Japanese companies gradually abandon lifetime employment

The latest evidence of Japanese companies moving away from lifetime employment comes from Ajinomoto, a company with a history of more than a century, which announced on November 29 that it would cut 100 positions through voluntary resignations, according to Bloomberg. The move is part of Ajinomoto’s efforts to improve its business after three consecutive years of declining profits.

Ajinomoto was founded more than 100 years ago, after founder Kikunae Ikeda discovered monosodium glutamate and called its sweet taste umami.

An Ajinomoto factory.

As Japan’s economy slows, companies are increasingly moving away from the concept of lifetime employment that they have embraced for decades. Prime Minister Shinzo Abe has said that changing the labor market is one of the biggest challenges the country must overcome to restore economic growth. Analysts say that the lack of worker mobility is one of the most important reasons for Japan to implement labor market reform.

Many Japanese companies have traditionally used age-based pay, but highly paid executives have faced criticism that they are not getting the pay they deserve. Toyota CEO Akio Toyoda said in May that it was becoming increasingly difficult for Japanese companies to maintain lifetime employment.

Ajinomoto, the Tokyo-based company, said in a statement that as it carries out a restructuring program to maintain growth, "some of the company's managers may wish to utilize their expertise and strengths outside the Ajinomoto Group."

Ajinomoto said those participating in this round of layoffs are all managers aged 50 or older and the company will support them.

The impact of the layoffs will be revealed by Ajinomoto in its upcoming earnings forecast. Earlier this month, the company lowered its full-year outlook after reporting a second straight quarterly loss.