Roundtable Discussion: Questioning Japanese Work Styles After "Work-Style Reform"

Today, I would like to discuss with all of you the topic of "working styles," which has recently been a subject of discussion in various forms.

First, I would like to start our discussion with a "comprehensive review of work-style reform." Seven years have passed since the enforcement of the Act on the Arrangement of Related Acts to Promote Work-Life Balance in 2019. Of course, work-style reform had been promoted even before then, but I would like to briefly explain what the actual situation looks like based on official statistics.

First, according to the Ministry of Health, Labour and Welfare's "Monthly Labour Survey," if the total actual working hours of general (full-time) workers in 2012 is set at 100, it decreased from 2018 to 2020, remained roughly at that level thereafter, and most recently stands at 94.6. In other words, it has decreased by 5.4% compared to 2012. It is likely that 2019 was influenced by the enforcement of the work-style reform laws, and 2020 was also affected by COVID-19. Academic research also shows that working hours have decreased to a certain extent due to the work-style reform laws.

Furthermore, looking at the trends in the ratio of long-hour workers by enterprise size in the Ministry of Internal Affairs and Communications' "Labour Force Survey," the number of people working long hours has been decreasing since 2019 across enterprises of all sizes. However, the problem is that there are still more people working long hours in small and medium-sized enterprises compared to large enterprises, and the numbers remain high in government offices as well.

Additionally, looking at the trends in working hours for management and non-management levels in Nikkei Inc.'s "Nikkei Sustainable Survey: Smart Work Management Edition," which is primarily aimed at listed companies, there is a downward trend similar to the macro movement. However, while working hours for the management level decreased in 2019, they increased in 2020 and 2021, and have remained at a high level since then. One could view this as the burden being shifted onto the management level.

Next, looking at the trends in the acquisition rate and number of days of paid leave in the Ministry of Health, Labour and Welfare's "General Survey on Working Conditions," the number of days taken has certainly increased, partly because taking five days of leave was effectively mandated by the work-style reform laws. I believe this has also contributed to the decrease in annual working hours.

As you can see from these figures, working hours and working days have steadily shortened since 2019. Based on this premise, I would like to consider what has happened to productivity, as well as well-being—which is currently attracting attention—physical and mental happiness, health, and work engagement.

First, Mr. Ikeda, looking back over the past seven years or so, how have working styles changed at your company, and how have productivity and well-being changed as a result?

Our company was founded in 1927, and next year will mark our 100th anniversary. Our core operating company, Onward Kashiyama, develops apparel brands such as "23-ku," "Gotairiku," and "J.PRESS." Group companies include Chacott, which handles ballet and dance supplies, and Yamato, a catalog gift company. Also, last year, WEGO, which is popular among the younger generation, joined our group. We are a company that focuses on fashion while also addressing wellness and lifestyle as a whole.

Because of our long history, our organization and systems were well-established. Consequently, we felt a gap between changes in global lifestyles and our company's work systems. Since 2019, under the guidance of Ms. Komuro, we have been working on work-style reform and promoting a project called "Work-Style Design."

In terms of specific facts, the average number of annual holidays taken was 119.0 days in fiscal 2018 before the initiative, but the figure for fiscal 2024 has grown to 129.7 days. Average monthly overtime was 17.7 hours in fiscal 2018, but has decreased to 10.0 hours in fiscal 2024. I believe this aligns with the data shown earlier; the results of our efforts are evident here.

Regarding how this links to productivity, the group's consolidated operating profit was 5.167 billion yen in fiscal 2018, but it doubled to 10.153 billion yen in fiscal 2024. We have achieved both progress in work-style reform—with overtime hours halved—and a doubling of company performance, and we truly feel the results.

That is amazing. Doubling operating profit. Have you heard from employees that they are also feeling the impact?

Yes. When we surveyed the front lines after introducing the shift selection system (described later), 98% responded with either "it has become easier to work" or "no change," while only about 2% said "it has become harder to work." So, in general, I believe it has indeed become easier to work.

As part of the initiative we call "Work-Style Design," we are promoting "My Golden Week," where we actively encourage employees to take 10 consecutive days off, separate from the calendar Golden Week. By enriching time spent with family and personal life, I believe employees are able to approach their work with a sense of well-being as a result.

The turnover rate at Onward Kashiyama for fiscal 2024 was 5.7%, and the retention rate is increasing. I feel that the results of our work-style reform efforts are showing in these areas as well.

