pegged to seniority were prime targets of downsizing that cut expensive, top-heavy personnel costs to protect a smaller number of productive workers (Shibata 2007, 122).⁹ Thus, while regular employees have remained more protected than their Western counterparts since the late 1990s, Japanese companies have conducted various restructurings – closing factories, moving production abroad, selling subsidiaries, and conducting mergers and acquisitions – and regular employees’ dismissals have become common (see Genda and Rebick 2000; Westra 2012).

Inside the New Management Practices

As part of broader economic policy, neo-liberal reforms take both macro-level institutional forms and micro-level forms of company-level governance. Together, these reforms aim to facilitate increased labour market flexibility and to reduce operational costs, in particular personnel costs. At many companies, the internal labour markets and employee management systems became reform targets. Beginning in the late 1990s, the new disciplinary grid of performance-based metrics, a hallmark of neo-liberal corporate governance, was introduced to the private sector. By the early 2000s it was extended to public sectors, reflecting similar hegemonising techniques of “measuring performance” instituted in Britain and North America since the 1980s (Miller 2005).

Reforms at the firm level involve a range of management strategies based on the system of discretionary work and the concept of “management-by-objectives” or MBO (Keizer 2010, 50–51).¹⁰ These deregulatory measures aim to promote flexibility of regular employment by cutting seniority-based wage practices and other forms of long-term human resource development (Tatsumichi and Morishima 2006). First, the discretionary work system links the salary of regular employees to their work performance instead of actual working hours (Watanabe 2015, 515). It was promoted as a way to free employees from being tied to mandatory long working hours and to give them control over their work schedule. Alongside this, MBO was introduced as a strategy to formalise job tasks and expectations, on the one hand, while rewarding competent employees regardless of age, gender, education, rank, and years of employment, on the other.

The new focus on MBO did more than just transform the criteria of employee evaluations; it also contributed to the transformation of the meanings of work and employees’ workways. Before the introduction of MBO-style management strategies, Japanese companies were known for having no set “job description” for their employees, in contrast to the common practice of clearly defined terms of employment and job content in employment contracts in the West (Imai 2011, 165). The MBO system was intended to rectify this with clearly defined contracts. To this end, MBO was the basis of a new self-management technique, “the performance-based merit system” (seika-shugi) that was popularised across the Japanese corporate world, which was implemented to offer grade, pay and promotion as incentives based solely on short-term performance defined against clear targets (Conrad and Heindorf 2006; Morishima 2002). While promoted as individually empowering, one of the aims of the performance-based merit system was to reduce the current and future burden posed by seniority-based wages (MHLW 2011; see also Sato 1994).

At many large- and medium-sized corporations, the new merit system was implemented to replace the suggested inefficiencies of older business practices, seen as barriers to competitive growth and independent, creative, and proactive employees (Moriya 2005; Nomura 2000). The new measures were promoted as democratic, progressive and empowering for individual employees. Theoretically employees no longer needed to sacrifice their private life for the company; instead, they should be loyal to their jobs only by producing concrete results, and they should not rely on the company for their private life.

Thus, the performance-based merit system was seen as an innovative strategy for two reasons. For employees, it was meant to motivate them by promising quick promotion based on individual achievements, rather than tying them to their cohort with seniority-based wage increases. For management, it offered a blueprint and logic for cutting labour costs by decreasing total seniority-based personnel costs, reducing generalised benefits, and firing employees when deemed necessary. By 2001, a large proportion (76.6%) of corporations had adopted performance-based merit systems. According to MHLW (2011), the proportion of companies that used merit-based systems reached a high in 2004, with 54.1% of companies with more than 30 employees, 73.7% of companies with more than 100 employees, 82.9% of companies with more than 300 employees, and 86.8% of companies with more than 1,000 employees. While it has remained relatively high among those companies with 1,000 employees or more, since 2007 the number of companies with fewer than 300 employees that use performance-based merit systems has declined. Yet even as merit-based evaluation systems had become widely implemented by 2001, only about 11% of companies rated the systems as “successful,” with nearly 73% citing various problems that were caused by the new system (MHLW 2011; see also Hirakimoto 2005; Moriya 2005; Vogel 2006, 123).

