The Ultimate Guide to Japanese Management (2026 Updated)

From kaizen to nemawashi to non-verbal cues, there are a handful of terms and customs foreigners should equip themselves with before starting a business in Japan. Implementing effective Japanese management strategies in a foreign company will help aspiring entrepreneurs and founders grow and sustain their businesses. In this article, we will explore the basics of Japanese management, what we can learn from it, and how exactly it can help you.

Key Takeaways

What Are the Basics of Japanese Management?

Have you ever wondered what kind of principles drive Japanese management and how different it is from Western management? This section of the article will introduce you to some important philosophies in the context of Japanese business culture. Afterward, we will explore how it varies from the Western style of operating a business.

What is the “Three Sacred Treasures” Framework?

Japanese management is built on a foundation often called the “Three Sacred Treasures” (三種の神器, sanshu no jingi), a term coined by American management scholar James C. Abegglen. These three pillars supported Japan’s post-war economic miracle and remain influential today, though they’re evolving to meet modern challenges.

The Three Sacred Treasures are:

1. Lifetime Employment (終身雇用, shūshin koyō) – Companies hire new graduates with the implicit promise of employment until retirement age (traditionally 60-65). This creates deep loyalty and allows for long-term employee development. While the practice is declining among younger firms and startups, it remains common in large established corporations.

2. Seniority-Based Wages (年功序列, nenkō joretsu) – Compensation and promotions are primarily determined by age and years of service rather than individual performance. This system rewards loyalty and patience, ensuring predictable income growth throughout one’s career. However, it’s increasingly criticized for not adequately rewarding high performers and for creating wage burdens as workforces age.

3. Enterprise Unions (企業別組合, kigyōbetsu kumiai) – Unlike Western industry-wide unions, Japanese labor unions are formed within individual companies. This creates a partnership dynamic where unions and management work collaboratively rather than adversarially, as both prioritize the company’s long-term success.

According to Japan’s Ministry of Economy, Trade and Industry (METI), these practices emerged from post-war labor shortages and the need to secure and develop skilled workers. While they drove Japan’s competitiveness from the 1960s through the 1990s, demographic changes and globalization are forcing companies to adapt. The Organization for Economic Co-operation and Development (OECD) 2025 report notes that Japan’s traditional employment system, while effective during periods of population growth, now “inhibits labor mobility and prevents optimal utilization of human capital” in an aging society.

Verification note: Implementation of these three treasures varies significantly by company size, industry, and age. Startups and foreign companies in Japan often adopt modified versions or Western practices. Confirm current policies with specific employers.

If you’re building a business in Japan and wondering how to balance traditional and modern HR practices, Scaling Your Company can help you design systems that respect Japanese business culture while attracting top talent.

What are the 5S Principles and Why Do They Matter?

The 5S methodology (ファイブエス, faibu esu) is one of Japanese management’s most exported concepts. Developed in the 1960s by industrial engineer Hiroyuki Hirano at Toyota, 5S provides a systematic approach to workplace organization that reduces waste, improves safety, and increases productivity. While it originated in manufacturing, companies worldwide now apply 5S to offices, hospitals, software development, and even personal productivity.

The five S’s come from Japanese words that each start with “S”:

1. Seiri (整理) – Sort
Separate necessary items from unnecessary ones. Remove everything that doesn’t add value to the work being done. This isn’t just about physical clutter; modern applications include sorting digital files, eliminating redundant meetings, and streamlining approval processes.

2. Seiton (整頓) – Set in Order
Organize remaining items so they’re easy to find and use. “A place for everything and everything in its place.” This includes labeling, color-coding, shadow boards for tools, and digital folder structures. The goal is to eliminate searching time and reduce errors.

3. Seiso (清掃) – Shine
Clean and inspect the workspace regularly. This isn’t just about appearance—regular cleaning helps spot equipment problems early. In software contexts, this translates to code cleanup, removing technical debt, and maintaining documentation.

4. Seiketsu (清潔) – Standardize
Create standards for the first three S’s so everyone follows the same approach. Document procedures, create checklists, and establish regular maintenance schedules. Standardization ensures consistency across teams and shifts.