It truly seems like the ideal form of work-style reform, or rather, a company where it is going very well.

Ms. Komuro, you support various companies. While there are companies like Onward where things are going well, I imagine there are also those that haven't started yet or where initiatives aren't succeeding. Having seen many companies, how do you feel looking back over the last six years or so?

First, what I think has been best for Japanese society regarding this work-style reform is that the labor force population reached a record high in 2025, exceeding 70 million in preliminary figures. It jumped particularly in 2019, the year of the work-style reform laws, and is now at an all-time high.

I have been a consultant for 3,600 companies over the 20 years since I founded Work-Life Balance Co., Ltd. When I ask companies that have already implemented work-style reform, "What image do you have of the labor force population being at a record high?" they generally say, "We certainly feel it in our company too."

This is because people with childcare or nursing care responsibilities, who would have quit under the old way of working, are now working as a matter of course, and many people who once quit have returned to work. Furthermore, among older people, those who would have quit abruptly at age 60 in the past are now increasingly choosing to demonstrate their abilities at the same company if flexible working styles are available, rather than having no income or being rehired for a new job. By changing the way employees work in this way, many companies are securing new labor.

On the other hand, there are companies that don't feel this at all. There are companies and industries that feel such a severe labor shortage that they wonder if the labor force has disappeared from the world, and those people have recently been calling for the relaxation of the upper limit on working hours.

Such companies are very common in the construction and transportation industries, where the law was applied five years late in 2024, as well as among small and medium-sized enterprises. There was a grace period until the work-style reform laws were applied, and they were supposed to prepare during that time, but they are in great trouble because preparation did not progress. At the same time, by deferring for five years, they have been completely branded as industries that are difficult to work in. In this way, there is a polarization between industries that are chosen by the supposedly increasing labor force and those that are not.

Companies and industries that could not implement work-style reform cannot attract talent, so they are in a state of feeling a labor shortage even greater than the actual shortage. After all, when a country becomes one with a declining population, how early you start work-style reform is a crucial factor in business competition. I think there are industries where the resistance of "I don't want a different way of working than before" has backfired because they failed to read this situation.

However, some parts of the construction industry are changing. It's not that people can't be hired because it's the construction industry; companies that have implemented work-style reform are now able to hire about twice as many people as before.

Also, if you look closely at companies that appeared to have implemented work-style reform, they are divided into two types. There are those that went as far as scrutinizing the work itself or giving up on unnecessary internal coordination, and those that performed "superficial work-style reform" by shifting working hours to management, as if saying "let the managers handle it," as shown earlier.

In the latter organizations, well-being figures become very poor over time. Very serious managers who take on work endlessly end up overworked and sleep-deprived, and their deteriorating mental state leads them to shout at subordinates. Even if the apparent working hours in the workplace decrease, subordinate engagement worsens and turnover increases, leading to a negative spiral where that work falls back onto the managers.

Such companies have a strong trauma regarding work-style reform and have a bad impression, feeling that the situation was made worse by the work-style reform suddenly decided by the government.

Japan must advance work-style reform further, or it will fall far behind global standards, yet a sense of rejection remains. While companies that have implemented true work-style reform are achieving higher results in less time and are very successful in recruiting talent, I believe this difficult problem remains in some companies and industries.

You have made a very important point. Six or seven years ago, when we were discussing work-style reform, there were many voices saying, "We can't make money if we reduce working hours," but it seems many companies have achieved results by pushing forward with the reforms.

I believe work-style reform was carried out for various reasons, but as Ms. Komuro said, the fact that it ultimately enabled a diverse range of people to work is significant. I think the fact that the old structure—which assumed "men and long working hours" and wouldn't accept anything else for regular employees—has changed considerably is a major effect. And as Mr. Ikeda showed, when you actually try it, productivity actually goes up.

However, on the other hand, I believe there are still challenges for companies that have not undertaken reforms in earnest. Based on the discussion so far, what do you think, Mr. Sato?

I am currently a faculty member at Keio, but before that, I worked at the Ministry of Health, Labour and Welfare for 12 years. Ms. Komuro mentioned that there is now a polarization between industries that are chosen and those that are not. Indeed, Kasumigaseki has become famous for long working hours, as the term "Black Kasumigaseki" suggests, and its popularity is currently plummeting.