Old Workways and New Work Metrics: Employees’ and Managers’ Responses

Given these various policy-level and management-level changes, how did employees and managers themselves respond? Listening to employees and management, it was clear that while many employees supported the new systems, the actual practice of MBO that lay at the core of performance-based merit systems triggered initial difficulties on both sides (see Imai 2011, 129; Keizer 2010, 169). Under the new system, employees were tasked with defining clear objectives which they were required to record on “target sheets” for each evaluation period. One’s merit was determined by how well one accomplished the objectives recorded on the target sheets during annual or biannual meetings with managers. These objectives were often numerical, such as the profit earned directly through an employee’s job and employees’ achievements were assessed at the end of each evaluation period in relation to the corporation’s overall objectives.

The difficulties of implementing and navigating the new systems were made clear in a conversation with a managerial consultant, Tsukada-san. Tsukada-san was a trainer who was hired by different corporations to train employees in the MBO system (Interview, April 17, 2007). When he came to the Tokyo office of one corporate conglomerate in 2007 to give a workshop on how the system worked, he explained that many were puzzled about quantifying their goals on target sheets. Instead, many employees are more familiar with qualitative objectives such as “working hard” (gambaru) or “making efforts” (doryoku suru). The consultant noted that even though employees came up with specific goals, “because the evaluation is often done by their own manager, he/she would rather know what their specific boss wanted him/her to achieve or what the most commonly expected goal might be.”

Articulating new goals was especially difficult for some long-term employees in administration. For instance, Shirai-san, a clerical worker in her 20s, was one of the participants in the workshop. She was not a new employee, but had worked in an administrative role for several years after junior college. While originally the performance-based merit system was only applied to the management, thereby exempting young people like Shirai-san, by late 2005 the system had expanded to other divisions, including hers (see Joe 2004). Twice every year she struggled to figure out what to write for her goals and “personal development” objectives on her target sheets. She explained that unlike salespersons who can quantify objectives, employees in clerical positions were not able to objectify their goals in numbers. As her work content did not change from year to year, she confessed that she really had nothing to write as a new goal (Interview, October 16, 2009).

Employees in research divisions often problematised the quantification of their work by distinguishing themselves from employees in sales and marketing divisions. However, these divisions had their own challenges due to the long-term and often very personal nature of business relationships at Japanese corporations (see Yasuda 2007, 134). Kakuta-san, an employee in his late 30s working in the sales division of a major corporate conglomerate, shared such concerns.

Even in sales, it is difficult to see every business negotiation (shōdan) through to a sale. This is because Japanese business negotiations involve a long process, and this process can rely almost exclusively on the personal relationships between individual employees or a few individuals representing each company. So especially if it is a replacement meeting where one employee replaces another for some reason in the midst of ongoing business negotiations, it can be extremely difficult for the new individual to pick up the negotiations at the same level of trust and rapport, and this difficulty may be reflected in the eventual outcome of the negotiations. So even though employees are unable to execute a sale in the end, management should evaluate how far employees succeed in making it to subsequent business meetings (Interview, August 15, 2007).

Kakuta-san’s insistence on recognising employees’ effort highlights the fundamental transformation in employee evaluation that the new performance-based merit system brought into the workplace, while the nature of business negotiations themselves have not changed much. No longer were employees’ indirect contributions to the business’ long-term goals recognised by managers: quick, clear results and short-term goals became the norm, even as business practices remained tied to long-term relationships (see Hirakimoto 2005; Tatsumichi and Morishima 2006).

Moreover, employees at a large manufacturing company raised other concerns about MBO evaluations. Maeda-san, an experienced worker in his 40s, shared the difficulty in evaluating employees because its “objectivity is misrepresentative” (Interview, November 29, 2007). He explained:

We say seika, seika [performance], but it is really difficult to see results (seika) in such a short term. And honestly employees in my division are generally “average” (donguri no sei kurabe) and there is not much to distinguish one employee from another. How can we make distinctions?