5. Shitsuke (躾) – Sustain
Make 5S a habit through training, regular audits, and continuous improvement. This is often the hardest S because it requires cultural change, not just procedural change. Leadership commitment and employee ownership are essential for sustaining 5S over time.

Japanese companies view 5S not just as a tool but as an integrated management philosophy linked to concepts like kaizen and respect for people. The study found that successful 5S implementation requires both the technical (visible procedures) and philosophical (invisible mindset) elements to work together.

Implementation Timeline:

• Initial setup: 2-4 weeks for a single workspace or department
• Full implementation: 3-6 months for an organization
• Sustain phase: Ongoing with monthly or quarterly audits

Cost Considerations:

• Materials (labels, storage, cleaning supplies): ¥50,000-¥200,000 for a small team
• Training: ¥100,000-¥500,000 depending on scale and external consultants
• Time investment: 2-4 hours per employee for initial training, 15-30 minutes weekly for maintenance

Many Japanese companies report productivity gains of 10-30% within six months of implementing 5S, primarily through reduced time searching for items, fewer errors, and improved safety. However, success depends heavily on management commitment and employee engagement.

What are Kaizen & Nemawashi and Why Do They Matter in Japanese Management?

Two concepts sit at the heart of how Japanese companies approach improvement and decision-making: kaizen and nemawashi. Understanding these principles is essential for anyone working with or within Japanese organizations.

Kaizen is a Japanese term that explains the concept of continuous improvement, ultimately leading to change for the better. Initially introduced to the world by Toyota in the 1980s, this principle provides businesses with a transformation framework dedicated to improving every aspect of the company. While it may sound daunting to have to improve so frequently, this can be done in small steps. No matter how small or big the step is, it is still a step forward.

The next Japanese term is nemawashi. This word literally translates to “digging around the roots”. It was initially discovered by Japanese farmers who learned that if you dig up a tree and transplant it right away, the tree will still go into shock and most likely have no chance of living. To address this, the gardeners came up with a technique that involves digging around the roots and making sure that each root receives the necessary care in preparation for the transplant.

In the context of business, nemawashi means allowing staff to carefully lay the groundwork and get support for their ideas. In turn, they would feel much more comfortable sharing their ideas because they know that this system allows them to be supported instead of just getting outright rejected.

Last, but not least, is consensus decision-making. Under Japanese management, decisions are formulated by a group consensus, so it is hard to say who exactly made it. The process of making a decision is similar to building momentum with a consensus rather than a decision made by a single person at a single point in time. There are many other etiquettes you should know before doing management in Japan. We have gathered that for you in the article Japanese Business Etiquette.

How Does Japanese Management Differ From Western Management?

Japanese culture emphasizes seniority and the importance of having a hierarchy. This means that it is crucial to get the higher-ups’ approval for things that, in Western culture, are something that lower levels have power over. As mentioned earlier, the concept of nemawashi encourages grassroots levels to share their ideas, although these are subject to feedback and approval from those in higher positions.

On the other hand, Western management allows these staff to make their own decisions so long as they have facts and logical arguments to support them. Another point is that in Western management, voicing out your opinion and showing people how passionate you are about it will more often than not get your point across. In Japanese management, what matters more is persistence. One can share an idea, and to truly push through with it, one would have to be able to show the team all the different ways that they can persistently get their message through.

If you’re curious to learn more about Japanese business culture, we have a podcast just for you! Check out Japanese business culture with Rochelle Kopp!

What is the Japanese Management Approach to Decision-making?

Now that we’ve laid out some basic principles of Japanese management, it’s time to understand how these fold out in consensus-building. In this section, we will detail the Japanese approach to decision-making and some common misunderstandings that foreigners may face at some point.

Negotiation and Consensus-Building

Decision-making in Japanese management operates fundamentally differently than in Western organizations. Rather than debate leading to a vote or executive decision, Japanese consensus-building focuses on gradually reducing opposing voices until everyone feels aligned with the direction. This process relies heavily on understanding both what is said explicitly and what remains unspoken.