I lost my father when I was one year old, and the cause was death from overwork. However, because the Ministry of Labour at the time did not recognize it as a labor accident, we fought in court for 17 years from then on. Having seen my parents in that situation, I became interested in labor and health, and joined the Ministry of Health, Labour and Welfare after graduating from university.

Regarding the 2019 work-style reform, although I was in the Ministry, I was studying abroad and could not be directly involved, but my impression was that the administration did quite a lot of what it could do. I became a researcher because I wanted to consider the relationship between labor and health based on evidence in the future.

In the discussion so far, it is true that total actual working hours are decreasing, but in reality, it seems to be polarizing. The percentage of workers working 49 hours or more per week is 15.2% in Japan. It is 11.8% in the US, 8.9% in the UK, and 4.6% in Germany. While it is true that initiatives within Japan have progressed considerably, my current understanding is that when viewed through international comparison, there is still work to be done in Japan.

While long working hours are becoming less common on average, how would you evaluate the situation from the perspective of well-being and health?

I am concerned that labor accident certifications due to mental disorders are increasing year by year. In fiscal 2024, there were 1,055 cases, a record high. While long working hours have decreased and labor accidents due to cerebrovascular diseases such as myocardial infarction and stroke have decreased, my recognition is that challenges still remain regarding the perspective of well-being.

In terms of well-being, Japan ranks last in international comparisons regardless of which indicator you take, such as work engagement or employee engagement. However, looking at it the other way, you could say there is room to increase well-being in Japan.

Currently, as corporate management to enhance well-being, I think there is a significant movement toward human capital management or health and productivity management. Is Onward also undertaking such initiatives?

Yes. We are very conscious of health and productivity management. Speaking of the next phase of work-style reform, we recognize that achieving employee satisfaction and well-being will lead to results for the company, and I believe it's about whether we can actually feel that.

Onward included an 11-hour rest period between shifts in its work rules in 2024. While rest periods between shifts have only been introduced by 6% of companies in Japanese society, this is quite early timing. Also, in fiscal 2021, men took an average of four months of childcare leave. For a company with 5,000 employees to have men taking an average of four months of childcare leave is a rare figure, so while the acquisition rate is important, I think the length of the period is amazing. They have created a workplace that functions no matter who takes a leave.

That is wonderful. You have entered the next phase of work-style reform.

On the other hand, there are companies that haven't even achieved work-style reform and are neglecting well-being. There is a risk that a significant gap is emerging.

Actually, a bill regarding rest periods between shifts was supposed to be deliberated in this fiscal year's Diet, but it was shelved. It should have been a very important discussion right now.

Remote work is important in terms of flexibility in working styles, but without the concept of rest periods between shifts, people may repeatedly wake up and work at their preferred times, potentially damaging their mental state without even realizing it.

Furthermore, side jobs are good in the sense that they are motivated by the individual's desire to learn, increase career change opportunities, and lead to labor mobility. However, if someone does a side job like a "double crop" without maintaining rest periods between shifts, there is a risk they will wear themselves out. Flexible initiatives that should be good will collapse if they are not paired with sleep.

In a survey on the relationship between corporate measures, employee satisfaction, and turnover rate reduction, employee satisfaction with the measure of "salary and bonus increases" is very high, but it has almost no effect on reducing the turnover rate. Moreover, the level of employee satisfaction does not reach that of companies that have introduced rest periods between shifts.

In other words, an increase in salary and bonuses is certainly happy for a moment, but it doesn't last. On the other hand, ensuring daily sleep seems to lead to a continuous sense of daily satisfaction for that person, and by reducing the number of sleep-deprived people in the team, it reduces the number of people who quit due to interpersonal problems such as irritability or bullying.

I believe we need a design for the entire nation that firmly addresses sleep as a country, rules for rest periods between shifts to protect the public's sleep, increases concentration during the day, and reduces deaths from overwork.

I completely agree. When Prime Minister Takaichi took office as President of the LDP last autumn, she said, "I will work, work, work, work, and work," which sparked pros and cons. Some said people who want to work should work as much as they want, while others questioned whether a leader should say such a thing. I also think people who want to work should work, but on the other hand, I feel we must draw a line to properly protect health.

Regarding sleep time, Professor Masashi Yanagisawa and others at the University of Tsukuba published a study last year targeting about 79,000 Japanese people using data from a smartphone sleep app called "Pokémon Sleep." The paper shows that productivity is highest when sleep time is 7 to 8 hours. While research showing that the mortality rate is lowest at 7 hours of sleep was already quite well-known, clear results have now been produced regarding productivity as well.

