A Big Worry For Japan Inc.

Economist Juichi Wako of Nomura Research Institute notes that Japanese labor's share of national income has shot up from about 68% through most of the 1980s to a new high of around 73% in recent years (chart)--about the same share of the pie as that of U.S. workers. Because the trend occurs at a time when Japanese economic growth has slowed sharply, Wako believes it reflects determination to keep lifetime employment systems intact.

And therein lies a dilemma. Japan may have benefited from benign employment practices in the past, but its increasingly sluggish growth suggests they are becoming counterproductive. Companies that wish to survive in a more competitive world, says Wako, may soon find that they can no longer afford to maintain commitments to lifetime employment.