Kuuki wo Yomu (空気を読む) – Reading the Air
A critical concept in Japanese business culture is kuuki wo yomu, which literally translates to “reading the air” but functionally means understanding unspoken context, emotions, and intentions. Someone who cannot do this is described as kuuki yomenai (KY) – someone who “cannot read the air” – and this is a significant criticism in professional settings.

Reading the air involves:

• Observing body language during discussions to gauge true sentiment
• Noting what isn’t said – silences and topic changes reveal discomfort
• Understanding hierarchical cues – junior staff may not openly disagree with seniors
• Recognizing consensus signals – when discussion naturally winds down, agreement has been reached

In practice, consensus emerges through this subtle communication rather than explicit agreement. You might observe a meeting where no one explicitly says “I support this plan,” yet everyone understands the decision has been made. Conversely, what appears to Westerners as agreement might actually indicate polite reservation waiting to be addressed through nemawashi.

The Process of Consensus
Consensus-building typically follows this pattern:

1. Informal groundwork (nemawashi) – Key stakeholders are consulted individually
2. Formal presentation – The proposal is presented in a meeting, but major concerns have been addressed
3. Discussion phase – Participants share perspectives, with careful attention to hierarchical dynamics
4. Tacit agreement – Through reading the air, participants sense when alignment has been reached
5. Formalization – Someone with appropriate seniority formalizes the decision

This process can frustrate Western business people who expect dynamic debate and quick decisions. However, according to the Harvard Business Review’s 2023 article on building consensus around difficult strategic decisions, companies using Japanese-style consensus-building report higher implementation success rates and fewer mid-course corrections than those using top-down decision models.

Power of Visual Consensus Tools
Modern Japanese companies are adapting traditional consensus-building with visual and digital tools that make the process more explicit while maintaining the collaborative spirit. These include:

• Digital polling before meetings to gauge initial positions
• Collaborative documents where team members add concerns asynchronously
• Visual decision boards showing evolving consensus in real-time
• Anonymous feedback channels for junior staff to raise concerns

Time Investment and Trade-offs
While consensus-building takes longer upfront (typically 30-50% longer than Western hierarchical decision-making), implementation is significantly faster:

• Planning phase: +30-50% time investment
• Execution phase: -40-60% time investment
• Net result: 10-20% faster overall project completion with higher quality outcomes

Verification note: The effectiveness of consensus-building varies by organizational culture and decision type. Strategic decisions benefit most from this approach, while operational decisions often require faster processes. Companies should evaluate which decisions warrant full consensus-building versus delegated authority.

Looking to implement more collaborative decision-making in your organization while maintaining efficiency? Scaling Your Company can help you design hybrid approaches that combine the best of Japanese consensus-building with Western decisiveness.

To help you prepare for your next meeting with Japanese individuals, we recommend reading our Guide to Best Japanese Business Phrases so you can leave a great impression on everybody!

Challenges in Decision-Making for Foreigners

It comes as no surprise for foreigners to experience culture shock in Japan, but that’s completely fine! We’re here to help you anticipate some challenges and how these can be overcome. Some cultural differences include different styles of confrontation, the role of hierarchies in decision-making, and business manners. As mentioned in the previous paragraphs, Japanese staff do not directly express their feelings when there is something they disagree with. This may be problematic for individuals who expect their colleagues to be completely open about their opinions.

Additionally, we also learned earlier that the decision-making process in Western management differs significantly from Japanese management. Such a difference could cause some conflict in collaboration and time management. Lastly, Japanese business manners can consist of the smallest gestures that may be overlooked by those who are used to Western Management. We have a podcast on Japanese business manners, so if you want to know more about these small gestures, we highly recommend listening to it!

One way some Japanese companies overcome this is by taking time outside of the workspace to have a casual gathering. This allows them to get to know one another as nakama which is Japanese for teammate, friend, or comrade. Such gatherings could be as simple as grabbing coffee together, having lunch, or dinner. However, lunch may be the ideal option as some individuals would like to spend dinnertime with their families after work. In doing so, teams will be able to get to know each other better and create a space where everyone is much more comfortable sharing their opinions.

What are Common Human Resource (HR) Practices Under Japanese Management?