In this way, I think it would be good if it became more widely known that protecting employee health increases productivity and has positive aspects for corporate management.

Japanese people still work too long compared to other countries, and for that reason, their sleep time has become short. I also perform such analyses, and that is precisely why I think just securing a little more sleep time would have a significant impact on productivity. That part needs to be addressed more by companies and by the nation.

Mr. Sato just mentioned Prime Minister Takaichi's remarks, and in the policy speech, the talk about wanting to review the discretionary working system attracted attention.

So next, I would like to consider the discretionary working system. Various things are being said about it. Regarding discretionary work, there was actually a system revision in 2024 to encourage more cautious operation, changing it in a direction that strengthens workers' rights. However, we are now hearing talk that the government is considering reforms in the opposite direction, such as expanding the scope of application for discretionary work.

For example, Mr. Ikeda, how many people are covered by discretionary work at Onward?

As a company-wide system, we currently do not have the discretionary working system in place. Our company integrates everything from the manufacturer function of creatively designing and making fashion to the retail function of delivering it to customers.

Since it is a system where we think about manufacturing together with the retail front lines, stores, and sales staff centered on the customer, store operating hours are fixed, and the head office also respects that management is operated with the customer first and centered on the stores. Therefore, it is difficult for the head office to implement a discretionary working system regardless of that.

However, on the other hand, regarding designers and pattern makers, we want them to demonstrate their best creativity. In that sense, we have a desire to give them discretionary power, but the challenge is how to link that with the stores in the future.

It might be slightly different from the main discretionary working system, but for pattern makers, for example, the result is how many patterns they can draw. Initially, I thought remote work might not be suitable, including hardware issues, but on the contrary, since there are many women, we found that remote work is also suitable for them to drop off, look after, or pick up their children according to their lifestyle.

The results of their work can be very clearly promoted, like "I created the best patterns for my goal of two patterns today, and they became hit products." I think it's close to discretionary power, and I feel that a way of working that gives discretionary power is suitable for creative professions in terms of how they face their children and family.

So, for jobs where it is difficult to measure results by time, discretionary work may be suitable.

In fact, by making remote work possible, we no longer have cases where people say, "My child is small and commuting is hard, so I'm quitting the company to work near my home."

Mr. Sato, what are your thoughts on the discretionary working system?

From the worker's perspective, there are concerns that the discretionary working system might lead to being forced to work as much as possible without overtime pay. On the other hand, if we take it positively as Mr. Ikeda said, I think it could enable more flexible working styles.

Rather, I feel that the management side, rather than the workers, might find it more difficult. The essence of the discretionary working system is to decouple working hours and wages. Working hours are the easiest input indicator to measure, but if that disappears, you have to measure by other criteria.

So, how will the management side measure that? Moreover, in a place like Japan with membership-type employment where jobs are not clearly defined, I feel that the challenges for the management side in how to measure results for individual duties are actually quite large.

Exactly. If the scope of discretionary work is expanded while the management side is unable to measure results, strange things are likely to happen.

Ms. Komuro, what do you think?

I currently belong to both the Japan Association of Corporate Executives and the Japan Business Federation, and when I look at the discussions from within calling for the discretionary working system, I don't understand what problem they are hoping to solve.

This is because the preamble to that discussion always includes "because there is a labor shortage." In the logic that a discretionary working system solves labor shortages, I strongly sense a hope that "people will work more hours than now for the same wage." But since overtime pay is paid even under the discretionary working system, there is something very strange about it, as if an implicit expectation of being able to make people work as much as possible is seeping out.

Furthermore, as the labor force population decreases, if we try to provide the same basic services as before, there will be more situations where everyone connects like a patchwork, with Person A coming at this time and Person B coming at that time. When there were many people, services could be provided without interruption even without detailed management, but to achieve that with fewer people, you have to give instructions like "Person X, you must absolutely be here from this time to that time."

That is a workplace far removed from a discretionary working system, so I wonder if it is realistic for people to have discretion, including over their time, in such a setting.

One more thing, regarding the "problem of shifting work to management" mentioned earlier, employees who requested the discretionary working system might risk being treated the same as the management side without intending to, becoming someone to whom it is easy to shift work.