The contradictions of performance-based evaluation were further exacerbated in cases where there was little appreciable difference in employees’ performance (see Joe 2004; Tatsumichi and Morishima 2006). As in some cases the most positive evaluations ultimately applied to the employee with the highest education or the employee most favoured by the boss, some corporations had to reincorporate aspects of seniority-based evaluations because they could not discern actual performance differences in a short period.

The new merit-based evaluation system thus not only altered employees’ perceptions about promotions and salaries, it also altered the concept of “competency” in evaluating workers’ ability. Under the new performance-based merit systems, competent skills strictly mean performance ability – whether or not one achieves a specific target – and competency is thus reducible to pure labour output (rōdōryoku). This is in stark contrast to the previous “ability-based merit system” or nōryoku-shugi. This is the competitive merit system that had been in place since the 1960s, where one’s “job competency” (shokunō) was not limited to particular job tasks but rather it meant broader “potential ability,” “adaptability,” and “human skills,” including interstitial work and hidden labours behind primary job tasks (Endo 1994, 70; Yasuda 2007, 134).¹¹ With the new system, reforms of the wage system were aimed at reducing labour costs, and thus long-term perspectives on employees’ potential and hidden labour were substituted for immediately objectifiable and quantifiable goals. As Keizer (2010, 144) explains, “By introducing performance related pay, firms could bring wage costs down because it rewards employees for their actual contribution rather than the potential productivity of their skills.”

At a research division at a major corporate conglomerate in Tokyo, senior researcher Sasaki-san explained how in the past if employees worked overtime at the office, while some might be just inefficient workers, many were hard-working and were praised for “doing important work for the company” (Interview, October 29, 2007). At his company, these efforts had been compensated monetarily. After the new discretionary work system, however, the implications of working overtime changed: it was instead seen as “demonstrating one’s incompetency” at worst, and at best as “meaningless labour” due to the lack of monetary compensation. As a result, some employees stopped working overtime at the office and brought their work home to finish privately.

In the end, for many, the new system did not reduce actual working hours as had been claimed, and actually led to longer working hours. As Imai (2011, 103) notes,

Although “scheduled working hour” declined, it did not mean the reduction of the amount of overtime work and unpaid overtime…the high level of unpaid overtime tells that a part of the increasing cost caused by the reduction of scheduled working hour was absorbed by the “ability to be flexible” demonstrated by workers…

This saw a reduced number of full-time workers taking on greater workloads for less pay. Indeed, across the corporate landscape the combination of deregulated labour policies and new management rubrics increased the long working hours among regular employees (Tsai et al. 2016, 13). In other words, by removing more holistic criteria from personnel assessments and by increasing workloads for full-time workers, the discretionary work system and MBO converged to penalise workways that previously had been appreciated and compensated by management.

Certainly, as much as the new competitive system could motivate some employees with higher salaries, it also undermined the motivation for others. According to Morishima (2004, 35–36), the new merit-based evaluation worked well for those with higher salaries from the beginning, but it undermined the motivation of those who received salaries in the middle to low range. Ohtake and Karato (2003, 7) report similar findings for blue-collar workers.¹² Some managers recognised these negative effects. For example, Tajima-san was an experienced manager in a large printing company. According to him, “In the past, if the evaluator saw that an employee’s ‘way of working’ was distinctive, co-workers more or less agreed with the evaluation precisely because such qualifications were ‘visible’ and recognised by others, and thus such promotion could be seen as ‘fair’” (Interview, October 10, 2009). With the transformation of the evaluation system into one based on target sheets and quantifiable output, the easily recognisable expressions of workways that had previously been part of employee evaluations were dismissed. This also left some employees questioning the “fairness” of evaluations.¹³ As a result, many managers endeavoured to avoid giving very high or very low evaluations to employees in order to prevent large wage discrepancies that undermined employee morale (Vogel 2006, 124, 151).

This is not to say that employees felt that the panoptic gaze of Japanese management had been lifted or that their workplace demeanours were no longer being observed. Rather, as Shibata (2007, 484) critically observes, this change to the merit system merely meant that “the panoptic gaze of evaluation has retreated to [a] faraway place…compared to [the] evaluation system of [the] (old) Japanese management system.” Ultimately, many interviewees and informants felt that neo-liberal policies have been wielded by management as “theoretical arms” (riron-busō) – weapons of self-defence to protect corporate actions against criticisms – in order to benefit the management by cutting labour costs and using “flexibility” as an excuse for reducing employee numbers.

