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November, 1988, Vol. 111, No. 11

Damage control: yen appreciation and the Japanese labor market

Glen Halm and Clinton R. Shiells

When the yen began its steep rise in late 1985, "Chicken Little" cries were heard throughout Japan. Headlines predicted massive job losses, an end to the export orientation of Japan's economy, and a decline in living standards of working people. Since then, significant changes have indeed been occurring in the Japanese labor market and in the structure of the economy, and some workers have suffered economically. But by late 1987, Japanese economic "damage control" had minimized most of the negative effects of the yen's appreciation and it is now clear a "leaner and meaner" economy has emerged as a result.

The appreciation of the yen (or "endaka" as it is called in Japan) apparently accelerated ongoing economic trends, but the genesis of most of the changes predated 1985. Interestingly, many of the changes are similar to those that have occurred in the U.S. economy in the past decade. For instance, both Japan and the United States, motivated by Asian competition to reduce labor costs, are moving from manufacturing industries toward information and service industries, thereby causing some worker displacements; are experiencing a decline in the rate of unionization, compelling labor unions to seek new ways to gain clout; and are experiencing an unprecedented increase in the rate at which women are entering the labor force.

In any case, changes in the Japanese economy and in labor practices and customs are occurring simultaneously. Often these phenomena are closely related, and have been given impetus by the appreciation of the yen.

This excerpt is from an article published in the November 1988 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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