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Several adverse macro-economic trends beginning in the early 1970’s drastically reduced the relative competitiveness of various sectors of the Japanese economy. Firms in Western (industrialized) countries that were faced with a similar loss of comparative advantage dealt with the problem by undertaking strategies of restructuring--primarily, retrenchment and downsizing strategies. However, in sharp contrast to the Western approach, the Japanese response to industrial decline, from a HRM standpoint, was a product of the political, cultural, and social institutions/values of that society. The Japanese government, business sector and the labor unions worked together to ‘maintain’ employment levels (albeit, mainly that of permanent employees) in order to minimize the costs of adjustment for the key stakeholder groups in particular, and for the Japanese society as a whole, in general.

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