Private Actions and Corporate Reactions to Neo-Liberal Reforms

As neo-liberal reforms began to reshape workplaces and workways, employees did not sit idle. By the late 1990s when Fujitsu began implementing performance-based merit systems, employees responded with a range of actions expressing their frustrations with the system and in some cases actively undermining the reputation of their companies (Joe 2004; Meyer-Ohle 2009). Importantly, they have seldom resorted to public actions in the form of strikes or union activities, and then only when the workers had nothing left to lose after being fired or were stuck in insecure temporary contracts (see Gordon 2015, 91). Rather, employees have often taken private actions to indirectly communicate their displeasure while also attempting to secure their own livelihoods.

These private actions have taken many forms. In some cases, which have gained the most media attention, individuals took extreme actions such as burning themselves to death, claiming this resulted from workplace pressure (Kumazawa 2010). Other workers committed suicide in their former workplaces after being fired (Joe 2004). These cases highlight the extreme ways that neo-liberal metrics of performance measurement shifted the locus of responsibility for employees’ success or failure to the workers themselves through the rhetoric of self-responsibility (jiko sekinin). This logic absolves the neo-liberal management system of responsibility for creating such categories of winners and losers, thereby individualising and internalising the institutional and systemic causes of employees’ suffering (see Shibata 2012).

While cases of suicide are the most destructive and lamentable forms of private action by employees, most have taken less drastic approaches to the new demands of neo-liberal working culture.¹⁴ For example, Yokota-san, a deputy manager in his 50s at a large manufacturing company, explained that he supported the new system, declaring that it was impossible to go back to the previous system as his company can no longer pay automatic wage increases every year to every employee. At the same time, he could not ignore the negative impact that the new merit system had at his company. He explained that “once employees became aware that their performance was evaluated based merely on what they put down on the target sheet they became increasingly defensive and started recording extremely limited goals that they could easily achieve.” Yokota-san called this an overall “target sheet deflation” as employees lowered their objectives in order to achieve safe evaluations (Interview, September 2, 2007; see similar cases in Joe 2004, Chapter 2).

Likewise, an over-emphasis on the index of quantitative goals results in the negligence of the innumerable “hidden labours” behind primary job tasks in employees’ evaluations (Yasuda 2007, 134). Some informants pointed out that a major limitation of the new performance grid was that they did not clearly recognise “interstitial job tasks” between the larger job tasks. This prompted some employees to cease performing tasks that were not on their target sheets. Other employees began to avoid any challenge beyond what was explicitly evaluated on the target sheet and withheld information from co-workers.

As more companies began implementing some form of neo-liberal governance over their workers in the 2000s, many employees began critically reflecting on and responding to the management’s ideology and practices. As described above, through various actions, including target-sheet manipulation, avoiding interstitial work, and withholding knowledge from co-workers, employees actively asserted their dissatisfaction with management through a kind of competitive subterfuge – quietly competing for their own job security while undermining company morale. Ultimately, these actions turned management’s goals for workers’ autonomy and efficiency into a self-serving strategy for survival at the expense of workplace cohesion.

In these various ways, employees drew from diverse practices of currying favour with bosses and self-defensively focusing on individual evaluations in their resistance to the neo-liberal policies of discretionary work and MBO systems. At the same time, many employees did not employ the logic of “neo-liberalism” that companies promoted to mobilise their workers. Individual employees discovered that their companies’ promises of rewarding employees quickly and fairly according to their performance were merely excuses for layoffs, voluntary retirement, and hiring freezes – tactics that were previously difficult to use due to strict labour laws.

Ultimately, many employees became extremely competitive and some became un-co-operative with their co-workers in order to survive within the increasingly individuating system (see also Morishima 2004, 35). Crucially, this was not to promote themselves as entrepreneurs and build their careers outside, but to survive within their companies for the less ambitious goal of their own family’s security. In this way, many continue to seek success by staying with their current employer despite the new system that encourages employees to take risks and more responsibility for their own career development (see Figure 1).