For some people, employment stability and security are vital when searching for jobs. Thus, Japanese management introduced certain HR practices to cater to this. In this section, we will learn about three common practices under Japanese management. Watch out for some practices that you might want to implement in your own company!

If you are looking for more tips on starting a business in Japan, we have an article just for you! Our guide on How to Start a Company in Japan will tell you all about market opportunities, funding, recruitment, and more!

Lifetime Employment 終身雇用 (shūshin koyō) is the practice of companies hiring individuals with the promise of keeping them until their retirement even in the event of economic crises. This practice is implemented mainly to provide job security and stability to workers. For individuals who are looking for this kind of stability and do not see themselves shifting industries, this adds to their loyalty to the company. Additionally, workers may also prefer lifetime employment as it provides them with a sense of belonging in the community they are working for.

A seniority-based wage system 年功序列 (nenkō joretsu) implies that an employee’s age and number of years in service are the two determining factors of their wage. Additionally, promotions are based on how close an employee is to their retirement which, in Japan, is at 65 years old. Some may argue that compensation must be based on performance and skills. However, this practice aims to keep an employee’s loyalty by guaranteeing them increased benefits in the long term. We have also discussed earlier the importance of hierarchy and seniority in Japan, so the practice of nenkō joretsu aligns with the principle as well. What do you think about this?

Omikoshi 神輿 management exhibits the important role of an intermediary party between the higher-ups and those in the lower positions. The term omikoshi describes a shrine that is carried by men; serving as a means of transportation for a deity toward a new shrine location. This is usually done during festivals in which the shrine is walked through neighborhoods by local volunteers. Taking this concept into the business scene, the main goal of omikoshi management is to have a middle-level party to relay the lower levels and higher levels’ insights and concerns to ultimately lead the entire company towards achieving its goals.

Human resources in Japan is one of the more complicated topics within Japanese management. We’ve prepared 5 HR tips for entrepreneurs who just started their company in Japan.

How is Work-Life Balance Evolving in Japan?

Japan’s reputation for intense work culture and the phenomenon of karoshi (過労死, death from overwork) has been well-documented for decades. However, 2025-2026 marks a pivotal moment in Japanese workplace culture, with significant government intervention, changing generational attitudes, and corporate reforms fundamentally reshaping how Japanese companies approach work-life balance.

The Current Reality: Progress and Persistent Challenges

Japan has made measurable progress in reducing excessive work hours. According to OECD data, average annual working hours have decreased substantially:

• 2000: 1,821 hours per year
• 2024: 1,607 hours per year (a decline of 214 hours, or approximately 12%)

However, serious problems persist. In November 2025 karoshi incidents rose by nearly 18% to a record 1,304 cases in 2024, demonstrating that headline working hours don’t capture the full picture of workplace stress. Another survey found that only 25% of Japanese employees reported good overall well-being (encompassing physical, mental, social, and spiritual health), compared to a global average of 57%.

These statistics reveal a complex reality: while formal working hours have decreased, the intensity and stress of work may have increased, particularly with the pressure to maintain output with smaller teams and aging workforces.

Government Interventions and Policy Changes

The Japanese government has implemented significant reforms to address work-life balance challenges:

Work Style Reform Law (2018-2019 implementation)
This landmark legislation introduced:

• Overtime caps: Maximum 45 hours per month and 360 hours annually
• Equal pay for equal work: Reducing disparities between regular and non-regular employees
• Mandatory paid leave: Employees must take at least five days of paid leave annually

According to FEM’s 2025 analysis of work culture in Japan, these reforms have had measurable impact in large corporations but implementation remains uneven in small to medium enterprises where monitoring is more difficult.

Four-Day Workweek Trials (2025-2026)
In a dramatic policy shift, Tokyo’s metropolitan government announced in April 2025 that government employees would have the option to adopt a three-day weekend. This follows successful pilots by companies like Microsoft Japan, which reported in 2019 that a four-day workweek increased productivity by 40% while reducing electricity costs by 23%.

Reskilling Leave Program (October 2025)
The Japanese government launched a financial support scheme allowing workers to take temporary leave (90-150 days) to acquire new skills, with education and training allowances covering 50-80% of wages during the leave period. This program, described by the World Economic Forum, aims to support both employee development and work-life balance by explicitly valuing time for learning.

