Economic and Labor Situation in Japan, March 2026

Prime Minister Takaishi Calls for “Review of the Discretionary Labor System” in Policy Speech

In a policy address, Prime Minister Takaishi has included a call for a “review of the discretionary labor system,” stating that the government would “proceed with discussions aimed at expanding flexible working arrangements.” She further emphasized, “In any case, we will press, press, press, press, and keep pressing the growth switch,” positioning the discretionary labor system as part of her economic growth strategy.
Since taking office last autumn, the Prime Minister has repeatedly referred to “considering the relaxation of working-hour regulations,” but this marks a step further by explicitly addressing a review of the discretionary labor system. Introduced in 1988, the system allows wages to be paid based not on actual hours worked but on a predetermined number of hours deemed to have been worked. Its application is limited to 20 highly specialized occupations, such as research and development and legal professionals, as well as to planning and policy-related duties concerning corporate management.
RENGO (the Japanese Trade Union Confederation) has acknowledged that the system offers workers the advantage of being able to allocate their working hours more flexibly. However, it has also expressed concern that the system makes it more difficult to accurately grasp actual working conditions and could lead to longer working hours.

Labor Force Survey Monthly Results 1

(1) The number of employed persons in January 2025 was 67.76 million, a decrease of 30,000 over the same month the previous year. By gender, this included 36.86 million men, down 10,000, and 30.90 million women, down 20,000 from the previous year.

(2) Unemployment
The number of unemployed persons in January 2025 was 1.79 million, up 160,000 over the same month in the previous year.
The seasonally adjusted unemployment rate in January was 2.7%, up 0.1 points, climbing for the first time in five months, as more workers left their jobs to seek better conditions. The unemployment rate was 2.9% for men, unchanged, and 2.5% for women, up 0.2 points from the previous month.

Units: 10,000 persons

(3) Job Availability
Japan’s job availability in January stood at 1.18, down 0.02 from the previous month. This ratio means there were 118 job openings for every 100 job seekers.
The ratio of regular employee job offers to applicants was 0.99, unchanged from the previous month.
The ratio of new job offers to applicants, a leading indicator for the labor market, was 2.11, down 0.03 from the previous month. The number of new job offers decreased 4.6% from the same month the previous year. By industry, new job openings rose 4.3% in the education sector and 0.8% in manufacturing compared to one year earlier.
In contrast, new job openings fell 13.8% in the hotel and restaurant sector and 11.6% in the wholesale and retail sector.

Industrial Production 2

Industrial Production Fluctuates Indecisively
Industrial output in January increased 2.2% over the previous month, marking the first expansion in three months, driven by strong production of automobiles and plastic-related goods.
Production, shipments, and inventories increased, while inventory ratio decreased. The industries that mainly contributed to this decrease were as follows: (1) motor vehicles; (2) plastic products; (3) chemicals (excl. inorganic, organic chemicals, and medicine), in that order.
According to the Survey of Production Forecasts in Manufacturing, production was expected to decrease 0.5% in February and 2.6% in March.

January  2026           2020 average = 100

Consumer Prices 4

The consumer price index (CPI) in January was 112.9 (2020 = 100), up 1.5% over the previous year but down 0.1% from the previous month, the slowest rise in two years, with the abolition of a provisional gasoline tax contributing to the deceleration. Core inflation (CPI less food and energy) was up 2.6% over the previous year and up 0.1% over the previous month. The inflation rate has remained at or above the Bank of Japan’s 2% price stability target since November 2022.
Food prices, excluding fresh items, climbed 6.2% over the previous year in January, driven by surging costs for items such as rice, chocolate, and eggs. Prices for rice, Japan’s staple food, soared 27.9%. Energy costs fell 5.2% after a drop of 3.1% in December, with gasoline plunging 14.6% from the year before, the sharpest decline since May 2020. Japan’s provisional gasoline tax was scrapped on Dec. 31 as the government sought to ease the burden on households hit by persistent inflation.

January 2026

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