The escalator is broken: Japan's shift away from lifelong employment

Japan has long continued its traditional employment practices, particularly the lifelong employment system or what we sometimes call the 'escalator system' (as in moving up in your career based on seniority rather than merit). However, as the global economy evolves, Japan is increasingly trying to move towards merit-based performance reviews, reflecting a significant cultural and economic shift.

Historically, the lifelong employment system ensured that employees would stay with one company for their entire careers, receiving promotions and raises primarily based on tenure rather than performance. This system ensured a strong sense of loyalty and stability, with companies investing in their employees' training and development. Unfortunately it also led to challenges, including complacency, a lack of innovation, and resistance to change.

As Japan faces demographic challenges, including a declining birth rate and an aging population, the traditional employment model has become increasingly unsustainable. Companies are struggling to remain competitive in a rapidly changing global market. The demand for agility, innovation, and productivity has prompted many organizations to reconsider their employment practices.

In response to these challenges, many Japanese companies are adopting merit-based performance reviews. This shift allows for increased accountability, enhanced motivation and also attracting and retaining talent (like younger workers or workers with caregiving duties).

Despite the benefits, transitioning to a merit-based system is not without challenges. Deep-rooted cultural norms around seniority and group harmony can make it difficult for organizations to implement these changes effectively. Additionally, companies must ensure that performance evaluations are transparent and fair to avoid potential conflicts and dissatisfaction among employees.

Here's where we can help! We have plenty of experience training Japanese companies who are struggling to adopt or implement merit based performance systems. Reach out today for a free assessment and bespoke training based on your needs!

Want to know more? At Japan Consulting Office, we specialize in equipping professionals to thrive in cross-cultural environments. Whether you’re looking for group training or one-on-one sessions, we’ve got you covered!

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https://www.japantimes.co.jp/news/2025/06/02/japan/society/japan-youth-employment-workplace/