Talented people who demonstrate high productivity when concentrating but have uneven working styles often want discretionary power. It is certainly suitable for such genius types, but there is a tendency for them to become the outlet for adjusting the workload in the workplace because of the discretionary working system, and they end up being pushed into a state where an unmanageable amount of work falls on them. I feel that the danger of the discretionary working system lies in the risk of crushing that talent as a result.

In Japan, partly due to the labor shortage and the remaining membership-type employment, there probably aren't many people who can work with discretion over their time. On the other hand, even if discretionary work is applied to those whose job characteristics allow it, there is a risk they will become targets for shifting the burden.

Managers and supervisors can work autonomously and are in a position close to management, so they are exempt from working hour regulations, but people under discretionary work are not, so their position is still weak.

Recently, an analysis conducted by a research group including Professor Taiji Kawaguchi of the University of Tokyo and Professor Sachiko Kuroda of Waseda University also showed results that applying discretionary work to people who do not substantially have discretion leads to a significant decrease in well-being.

If there is indeed an intention on the management side to make people work more than now, as Ms. Komuro mentioned, then we must be very cautious about expanding the scope.

If the goal is truly to allow people to work according to their own discretion and concentration times, I think flextime would be sufficient.

Regarding the people who create the patterns mentioned by Ms. Ikeda earlier, do they also work using flextime?

We have adopted a work style with several patterns for start and end times. It is an original elective shift system that feels like taking the best of both flextime and non-flextime. There are 13 patterns with set 'in' and 'out' times, and these can be changed daily.

Before the work-style reforms, the rule was uniformly 'work from 9:00 a.m. to 5:40 p.m.,' but now it is about uniquely adapting to life stages and specific job types. We have paired this with mandatory rest periods between shifts (inter-shift intervals).

For those working in stores, I imagine many start at 9:00 a.m., but if they work late at night, can they use the inter-shift interval to start work at 10:00 or 11:00 a.m. the next day?

That is correct. Since stores operate entirely on a shift system, to put it simply, one could work an early shift and leave early, then work early again the next day. Or, if someone needs to pick up their child at 5:00 p.m., they can combine a reduced-hours system with the shift system to finish work completely at 4:00 p.m. every day.

I think that is a wonderful way to work. In an environment of labor shortages, companies sticking to old-fashioned ways of working cannot win. Rather, because of the labor shortage, we are entering an era where those who are properly reforming are the ones making the right choice.

That is exactly right, but I feel the biggest waste is that many people misunderstand work-life balance as something that is 'kind to employees but bad for business.'

From the moment Ms. Takaichi said 'work, work,' I have been receiving a huge volume of interview requests from the media. What I discovered was that everyone thinks of work-life balance as a very 'flowery' or idealistic story. It seems I was perceived as someone talking about being kind, and people tell me, 'When I actually listen to you, it's quite a tough, realistic story.'

Work-life balance started in the UK under the Blair administration and in France from the realization that a country cannot survive if it educates both men and women but only one side becomes part of the labor force. It is a tough reality: the labor market is being made accessible to both men and women, so in exchange, they are expected to bear the tax burden and contribute to the economy. It seems people did not understand that.

France's switch to a 35-hour work week was not necessarily about being kind to employees; it was because doing so brings people who had fallen out of the labor market and were being supported back to the side of those providing support. It is a survival strategy for a country with a shrinking population: 'I don't care how you work, just stay on the supporting side for even one more minute or second,' and 'Everyone who has been educated must work.'

The interviews increased following Ms. Takaichi's remarks, but I think it was good that people were able to realize once again that this is a very important issue for Japan. There are far too few people who talk about work-life balance in the context of business and economic growth.

From a woman's perspective, I started Work-Life Balance Co., Ltd. 20 years ago based on the thought, 'Does Japan really think it can continue economic growth with this way of working? That's naive.' From a woman's point of view, it was a society where it felt like, 'You spent so much tax money to educate me, but in this labor environment, I'll lose my motivation and fall into the category of those being supported—is that really okay?'

There are estimates showing a 200-million-yen difference in lifetime earnings depending on whether a woman quits her job and finishes her life working part-time, or continues to work as a regular employee even after taking three maternity leaves. The question for Japanese society is, 'Is it okay to lose GDP equal to 200 million yen multiplied by the number of women? You could be collecting taxes on that.' If I were a national leader, I would consider it such a waste that I would take measures immediately. I have been promoting efforts in this field for 20 years with that sense, but for a long time, it was misunderstood as welfare.

I feel that if we don't use this opportunity, where a backlash is occurring, to dispel that perception, Japan will truly sink as it is.

