Japan has in effect a dual labour market at the heart of which is the distinction between employee contracts that are fixed term and those contracts that are of indeterminate length. Different legal rules and cultural practices apply in each case. Given the old Japanese cultural principle (or “treasure”) of lifetime employment, an indeterminate contract can be hard to terminate. Such employees cannot be dismissed without legitimate cause according to law and social norms and so can become genuinely indefinite.
Consequently and for obvious reasons, employers are attracted to the flexibility of fixed term arrangements. Now 35% of Japanese employees are on such fixed term contracts.
There have been recent changes which have tightened the rules regarding fixed term contracts particularly in relation to renewal rights and rights to an indeterminate contract after a certain period of time. The changes are aimed at reducing what is known as “non-renewal anxiety” but it is not yet clear if they are having that effect.