Figure 1. Desirable career development.

Source: Adapted from JILPT (2012, 4–5).

Reconstruction: Systemic Revision of Japanese Management

Not surprisingly, the various problems emerging in workplace dynamics have been noticed by company managers and leaders in the Japanese corporate world. While private and discrete in their actions, the employees’ attitudes and actions have sparked public discussions about the negative effects of the new management practices. As a result, there have been signs of a reconsideration of the impacts of restructuring (see MHLW 2011). Since the mid-2000s, an expanding discourse has questioned whether the new merit systems suit Japanese society, with some claiming that the new merit systems have created a new “dual structure” of the economy: a small group of highly competitive and efficient multinationals and a majority of companies that remain “very Japanese” and economically inefficient (Moriya 2005). Others have claimed that “officials and corporate leaders have probably gone too far in emulating the US model” (Vogel 2006, 213). Many corporations and consulting companies have critically analysed the differences between the new and the old merit systems and called for amendments to suit their companies (see Keizer 2010, 175; MHLW 2012).

Importantly, not all corporations started from the same point when implementing economic restructuring, and this was reflected in the diverse pathways they took towards restructuring. For instance, a medium-sized printing company observed for this article started using “open” or “closed” MBO forms, leaving employees and supervisors to develop the specific criteria. Others actively differentiated their performance-based merit systems from conventional MBO systems by incorporating other evaluations based on work processes. These included: co-operativeness, effort, and personal assessments; focusing on “competency” as the ability to consistently “concretise” (gugenka) results; appropriating the ability-based merit system and adding some factors of seniority; reintroducing long-term employment; motivating workers through various human resource developments; publicising performance standards and evaluation results; and strengthening human relationships in addition to assessing individual performance (see Keizer 2010, 43–57; Tatsumichi and Morishima 2004, 35; Vogel 2006, 215).¹⁵

To address the problems with morale caused by increasing income disparities among regular employees, many companies have considered ways to minimise these inequalities by only applying merit-related compensation to bonuses and other fringe benefits (Tatsumichi and Morishima 2006). Indeed, research conducted by the Ministry of Health, Labour and Welfare (MHLW 2011) shows that even as the number of companies with performance-based merit systems increased from the end of the 1990s to the early 2000s, by the mid-2000s, the number of companies with such systems began to decline. Tatsumichi and Morishima (2006, 78) call this “making performance metrics ‘milder’” (mairodo ka), reflecting companies’ self-conscious efforts to reduce income disparities since 2000. They suggest this is because companies have learned from the failures of other companies in the past which had incorporated such performance metrics that resulted in creating large disparities, and which lost the support of their employees (Tatsumichi and Morishima 2006, 78). Through the process of the diffusion of performance-based merit systems, more companies have attempted to soften the edges of the bare results-based merit system (see Vogel 2006).

These changes demonstrate how managers have creatively responded to new challenges and their own needs produced by the new neo-liberal policies, which also results in new diversity in employment practices between and among industries and companies (Vogel 2006, 220). More critically, rather than eradicating the previous system, these changes show the resilient desires among management for maintaining understanding and support from their employees and for providing long-term provisioning for core workers while also changing the rules of the internal labour market and loosening conditions for long-term employment (see Tatsumichi and Morishima 2006; Vogel 2006).¹⁶

While diverse and diverging in their process and forms, these transformations in the workplace herald a new chapter in the development of Japanese capitalism. Marked by a dynamic recombination of post-war employment systems with neo-liberal logic, this has produced new mutations in the meanings and modes of work for employees. For my informants, the particular variations of these systems were less important than how such variations were manifested in practice.