So you are saying we can use the backlash effectively.

Even before the work-style reforms, the 'Charter for Work-Life Balance' (2007) was issued and there was an action plan, yet the necessity of work-life balance in its true sense had not permeated. I hope that this discussion will serve as a catalyst for a correct understanding to spread once again.

As Ms. Komuro mentioned, work-life balance and productivity are by no means contradictory; rather, evidence is showing that work-life balance actually increases productivity.

Regarding remote work, Professor Nicholas Bloom of Stanford University and others have published various studies. For example, in a call center, half of the people were randomly selected to work from home four days a week, while the other half worked in the office five days a week. Nine months later, it was found that the productivity of the group that worked from home was 13% higher than that of the office group. Furthermore, the remote work group had significantly higher job satisfaction, and their turnover rate was halved.

Management also sees a huge benefit because office rent can be reduced as fewer people come in. Ultimately, it was reported that a profit of $2,000 per employee per year was generated.

Subsequently, Professor Bloom and his colleagues conducted randomized controlled trials on white-collar college-educated workers as well. There, too, the results showed that the group able to work from home two days a week saw increased productivity and a decreased turnover rate.

Furthermore, a paper published by Professor Bloom and others this year suggests that remote work may significantly increase birth rates. People who work from home at least one day a week have higher birth rates compared to households that do not. When both spouses or partners work from home, the rate is even higher, showing that the total number of births per woman is on average 0.32 higher.

Incidentally, the percentage of people in Japan who work from home at least one day a week increased considerably during the COVID-19 pandemic, but it is still only 21%, ranking last among the 38 countries surveyed. If remote work in Japan were to increase to about 45%, similar to the UK and US, it is estimated that the birth rate would rise by about 4.6%, resulting in an increase of 31,800 births per year.

The spread of remote work not only increases corporate productivity but also has the potential to be a measure against the declining birth rate.

So, improving well-being through remote work also leads to improved productivity. However, according to my research, if remote work is forced upon Japanese companies or if the application rate is increased artificially, productivity can sometimes actually drop. Ultimately, I believe what is important is to improve the environment to make remote work easier, such as modifying the rigid membership-based employment model, organizing job descriptions, and enabling the effective use of technology.

A good point about remote work is that productivity can increase because you can concentrate on creative work in your own space without being unexpectedly interrupted by a supervisor.

Looking ahead, challenges remain in the work styles of regional areas and small and medium-sized enterprises (SMEs). SMEs in regional areas are particularly struggling with labor shortages. Also, in regional areas and SMEs, there are many older managers and employees, and I think there is a generational gap regarding work styles. What are your thoughts on this point, Ms. Ikeda?

I think things like inter-group gaps and inter-generational gaps are commonly discussed in society. Based on the premise that such challenges exist, in our company's case, when we tackled work-style reform, we started psychological safety training with the executives, followed by general managers, department managers, and then employees.

In addition, since performance carries a heavy weight in the evaluations of managers and executives, we simultaneously introduced 360-degree evaluations from subordinates into the behavioral evaluations.

We introduced a system where it's not just about producing results, but also about how you are perceived by your subordinates, including your way of working. It's not so much about deducting points as it is an evaluation saying, 'You are seen this way, so you should improve this area.' By trying these things, we are working to bridge the gaps between industries, generations, and positions.

Also, something became clearly evident through our remote work efforts. I mentioned earlier the productivity improvement of the manufacturing team, but the need for corporate investment to create a situation where that can be done at home became apparent. We made what you might call a DX investment, installing full CAD systems and creating a mechanism where work can be done from home.

Investment costs money, of course, but when you invest within a virtuous cycle, productivity increases. Within that, DX is indispensable. There are many challenges that can be solved with that kind of approach, gaps will be bridged, and I believe that both compensation and satisfaction will increase for everyone as a result.

So, companies that are seriously committed are investing significantly in technology and linking that to work-style reform, which creates a virtuous cycle where remote work also succeeds.

I'd like to share a story about a regional area. Since last year, we have been working on a major initiative with the Kochi Prefectural Government.

The catalyst was an article I wrote for the Asahi Shimbun last February regarding overtime premiums. Only in Japan is the overtime premium rate 1.25 times the base wage, while in almost all other developed countries, it is 1.5 times. First of all, I am shocked that no one, including business owners, knows the concept of the 'equilibrium premium wage rate' for overtime.

