Engage In Japan

Table of Contents

About Japan

Capital City

Tokyo

Population

As of March 2024, the estimated population of Japan is 123.2 million.

Currency

The currency in Japan is the Japanese Yen (JPY). The currency symbol is ¥.

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Overview

Japan, officially known as the Nihon-koku or Nippon-koku, is an island country in East Asia. It is situated in the northwest Pacific, forming an arc across the Pacific coast of northeastern Asia. Japan comprises four major islands, namely Hokkaido, Honshu, Shikoku, and Kyushu, along with numerous smaller islands that span over 1,500 miles together. With a total landmass of just under 150 thousand square miles, Japan’s geography is defined by its volcanic nature as part of the “Rim of Fire.” This unique location results in a wide variation of climate throughout the country. Japan shares its borders with Russia, Korea, and China, with the Korean Peninsula historically acting as a bridge between Japan and the vast civilization of China. Japan’s rich history is marked by its physical isolation, protecting it from invasion for much of its existence. Despite this isolation, the Japanese have demonstrated a curiosity and admiration for foreign cultures, incorporating foreign influences and transforming them into distinctly Japanese forms and styles. The country is governed through a parliamentary government with a constitutional monarchy, with the emperor serving as the chief of state and the prime minister as the head of government.

Employment Relationship

Permanent Employment

The Labor Contracts Law states that employment contracts concluded for indefinite duration are considered permanent. Permanent employees are entitled to benefits, including but not limited to paid annual leave, paid sick leave, public holiday allowance, parental leave allowance, and allowance for late-night work.

Fixed-Term or Specific-Purpose Contracts

In Japan, the duration of fixed-term contracts may not exceed three years, unless the employee is either someone who has the expert knowledge, advanced skills, or experience or someone who is aged 60 years or older. Fixed-term employees cannot be dismissed before the expiry of the term of the contract, except in case of gross misconduct.  Fixed-term employment is converted to permanent if the fixed-term employee has been working for more than five years with the same employer, with two or more renewals of the labor agreement. Employers must disclose renewal restrictions and the application process for converting to indefinite employment in the working conditions of the contract.  The Labor Contracts Law provides that there must be no unreasonable differences in the rights and working conditions of fixed-term employees and permanent employees. 

Temporary Employment Contratcs

In Japan, temporary employment is allowed in almost all occupations except for port transport services, construction work, security services, lawyers, and healthcare-related work. Temporary contracts can be valid for a maximum of 36 months with the same employer in a particular job and cannot be concluded for less than 30 days. Temporary employees are hired through temporary staffing agencies that determine their wages. Such agencies cannot dispatch more than 80% of their employees to group companies. A dispatch fee is determined while concluding a contract with an agency. Agencies must provide a statement on expected wages and treatment when employed, their business operations  and overview of the worker dispatch system. The law prohibits an unreasonably different treatment (e.g., wages, allowances, benefits, education) of permanent or full-time employees, and temporary employees. 

Probationary Period

The labor law of Japan does not offer provisions regarding the minimum and maximum duration of the probationary period. Most companies include a probationary period of three months. The employee who has been working for at least 14 days under probation is entitled to a 30-day notification period prior to being terminated by the employer.

Working Hours

In Japan, the maximum working hours are 40 hours a week and eight hours a day. These hours may be extended under special circumstances, such as a disaster and other unavoidable events, not exceeding ten hours a day. Minor employees 15-17 years of age are not allowed to work for more than 7 hours a day, or 40 hours a week, including school hours. Japan has introduced new guidelines for remote work. It allows working from home or any other location. Duration of working hours and other terms of work are discussed between employer and employees. Employers must introduce tools to facilitate remote work and track hours of work. 

Holidays / PTO

Statutory Holidays

New Year’s Day, January 1; Coming of Age Day, Second Monday of January; Foundation Day, February 11; The Emperor's Birthday, February 23; Vernal Equinox Day, Around March 20; Shōwa Day, April 29; Constitution Memorial Day, May 3; Greenery Day, May 4; Children’s Day, May 5; Marine Day, Third Monday of July; Mountain Day, August 11; Respect for the Aged Day, Third Monday of September; Autumnal Equinox Day, Around September 23; Health and Sports Day, Second Monday of October; Culture Day, November 3; Labour Thanksgiving Day, November 23.

