PAYA to PAYP

Tomohiko Taniguchi (Editor at Large, Nikkei Business Publications)

PAYA to PAYP

Wage and age always went hand in hand in Japan. They were in sync at any given time. This was the case in the good old days when Japan Inc. was young, its surrounding environment inflationary, and Japanese management looked distinctively superior to its counterparts in the US or in Europe. However, the last couple of months have seen a number of blue chip companies abandoning this custom, namely the Pay As You Age, or the PAYA scheme.

Switching from seniority-based to performance-based is the name of the game of late, and industry leaders such as Toyota and Sony have announced that they will replace the PAYA system with one of meritocracy. Now Hitachi, Matsushita, Takeda Pharma, Mitsubishi Motors, the SMBC and Mizuho financial groups, to name just a few, have all decided to change their payment schemes from PAYA to Pay As You Perform, or PAYP.

According to Tokyo Shoko Research Ltd., the combined total number of employees on the payroll of those companies listed on the Tokyo Stock Exchange has decreased by 117,600 over the last year and by more than 300,000 over the last three years. Companies can only afford to provide "lifetime" employment for twenty years at most in an age when the prolonged life expectancy stands something like 85.

Also unsurprisingly, the estimated ratio of union members as against all employees has been in constant decline, hitting a historical low of less then 20% this year. Given that service industries which create more jobs have had the worst record in unionising workers, it is all the more certain that unions will continue to be fossilised. Reflecting all these, personnel affairs management, itself more and more an object of outsourcing, is where a massive wave of Americanisation is going on, for there jargon such as "mission statement" (to be written by managers whose annual compensations are no longer related to their lengths of service but solely to their performances) and "360-degree evaluation" have been in wide use without getting translated into Japanese.

Three ingredients, it used to be said, constituted the acclaimed system of the Japanese way of management: lifetime-employment; PAYA; and company-specific unionisations. With all these three either having ceased to exist or becoming in large part irrelevant, few if any talk of the Japanese way of management. Adieu, Nihon teki Keiei (Japanese way of management).

Makoto Koga, Minister of Foreign Affairs?

It is widely believed that Yoriko Kawaguchi, Minister of Foreign Affairs, already had her belongings packed when after the November general election Prime Minister Junichiro Koizumi reappointed her, much to everyone's surprise. Rumours were varied at the time as to who Koizumi was thinking of replacing Kawaguchi with. The latest and- the most unbelievable - is what the otherwise honest Masajuro Shiokawa, former Finance Minister, is whispering in the ears of his friends. According to this rumour, it was Makoto Koga who could have succeeded Ms. Kawaguchi.

The idea is that had Koga actually taken up the offer, he could have fallen very much under Koizumi's control. Given that Koga is the epitome of the anti-Koizumi faction within the Liberal Democrats, Koizumi's tactic was indeed cunning: letting the leader of the anti-Koizumi camp eat a piece of poisonous cake. As it was almost certain that the head of pork barrel politics could have done little service as Foreign Minister, he would eventually have been ousted, probably sooner rather than later. From Koizumi's perspective, it could have been an excellent way to put an end to his arch-rival. Koizumi may in fact be a shrewder politician than is conventionally believed.