The equilibrium premium wage rate is the point where it becomes equally costly to either have current employees work overtime or hire a new person for a short time when new work arises, and that is around 1.5 in most countries. Therefore, setting the premium rate lower than 1.5 is equivalent to suggesting to business owners that they can profit by hiring fewer people than originally necessary and using overtime as a buffer. If a business owner operates with an overtime premium rate of 1.25, they can distribute maximum profits to shareholders, which results in creating a 'black' (exploitative) company.

Why has Japan alone kept it this way for so long? Legal reform is truly what is needed most, and this structure, where an enormous amount of long working hours is placed on men, is one major factor in the declining birth rate. Furthermore, people who want to work while managing various personal circumstances end up not being seen as full-fledged workers.

After I wrote this, I was contacted by Governor Hamada of Kochi Prefecture. Kochi has the worst birth rate, and despite extensive support for male childcare leave and for women, the birth rate has not risen. He realized after reading the article that instead of support for women and children, what was actually needed was to shorten the working hours of those working long hours in the workplace, and that the premium wage rate was the key. Consequently, the Kochi Prefectural Government decided in the assembly to raise the overtime premium rate to 1.5 times, which will be implemented starting this spring.

If they did that as is, it would cost more of the taxpayers' money, so to prevent that, they decided to compress current overtime hours to five-sixths of their current level, and they have been working on this through an agreement with our company since last year.

Furthermore, they have decided to create a new employment category for people who can work even for short hours. This was also the governor's strong preference: hiring them as regular staff who are eligible for bonuses, working 10 hours a week, with a system where they can take unpaid leave if they wish.

This is a very clever system where, depending on the week, one can work 30 hours or full-time. When they actually started recruiting, 100 people applied for just five positions. Moreover, they were talented people of a kind who hadn't applied before, and almost all were women. They couldn't apply if told it must be full-time from the start, but the element that attracted these talented people was indeed the flexibility of those '10 hours a week.'

If you use this approach, 100 applicants will come. I think this is the same for SMEs. I believe that the more a regional area faces a shrinking workforce, the more it needs to make its work style attractive to increase its hiring power.

That is quite a wonderful example.

When we say work-style reform increases productivity, it tends to boil down to the idea that one person's concentration improves and their productivity goes up, but I think the actual productivity improvement effect happens within the team.

Until now, if someone's working hours were missing, that work was placed on someone else who could work overtime. The structure was that supervisors relied only on those who could work a lot of overtime, giving only them high evaluations, while others felt dissatisfied.

On the other hand, if you introduce inter-shift intervals or set the overtime premium rate to 1.5 times, you start giving full-scale work to people who were previously only thrown menial tasks because they were on reduced hours for childcare.

When that happens, you have to ask the people who were previously working overtime to change how they work. When work that was a 'black box' on the premise of always being done by one person is properly visualized, shared, and uploaded to the cloud so that anyone can pick up the pass even from home, the team's productivity rises dramatically.

Onward has also seen a V-shaped recovery in performance, and that is because this coordination has improved.

Another thing is that digitalization also progresses significantly. This is because as long as there are employees who work as excellently as an AI until late at night, business owners think 'maybe later' and never invest in DX. But when the overtime premium rate becomes high, they think 'it's time' and digital investment proceeds. This kind of chain reaction actually leads to productivity improvements.

And the last thing that happens is a base pay increase. Many companies don't know their monthly overtime costs until the end of the month, and because they think they shouldn't run out of cash, they keep the base pay low, making it impossible to raise it for many years.

However, if you seriously bring overtime down to almost zero, you can predict the monthly cash outflow. Then, it becomes easy to estimate how much can be added to the base, and base pay increases become possible.

Now, Onward has been able to implement a 10–16% base pay increase, and salaries have grown significantly. It's not a one-time bonus; you can't recruit new graduates now unless you raise the basic salary, and their recruitment is now going smoothly.

Closing the gender wage gap, digitalization, and improving base pay. These start spinning in a virtuous cycle, so performance goes up. I analyze that this is how the mechanism of productivity improvement works.

I strongly hope that such things can be done not only in large corporations but also in SMEs and regional areas. As one catalyst, economic theory also suggests that raising the premium wage rate has the potential to reduce overtime hours and increase the hiring of new people.

I think it is truly bad not to know the equilibrium premium wage rate, so I would like you to mention this concept repeatedly.