Paid Annual Leave

In Japan, employees are entitled to at least 10 days of paid annual leave (can either be consecutive or distributed throughout the calendar year), if they meet the following conditions: Have been employed for at least 6 months Have reported to work at least 80% of the total working days Persons employed for at least 1.5 years receive one additional day for each year of continuous service, up to a maximum of 20 days. Unused annual paid leave may be carried over and taken the next year only. Payment in lieu of unused leave is subject to the agreement between the employee and the employer.

Sick Leave

Under the labor law of Japan, sick leave is not mandatory unless agreed upon in the employment contract. Employees must use their paid annual vacation days as sick leave, or else it is not compensated. Employees are paid 60% of their average wage during absence from work due to work-related sickness or injury. 

Maternity Leave

Maternity leave in Japan is set at 14 weeks, including six weeks of prenatal and eight weeks of postnatal leave. It is paid at the rate of two-thirds of the employee's daily wage if she is enrolled in the Employees' Health Insurance Scheme. Employers are prohibited from dismissing employees due to marriage, pregnancy, or childbirth. Dismissal of pregnant workers or employees in the first year after delivery is void unless the employer can prove just reasons for dismissal.

Paternity Leave

Paternity leave is provided and can be taken for 4 weeks (within the first 8 weeks) and is counted as parental leave and falls under child care leave taken by either parent until the child turns one year old. When both parents take child care leave, its duration will be extended until the child reaches one year and two months of age. The first 180 days of parental leave are paid at 67% of the average earnings and the remaining period at 50%. Fathers who have taken child care leave within eight weeks of the birth of their child can take second leave within one year. Beginning April 2022, fixed-term contract employees will be entitled to parental leave and employers must inform employees of the parental leave framework and take measures to facilitate the use of child care leave.

Termination of Employment

Notice Period

Employers are required to provide at least 30 days' notice or pay in lieu of it, irrespective of the duration of the employee's service. The notice period requirement does not apply to employees on probationary period who have worked for less than 14 days. 

Severance Benefits

The labor law of Japan severance pay is not a mandatory benefit unless it is issued in lieu of a notice of dismissal. Employees, however, are entitled to compensation for unfair dismissal. Typical compensation at 20 years' tenure equals six months of income. 

Social Security

Pension

The national retirement scheme in Japan is guided by the National Pension Law. National Pension covers all persons living in Japan, including foreigners. They are separated into 3 categories:  Category I – persons living in Japan aged 20 to 59 Category II – persons covered by Employee’s Pension Insurance or Mutual Aid Pensions Category III – dependent spouses of Category II insured persons A person can receive old-age pension benefits if they reach 65 years old, have contributed to the National Pension system for at least 10 years, and meet other requirements. For individuals who have contributed for at least 40 years, the benefits are JPY 816,000 annually for the fiscal year 2024. Those who have paid extra contributions receive 200 times the number of months for which they have made additional contribution as benefit. Employees covered under the Employees Pension Insurance scheme are entitled to benefits if they have paid premiums for at least 10 years in total. The amount of benefit is calculated according to the amount of insurance premiums paid and the length of the period over which they were paid.

Dependents/Survivors Benefit

In Japan, if a person insured under the National Pension System dies, the surviving spouse who takes care of the deceased's dependent children and the dependent children themselves are eligible for a survivors pension. Eligible children must be 18 years or younger or up to 20 years of age if they have a disability. Survivors receive a pension if they fulfill eligibility criteria. A surviving family member can receive a lump-sum death benefit if an insured person dies without receiving a pension. The insured person must have been in Category I (persons living in Japan aged 20 to 59 years) and paid at least 36 months of contributions. The surviving relative will receive between JPY 120,000 and JPY 320,000 depending on the deceased person's contributions. Under the Employees Pension Insurance, an insured person who is eligible to receive an old-age pension or a person receiving a disability pension who fulfills certain conditions dies, a survivor's pension shall be paid to that person's surviving family.  If an employee dies due to a work-related illness or accident, the employer must pay compensation to the employee's dependents. The amount must be equivalent to the average wage that is earned over 1,000 days. 