For example, Hotta-san, a man in his late 30s working for a medium-sized manufacturing factory, experienced a shift to performance-based merit systems at his company in 2003 (Interview, August 7, 2010). He recalled that when his company first adopted the system it undermined the assumption among employees that “the company will train employees for the long-term.” Previously employees had joined the company expecting to invest their working lives in it for the long term, and to be invested in by the company through long-term training, benefits and job-security in return. The performance-based merit system, however, made employees question whether the company would provide long-term provisioning. According to Hotta-san, after the implementation of the new system, employees became defensive and backward-looking. They lowered their objectives on their target sheets and stopped doing interstitial tasks beyond their individual contract-stipulated job tasks. Moreover, the system also resulted in creating differentiation in wages among employees, which reversed the previous link between wage and seniority, consequently affecting “the smooth functioning of company communication.” Hotta-san explained that in the end the company recognised these negative effects and revised its system in response, adopting a new system with the performance-based merit system as the base, and with additional metrics of evaluation, called “human connections.” In concrete terms, rather than a single standardised target sheet, the company encouraged employees with two forms of responses regarding their achievements: a challenge sheet and an essay in which employees write in their own words what they have done in terms of effort, the potential for improvement, and the potential for their future achievements.

A different approach was tried at the major printing company where Matsuda-san, a manager in his early 60s, worked (Interview, December 14, 2007). His company also went through major revisions to its merit system beginning in 2006. As a veteran manager, Matsuda-san told me about how he had been involved in rethinking the merit system to respond to declining employee morale. Since 2006, they incorporated “permutation tournaments” (irekae sen) with the performance-based merit system, where employees with low evaluations can have a second chance for higher evaluations and promotion the following year. In other words, while the company uses short-term evaluations, they also provided another chance to those who became “losers.” Matsuda-san proudly claimed, “There are people who were winners this year, though the same people were classified as losers last year.” Though his status as an employee-evaluating manager placed him in the opposite position of the evaluated employee Hotta-san, Matsuda-san echoed Hotta-san’s concerns about working under new evaluation systems:

Evaluation is always very difficult especially for the evaluators. Based on some sort of tournament, we decide winners or losers…No matter how fine an employee’s boss is or how much quality is quantified under performance-based merit systems, it is still a human evaluation on another human being. There is always a limit to such an evaluation.

In short, while performance-based merit systems were originally developed to replace the older systems, in the end, most companies realised that cultivating and enhancing employees’ performance would not happen over the short term, but require long-term provisioning and support and careful evaluation of their employees. As such they could not completely abolish the previous qualitative evaluations or long-term employment orientation.¹⁷ Indeed, the problems triggered by the initial attempts at implementing new systems eventually produced increasing support for the older management practices (see Figure 2). There was also a growing awareness of the need to foster self-motivation beyond external motivators such as pay rises and bonuses. However, for employees, it was only by becoming “neo-liberal subjects” – that is, by being subjected to neo-liberal reforms in the company – that they began actively trying to gain control over work, which further fuelled their aspirations for regular and long-term employment.

Figure 2. Support ratio for Japanese-style employment practice.

Source: Adapted from JILPT (2012, 3).

Conclusion

With various discourses and moral panics surrounding Japan’s two decades of economic recession and subsequent economic restructurings, neo-liberal economic reforms and other issues are often framed as simply a transformation from “Old Japan” to a “New (Neo-liberal) Japan,” with the former characterised as an outdated version of capitalism and the latter as a “corrected” version based on Anglo-American models of efficiency.

While these two models of business were often pitched against each other as “old” versus “new” by politicians and foreign media, what underlies this argument is a distinctive ideological orientation within Japan’s post-war “new middle class” model of companyism and post-bubble neo-liberalism. As this article has argued, neo-liberal reforms such as labour deregulation and new performance-based merit systems were encouraged by politicians and employed by corporations in order to “correct” Japanese capitalism and revitalise the economy. The goal was to enhance both domestically-oriented corporate productivity and globally-oriented market efficiency. Beneath these reforms was the political economic ideology of transforming society from a corporate-centred, companyist society to a neo-liberal society. The implicit expectation was that introducing the neo-liberal ideology of merit-based compensation and individual competitive success would create a society of self-motivated and self-actualising autonomous workers.

Importantly, marketisation and the notion that the state is not responsible for the welfare of citizens are not foreign to Japanese citizens, and the rise of neo-liberal rhetoric in post-bubble Japan has been met with neither complete bewilderment nor unbridled enthusiasm. Nonetheless, what the advent of aggressive neo-liberal reforms did trigger was nationwide debate over what the future of the corporate world should look like, what the future workers in that world should be like, and, crucially, how much the expectations for citizens would have to change to meet the new demands.

