Happy New Year?

Posted by Jim Ivanoff
January 4th, 2009

New_Years_2009As the whole country is on holidays celebrating the start of 2009 with their families, all of the traditional hope for the new year is being tempered by worries about which way the economy will go. There are many big questions that are being discussed with the help of a lot of sake these days.

The one thing that seems to be certain is that the plight of Japan's temporary workers (hakken) is going to get worse. In fact, commentators are now starting to talk about this being the "2009 Problem."

While the recent weakness in exports has forced many Japanese manufacturers to not renew temporary workers' contracts, unemployment among hakken is expected to greatly increase in 2009 as a result of labour law changes made in 2006. The change basically extended the term a manufacturer could employ hakken from 1 year to 3 before having to decide whether or not to make them lifetime employees or let them go. The longer-term commitment and booming exports at the time encouraged many companies to greatly expand their use of hakken. 

With export markets in the US and Europe in the dumps, there is little incentive for manufacturers to turn these temporary workers into full-fledged employees. Undoubtedly many of them probably expected that they would be able to make the transition in 2009 but are now fearing for their futures. 

What does this mean? For one, it might be the beginning of the end for the hakken system. Younger workers who were open to non-lifetime employment positions in the past are already saying that they will not accept any hakken position now. The fallout from mass unemployment among hakken workers will also pressure the Japanese government to bring in new measures to encourage companies to hire people as full employees (as it was thought that employees with 3 years of experience and training would become to valuable to let go, the extension from 1 year to 3 years was actually also aimed at encouraging more lifetime employees).

Due to all of the volatility expected in the hakken labour market, increasing weakness can also be expected in the apartment markets that serve these workers. I have already mentioned that the termination of temporary workers' contracts will have an adverse effect on the construction of new 2×4 apartments. However, if this "2009 Problem" does result in the mass layoffs that some are now predicting, then the 2×4 apartment business model itself could be in for a very unhappy 2009.

By Jim Ivanoff

BC Wood Japan Office

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