In the context of wage hikes, if the overtime premium rate is set to 1.5 times, a person who used to work 30 hours of overtime a month can work 26 hours and have more take-home pay than before, with those 4 hours going toward childcare, which also produces an effect as a measure against the declining birth rate.

Japan has an aspect of having grown on the premise of long working hours, and within that, the premium wage rate has been kept low. I felt that in the future, it is important not only to regulate working hours but also to encourage behavioral changes in companies by raising the premium wage rate.

From the perspective of women raising children, it is truly unjust not to be evaluated despite producing such excellent results within their hours. The reason business owners feel dissatisfied with work done only within regular hours is that overtime labor is too cheap. Overtime is treated as part of a single work package as if it were regular hours, and about 10 hours of work is expected for a 'full-fledged' workload, so people who can only work 8 hours receive evaluations that make them seem inferior.

However, in a future society where the number of people who can only work within regular hours will increase, I think we need to recognize that this is actually a bad system for the citizens.

Also, I think this relates to a gap in perception between generations. The reason it was kept at 1.25 was that it was a strength in a country with a growing population. So, keeping it at 1.25 made a lot of sense at least until the mid-90s.

However, the biggest problem is that we didn't change it promptly when that environment disappeared. Once you enter a population decline phase, you must promptly make overtime expensive, turn diverse people into a workforce, and switch to a high-value-added business model with both men and women working shorter hours. The change in population structure and the logic for winning in business are a set.

It seems that if we implement 360-degree evaluations and reform at every level, as Onward has done, the generational gap will disappear, but it's difficult to do that in places like regional SMEs. Such discussions really need to happen across Japan as a whole.

I believe a set of legal reforms and incentives is effective for changing SMEs. Large corporations can change through training, but for SMEs, I think it's better to guide them with a combination of legal reform to 'raise the overtime premium rate to 1.5 times' and tax incentives for companies that shorten working hours.

Ms. Komuro mentioned that business owners do not know the equilibrium premium wage rate. Also, in Japan, it is believed that productivity drops when doing remote work. That is why there are many companies requiring office attendance, but we researchers need to communicate more that this is a misconception and not based on evidence. I want management levels to know more about good examples like Kochi Prefecture and Onward.

Also, while the Japanese-style membership-based employment is often criticized, I believe it also has positive aspects in terms of preventing work from becoming dependent on specific individuals. By being able to help each other as a team when in trouble, people who cannot work long hours due to various circumstances can also participate as part of the workforce.

We have come to understand quite well that forcibly introducing a job-based model does not work. Shouldn't we think about how to work well under membership-based employment?

Indeed, membership-based employment is surprisingly not bad. Japanese people are good at passing the baton, so by enhancing that, I believe a new model is possible where a small number of people demonstrate extraordinary productivity.

I don't deny the membership-based model either. For example, when considering the impact of AI, training and reassignments tend to function well, especially in large Japanese companies, so we can expect progress in acquiring new skills and the division of labor with AI. Regarding work-style reform, I believe a model unique to Japan can surely be created by successfully changing systems within companies to create better ways of working.

The point that precisely because a backlash is coming now, we need to make a steady appeal and that it is actually an opportunity, was a very significant realization.

Also, I personally felt that raising the premium wage rate is an effective measure, especially for SMEs. I think Japan's future work styles still need to change, but if we handle it well without being pessimistic, I felt that a good labor market will be formed.

Consulting for several regional SMEs, I feel that when work styles are reviewed in regional SMEs with a scale of about 50 to 100 people, the birth rate rises significantly. SMEs change quickly depending on the owner, so they change a lot in about eight months. If SMEs change to work styles that further increase the birth rate, I think Japan can resurface in terms of population as well.

So, changing work styles not only simultaneously improves the well-being of workers and corporate productivity but also has the potential to lead to the resolution of the fundamental challenge Japan faces: increasing the birth rate. I felt once again that it is important not to let the flow of work-style reform since 2019 die out, and to deepen the discussion further, moving beyond just reducing working hours to implementation including sleep, health, flexible work styles, inter-shift intervals, and extending to SMEs and regional areas.

Through today's discussion, I think it has become clearer that work-style reform is not just about being 'kind to workers,' but is itself a management strategy for Japanese companies to secure human resources, increase added value, and grow sustainably. Moving away step by step from a society premised on long working hours and transitioning to work styles where diverse people can demonstrate their respective strengths will likely become increasingly important when considering the future of the Japanese economy and society.

Thank you very much for today.