Needless to say, the economic restructurings of the past 25 years have not remade Japan as a “neo-liberal society,” but there have been noticeable changes, with growing socio-economic inequality and the changing meanings and organisation of work. Many individuals continue to praise the ideas of entrepreneurship, the neo-liberal spirit of idiosyncratic moneymaking practices, and pursuing personal freedom. Moreover, many are supportive of the idea of the new systems that value performance and entrepreneurship as well as the older employment systems which privileged long-term provisioning to foster ability and performance and long-term employment relationships.

At the same time, in the boardrooms, many companies took advantage of financial and employment deregulation while defensively holding on to retained earnings (naibu-ryūho), cutting salaries, and downsizing, while also eschewing the speculative mergers and financial ventures that were pursued by many overseas corporations as part of their neo-liberal reforms (Buchanan, Chai, and Deakin 2012, 313; NTA 2013, 5). In the office, employers promoted managerial flexibility by attempting to devise new ways of moulding employees’ subjectivity to changing institutional structures, replacing older discourses of organisational values and welfare with new rhetoric of efficiency and autonomy. However, these reforms came without providing security and positive predictability for employees, and without recognising the efforts and ability of individual workers. As a result, many companies lost the understanding and trust of their employees, and individuals have fought bitterly for themselves, sometimes becoming highly competitive and defensive by thinking only about their own security and turning their backs on both their co-workers and companies.

Ultimately, the restructuring promoted by neo-liberal ideology subjected employees to the ideological clash between two systems, which created an opening for employees to reflect on the particular historical construction of companyism. This emergent reflexivity went hand-in-hand with the new alienation that isolated workers from both their work and their co-workers, precisely because many did not become co-opted by the new ideology, nor could they roll back the new corporate governance regime. In this way, their renewed, self-conscious subjectivity and agency could not have been born within an unproblematic transition to neo-liberalism but became forged from the molten alloying of these ideologies.

Disclosure Statement

No potential conflict of interest was reported by the author.

Additional information

Funding

This work was supported by the The Japan Foundation [Japan Foundation Research Fellowship];Waseda University [Researcher Fellowship]; The Chinese University of Hong Kong [Direct Grant].

Notes

1. A similar view would be taken by reformers in South Korea later in the 1990s, but to much more devastating effects. Lim and Jang (2006, 447) discuss how elite bureaucrats and economic experts “joined global neo-liberal voices blaming by wholesale previous practices, rules and institutions in South Korea for having been the main causes of the 1997 crisis. And the combination of shareholder-oriented corporate governance, a stock market-centred financial system and a flexible labour market was presented as the ideal economic model.”

2. In 1989 the real estate asset price bubble reached its peak, and after the Bank of Japan raised interest rates in January 1990, the stock market plummeted, leading to a recession. Banks became overwhelmed with loans that could not be paid, and corporate growth slowed, leading to declining consumer demand, deflation and sinking profits. This was the beginning of the so-called lost decade(s).

3. Among such economists and political scientists are Boyer and Yamada (2000), Buchanan, Chai, and Deakin (2012), Deakin and Whittaker (2009), Imai (2011), Keizer (2010), Morishima (2002), Sato and Imai (2011), Vogel (2006) and Watanabe (2014). Representative anthropological and sociological research on Japanese large- and medium-sized corporations includes Dasgupta (2013), Graham (2004), Matanle (2003, 2006) and Matsunaga (2000).

4. Of these 59 individuals, 52 were male and seven were female. Many of them had been continuously employed in the same company since immediately after they graduated from college or high school. Only seven individuals came to their current positions after working for a different company or subsidiary, while the remaining 52 have worked for the same corporations throughout their careers.

