As Japan PM Abe weighs labour reform, IBM emerges as test case

When 27-year IBM veteran Martin Jetter came to Tokyo last year, the new president of the technology giant’s Japanese arm had a radical idea: hold workers accountable for performance.

Within months of Jetter’s arrival, IBM Japan fired a group of workers deemed to be underperforming in the kind of restructuring common in many Western countries but rare in Japan, where the most sought-after jobs have carried a promise of lifetime employment.

International Business Machines is now being sued for wrongful termination in what is shaping up as a legal test case in one of the most divisive and politically charged issues facing Prime Minister Shinzo Abe - whether to make it easier for companies operating in Japan to fire workers.

After years of economic stagnation, the prime minister hopes to shift Japan away from an employment system that prioritises stability to focus on growth. On a Sunday television show, Abe said he wanted more hiring based on specialisation or location - jobs that would offer benefits closer to full-time positions but be easier to cut if deemed no longer necessary - as one of his planned labour market reforms.

Advocates say these reforms would spur hiring and create opportunity for women and younger workers more likely to be stuck in lower-paid contract jobs without legal protection.

“We need to move away from this notion of lifetime employment. That means all the Japanese individuals should be more independent,” said Hiroshi Mikitani, chief executive of internet shopping firm Rakuten Inc and a member of an industrial competitiveness panel that advised Abe on economic reforms.