Japanese-Style Human Resource Management and Its Historical Origins

This paper examines the economic rationality of Japanese-style human resource management (HRM) and provides an overview of how and in what historical context Japanese firms formed such a model, which had no precedent in the Western world. The core of the Japanese model is an employer’s promise to provide human capital investment and employment security to regular employees in exchange for their dedication and skill formation, so as to achieve high productivity. However, this “exchange” is not a legally binding contract but merely an implicit one, and for it to constitute a self-enforcing equilibrium, complementary HRM policies—such as internal promotion and joint labor-management consultations—must also be instituted. With this in mind, this paper defines the Japanese-style HRM model as consisting of seven key policies that complement one another, and traces their historical origins by making use of a wealth of preceding research. The process can be divided into four phases: the inter-war period (1914−37) during which leading firms in heavy industry explored new labor policies; the wartime period (1938−45) with heavy military intervention; the turbulent period of fierce labor-management conflict immediately after WWII (1946−55); and the first half of the period of high economic growth (1956−65) during which HRM was combined with productivity improvement. All phases were important in shaping the Japanese HRM model, but the seven key policies did not come together to form a stable equilibrium until the final phase. During this period, Japanese-style HRM became an engine for economic growth “by the middle class for the middle class,” and brought the nation a rare combination of affluence and equality. The lifetime employment became institutionalized since the end of the high growth period and continues to impact Japanese society, both positively and negatively, to this day.