5. Japan has a long history of local capitalist thought and practices, which have undergone several local transformations throughout Japan’s modernisation process. It was precisely out of this historical trajectory that labour unions and corporations clashed and negotiated amidst political and economic turmoil and uncertainty that characterised post-war Japanese capitalism. Their reconciliation was that rather than the state, it is corporations that should ensure citizens’ employment and livelihoods (Gordon 1998). In other words, from early on in its modernisation process the state was sceptical of the welfare state model of social support and assistance as “engendering a culture of dependency” (Borovoy 2010, 60, 61). Thus, the state attempted to relegate various state functions to corporations post-wartime. Though initially corporations had resisted such demands from the state, following Japan’s war defeat, and with the sanctions of the Allied Occupation in the early post-war years, powerful unions put pressure on corporations to guarantee job stability and to meet workers’ “life needs” in a fractious struggle between workers and managers (see Borovoy 2010, 62; Gordon 1993, 379; Shibata 2007, 536–537).

6. On India, see Gooptu (2009); on China, see Hoffman (2006), Kipnis (2007) and Yan (2003).

7. On Europe and North America, see Dore (2000) and Harvey (2006). For Dubai, see Kanna (2010), and Palomera (2014) writes on Spain.

8. Interestingly, in contrast to cases where calls for neo-liberal economic reform led to increased alignment of the domestic economy to global neo-liberal economic trends by taking advantage of economic crisis for domestic political regime change, in Japan the post-bubble crisis did not lead to the simple convergence of Japanese capitalism with other capitalist systems such as the US, but rather the “neo-liberal” reformers such as Koizumi and later Abe pursued idiosyncratic policies that were not clearly neo-liberal in the Anglo-American sense (see for example Tiberghien 2014). An interesting contrasting case is South Korea. Lim and Jang (2006, 446) argue that the financial crisis in the late 1990s in South Korea led to the delegitimising of the ruling party and the overhaul of its economic system because “[s]trong homogeneity in neo-liberal economic thinking between the domestic elite and transnational actors, such as the IMF or global business media, also led to the convergence in reform programs, which facilitated the large-scale transformation of the domestic economic system.”

9. Other key texts regarding the restructuring of long-term employment and seniority systems include McCann, Hassard, and Morris (2004, 2006) and Nomura (1994, 1998).

10. The MBO system introduced in Japan was a reformulated version of Peter Drucker’s management theories. Drucker had been an influential force in American management from the 1950s, and his books became popular in Japan from the 1960s. However, his approach to performance-based MBO was not widely adopted until the increased interest in American management styles in the 2000s. Moreover, following Drucker’s death in 2005 numerous translations and distillations of his work appeared in bookstores and on convenience store bookshelves. This became part of a major “Drucker Boom” that also included the publishing of a novel and later a manga, anime and live-action movie about how a female high school sports manager applied Drucker management practices to a high school baseball team. This increased visibility of Drucker’s management theories further popularised “American-style” MBO management among Japanese.

11. They may also include personal assessment (satei), process-based assessments (katei-shugi), and effort-based assessments (doryoku-shugi).

12. While companies exercised wage restraints, Vogel (2006, 121) observes that “they have maintained a sense of equity by restraining compensation for mangers even more than for blue-collar and clerical workers.” In manufacturing companies, employers would apply the performance-based merit system to white-collar workers but not blue-collar workers (Vogel 2006, 123).

13. For Joe (2004) and Morishima (1999) for extensive discussion on feelings of unairness in the workplace.

14. Unemployment is significantly associated with male suicide rates, especially those of men in their prime working age, while the correlation between unemployment and suicide is not as straightforward with regard to female suicide rates (Kuroki 2010).

15. Tatsumichi and Morishima (2006, 79) qualify the meanings of “competency” to differentiate it from the concept of “ability” in the ability-based merit system. Specifically, they draw from Spencer and Spencer (2003) and argue that this competency refers to a quality that can be confirmed through observable actions rather than implicit or invisible qualities.

16. This approach has also been supported by Nippon Keidanren and the Japanese national union Rengō, despite what Keizer (2010, 172) describes as their different views on “the appropriate working conditions and the preferred direction of change” (see also Imai 2011, 164).

17. There is considerable literature on this point. See Conrad and Heindorf (2006); Inagami (2004, 47–49); Keizer (2010, 171–178); Matanle (2006); McCann, Hassard, and Morris (2006).