PRICE STRUCTURE AND EMPLOYMENT MOVEMENT IN JAPAN

As of January 2011, the number of employed persons in Japan was 44.44 million of this number, 14.4%,
or 6.41 million people, separated from their jobs during 2011.
The fact that 14.4% of employed persons left their jobs in the course of one year supports the
perception that Japan is a country in which few people leave their jobs, even when compared to other
developed countries.
The general view concerning Japan’s labor market is one that sees a low unemployment rate and stable
employment. Even as stability in the labor market fluctuates in line with economic fortunes, this view
may still be valid in the case of Japan.
Nonetheless, the number of job changers in Japan’s labor market is growing compared to past years,
and even large enterprises, which previously only hired new school graduates, have become actively
involved in mid-career hiring in recent years. Moreover, dismissals by enterprises, and particularly small-
and medium-sized enterprises (SMEs), happen more frequently than is thought.
This manuscript presents the Labor Force Survey (Statistics Bureau, Ministry of Internal Affairs and
Communications [MIC]) and Survey on Employment Trends (Ministry of Health, Labor and Welfare
[MHLW]), which are the main statistical surveys that provide clues to understanding job turnover and
movement in Japan

Japanese companies are looking forward to a better year ahead after a relatively challenging 2016.
Contract employees, which currently make up about 40 per cent of the national workforce, will remain a
major human resource for most companies. Hiring is expected to pick up this year, especially in the
healthcare and life sciences technology sector, led by a consistent demand for innovative solutions in
light of the country’s rapidly ageing population.

Financial services are growing more cautiously. Revenue growth has dipped and banks are cutting back,
choosing instead to focus on core markets. Another area that’s experiencing a slide is retail, as overall
spending has declined along with waning consumer confidence and a slowdown in tourist spending.

Japan - Pricing

A decade of near-zero inflation, combined with decreased regulation and greater global competition,
has had a profound effect on Japanese companies and their price-setting strategies. The traditional
practice of Japanese companies undercutting prices of competitors in order to gain market share has
long been discarded. Moreover, the standard practice of adding a fixed markup to the cost of
manufacturing and distribution is no longer a prevailing method for price setting.

Instead domestic prices are being driven increasingly by consumer demand – that is, what the consumer
is willing to pay in return for a product or service, determined by what the market will bear. Continued
economic stagnation, combined with an aging population receiving fixed incomes as well as a greater
percentage of the work force employed in temporary positions (unsure of their next paycheck), have
constrained the average Japanese consumer’s disposable income. Technology, as demonstrated by the
growing uptake of online purchases fueled by the growth of online marketplaces such as Rakuten and
Amazon Japan, has also contributed to greater product awareness and price sensitivity by Japanese
consumers. In addition, deregulation has resulted in the elimination of multiple layers of middle men in
the distribution process. These factors have led companies to move away from pursuing a low margin,
high volume strategy toward a more real-time pricing strategy aimed at adjusting prices based on
prevailing market conditions.

TAXATION IN JAPAN

Types of Taxes

Taxes in Japan are paid on income, property and consumption on the national, prefectural and
municipal levels. Below is a summary of some of the most relevant types of taxes paid by individuals:

 Income Tax
Paid annually by individuals on the national, prefectural and municipal levels. Also known as
"resident tax" on the prefectural and municipal level. The amount is calculated based on the net
income of the individual person.
 Enterprise Tax
Prefectural tax paid annually by self-employed individuals engaged in business activities. The
amount is calculated based on the person's net income and the type of business.
 Property Tax
Municipal tax paid annually by individuals who own land, housing and other types of
depreciable assets.
 Consumption Tax
Paid by consumers when they purchase goods and services. The rate is currently eight percent.
 Vehicle related Taxes
A prefectural automobile tax is paid annually by individuals who own a car, truck or bus. In case
of passenger cars, the amount is calculated based on the engine displacement. A municipal light
vehicle tax is paid annually by individuals who own motorbikes or other motorized light vehicles.
A national motor vehicle tonnage tax is paid by vehicle owners at the time of the mandatory
inspections (shaken). A prefectural automobile acquisition tax is paid by persons when they
acquire a car.
 Liquor, Tobacco and Gasoline Taxes
The national liquor tax is paid by consumers when they purchase alcoholic beverages. National,
prefectural and municipal tobacco taxes are paid by consumers when they purchase tobacco
products. A national gasoline tax is paid by consumers when they purchase gasoline. The liquor,
tobacco and gasoline taxes are included in the prices shown by shops.
Income Tax

Income tax is paid annually on income earned during a calendar year.

For tax purposes, people living in Japan are classified into three categories. This categorization is not
related to visa types:

 Non-Resident
A person who has lived in Japan for less than one year and does not have his primary base of
living in Japan. Non-residents pay taxes only on income from sources in Japan, but not on
income from abroad.
 Non-Permanent Resident
A person who has lived in Japan for less than five years, but has no intention of living in Japan
permanently. Non-permanent residents pay taxes on all income except on income from abroad
that does not get sent to Japan.
 Permanent Resident
A person who has lived in Japan for at least five years or has the intention of staying in Japan
permanently. Permanent residents pay taxes on all income from Japan and abroad.

Note that tax treaties between Japan and more than 50 countries, including the USA, UK, Canada,
Australia, China, South Korea and most European countries, can take precedence over the above
guidelines.

When to pay taxes?

If not withheld by the employer, national income taxes are due in full by March 15 of the following year
(mid April if you pay by automatic bank transfer), with two prepayments paid in July and November of
the running tax year. Prepayments are calculated based on the previous year's income, i.e. you do not
pay them during your first year in Japan.

For example, if you had to pay national income taxes for 2016, they had to be fully paid by March 15,
2017 (or April 20, 2017 in case of payment by automatic bank transfer), with the prepayments paid in
July and November 2016.

If prefectural and municipal income taxes are not withheld by the employer, they are to be paid in
quarterly installments during the following year. For example, the 2016 taxes are paid in four
installments in June, August and October 2017 and January 2018.

Tax Rates

The tax rate is determined based on the taxable income. Like in other countries, taxable income is the
total earnings minus a basic exemption, exemptions for dependents and various types of deductions,
such as deductions for insurance premiums, medical expenses and business expenses of the self-
employed.