Invalidity Benefit

The National Pension System of Japan provides a disability pension to insured persons who are covered by the National Pension System on the date of their first medical examination for disabling injury or illness. Employees must have paid contributions for at least two-thirds of the entire period of insurance coverage until two months prior to the medical examination. The amount of benefit depends on the category of disability. A person who suffers a work-related illness or injury and remains disabled after treatment and recovery is entitled to compensation. The employer will pay compensation for the injury based on by multiplying the average wage by the number of days prescribed by law. The average wage is calculated by dividing the total amount of wages for a period of three months preceding the day the injury arose by the number of days during the period.  For employees covered under the Employees Pension Insurance, where the illness or injury that causes disability occurs during the period when the disabled party is insured, the regular pension or lump sum shall be paid to the disabled party. The amount of benefit is calculated according to the degree of disability, the amount of insurance premiums paid and the length of the period over which they were paid.  

Taxation of Compensation and Benefits

Personal Income Tax

In Japan, the income tax year runs from January 1 through December 31. Individuals are taxed based on graduated tax rates from 5% to 45%. The Income Tax Act defines the following categories of individual taxpayers: Resident – a person who has a domicile or has had a residence continuously for one year. They pay tax on all income from Japan and abroad. Non-permanent resident – a resident who does not have Japanese nationality and has had a domicile or a residence in Japan for not more than five years in total within the past ten years; non-permanent residents pay taxes on all income except on income from abroad that does not get sent to Japan. Non-resident – a person who is not a resident or is a non-permanent resident; non-residents pay taxes only on income from sources in Japan.

Immigration

Types of Visas

In Japan, visas can be grouped in the following categories: Working visas – considered long-term stay visas and cover the kind of work that requires high-level professional knowledge or skills, and thus, they do not include simple labor tasks.  Non-working visa – anyone who holds a non-working visa is allowed to work as long as the immigration office grants the permission. Persons working under a non-working visa cannot exceed the number of authorized weekly hours. Family-related visas – issued to family members of Japanese nationals, permanent or long-term residents for up to five years Tourist visa – valid for up to 90 days, this short-term stay visa is used for sightseeing, visiting friends, or attending conferences or courses. Under the single-entry regulation, foreign travelers can remain in Japan for up to 15 days. A tourist visa does not allow travelers to engage in paid work while in the country. Digital Nomad Visa – it allows individuals to work remotely from Japan for a period not exceeding 6 months.  They must submit an application with proof of annual income exceeding JPY 10 million (Japanese Yen), and documents for insurance against death, injury or illness during their stay in Japan. This visa is non-renewable. Visas are also categorized based on the number of entries allowed: Single-entry visas are valid for three months upon the issue and usually allow the holder to stay in the country for up to 15 days. Double-entry visas have a validity of six months from the date of issue. Multiple-entry visas are usually valid for one to five years, depending on the visitor’s nationality, the purpose of the visit, and the type of passport they hold; each stay cannot exceed the 15 or 30-day period.  

Work Permit

There are four categories of work visas in Japan: High Skilled Professional Visa – issued to highly educated foreign nationals under a point-based system. It is granted for up to five years, with the possibility of permanent residence. General Working Visa – issued to different categories of professionals. The duration of this visa ranges from three to five years. Working Holiday Visa – issued to citizens of 26 countries that have a mutual agreement with Japan for a Working Holiday visa for a year. Specified Skills Work Visa – newly launched visa to meet critical labor shortage in Japan in 14 specified industrial sectors. It is issued for a period of up to five years. Foreign employees have to pass a Specified Skilled Evaluation Test to get this type of work visa. 

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