Is it really impossible to terminate an employee in Japan?

In Japan, it is often said that terminating an employee is extremely difficult.

But is it really true? Let me share my experience and what it's actually like in practice.

*Please note, this article is for informational purposes only. For legal advice, it is essential to consult with an attorney, a legal professional, or our team.

1. The Nature of Foreign Subsidiaries in Japan

Foreign subsidiaries in Japan are heavily influenced by external factors such as currency fluctuations and market volatility.
Unlike domestic companies, even a small change in the exchange rate can have a huge impact on profitability.
This means management sometimes has to make rapid structural adjustments — but Japan’s labor laws don’t always move at the same speed.

2. The Founder Presidents and Their “Special Privileges”

Many foreign subsidiaries established in the 1990s and 2000s were led by founding presidents who had strong, often personal, relationships with the headquarters’ management.
As a result, they often had significant freedom to decide salaries, benefits, and other employment conditions almost as they wished.

As a side note, some of these companies even had unique benefit systems that didn’t exist anywhere else — but I’ll save that story for another article.

3. The Era of Leadership Transition

Around 2020, a generational shift began.
New presidents — often the second generation — took over these long-established subsidiaries, and many were surprised by how high the salary levels were compared to market standards.
Naturally, they began looking for ways to optimize costs and restructure the organization.

4. The Harsh Reality of “Restructuring” in Japan

vise them to follow a long process:

Provide clear performance evaluations over several years

Issue multiple written warnings

Offer opportunities for improvement or reassignment

Only if there is still no improvement, then consider termination

While this may sound reasonable in theory, in practice few companies have the luxury of time to wait for years before taking action.
In reality, what’s often done is retirement recommendation (退職勧奨) — encouraging employees to resign voluntarily.

5. The Legal and Practical Boundaries

Legally, it is possible to propose voluntary resignation to all employees, depending on the company’s financial condition and employment contracts.
However, this must be done carefully under a lawyer’s guidance.
You should never pressure a specific employee repeatedly or conduct long, coercive discussions — that can easily backfire.
If there’s an employee you wish to separate from the company, financial negotiation is possible.
Some employees handle it directly, while others now seek legal or union representation, as information is much easier to access online.
In many cases, negotiations between lawyers lead to a settlement — typically equivalent to around one year’s salary or even less. Settling for less than one year’s salary could be seen as a reasonable investment for turning the page and moving forward.

6. Final Thoughts

For leaders of foreign subsidiaries in Japan facing similar challenges, I strongly recommend consulting with a lawyer who understands both Japanese labor law and the realities of global corporate management.
If you are struggling with such issues, feel free to reach out — I can also introduce experienced legal professionals who have supported me through similar situations.