Premium Friday Initiative
The government has promoted “Premium Friday” – encouraging companies to let employees leave work early on the last Friday of each month. While adoption remains limited, FEM’s research notes it marks a growing cultural awareness that work-life balance requires systemic change, not just individual choice.

Generational Shifts and Changing Values

Perhaps more significant than government policy is the cultural shift among younger Japanese workers. According to a 2025 Cabinet Office public opinion survey cited by the World Economic Forum:

• The share of people who cite “earning money” as their primary reason for working rose from approximately 50% in 2001 to approximately 63% in 2024
• The proportion who say they work “to find purpose in life” has declined
• “Work that allows for a good work-life balance” is increasingly valued, following only “stable income” and “enjoyable work” in ideal job characteristics

The Nomikai Dilemma
Nomikai (飲み会, drinking gatherings) represent a flashpoint in work-life balance debates. These after-work drinking sessions serve important social functions in Japanese business culture, building nakama (仲間, teammate/colleague) relationships and facilitating informal communication that’s difficult in hierarchical office settings.

However, multiple 2025 analyses note that younger workers increasingly view mandatory attendance at multi-hour drinking sessions as an unwelcome intrusion into personal time. Progressive companies are addressing this by:

• Making nomikai explicitly optional
• Limiting duration (ending by 9 PM)
• Offering non-drinking social alternatives (lunch gatherings, hobby clubs)
• Hosting nomikai during work hours rather than after
• Providing childcare support for evening events

The Remote Work Revolution

The COVID-19 pandemic accelerated remote work adoption in Japan, and unlike in some countries, the shift appears permanent. A 2025 survey cited by the World Economic Forum found:

• 82.2% of workers wish to continue teleworking
• Only 22.6% of companies neither implement nor plan to implement remote work
• 32.3% of companies report that approximately 50-80% of employees work remotely

This represents a dramatic cultural shift in a country where physical presence at the office was traditionally equated with commitment and diligence.

Persistent Challenges and Contradictions

Despite progress, significant obstacles remain. Japan’s new Prime Minister Sanae Takaichi drew international attention in November 2025 when she summoned staff to a 3 AM meeting (not for a crisis, but to prepare for a parliamentary appearance) and publicly stated she sleeps only 2-4 hours per night, emphasizing “work, work, work.” Her remarks – named Japan’s “catchphrase of the year” – sparked fierce debate about whether political leaders should model healthier work-life balance.

Labor advocates like Tomoko Yoshino, head of Japan’s largest union Rengo, expressed concern that employers remain too focused on attendance over productivity, and that political rhetoric could create conditions for employers to exploit workers. He noted that “we are still only halfway in terms of bringing down karoshi to zero and pushing for work-style reforms.”

A government survey found that 87.6% of respondents considered 1-20 hours of monthly overtime “appropriate,” yet approximately one in ten Japanese employees currently work over 80 hours of overtime per month – four times what most consider reasonable.

What This Means for Foreign Business People in Japan

If you’re working with or within Japanese organizations, understanding the work-life balance evolution is crucial:

For Foreign Employees:

• Tech and modern sectors generally offer better work-life balance than traditional industries
• Company age matters: Firms founded after 2000 typically have more progressive policies
• International companies operating in Japan often blend Japanese and Western practices
• Ask directly about policies during interviews – don’t assume based on company nationality

For Foreign Managers:

• Lead by example: Taking vacation and leaving at reasonable hours gives team permission to do the same
• Make flexibility explicit: Japanese employees may not use flexibility unless clearly encouraged
• Understand nomikai alternatives: Build team cohesion through diverse social activities
• Recognize generational differences: Younger employees may have different expectations than senior staff

The Path Forward

True change requires not just policy adjustments but “shifts in social attitudes about caregiving and professional success. Addressing Japan’s demographic crisis requires making it possible for people to have careers and families simultaneously.

The transformation is underway, but Japan remains in a transitional period where old expectations and new realities coexist uncomfortably. Success for both individuals and organizations depends on recognizing this complexity and actively choosing which direction to move.

Navigating Japanese work culture as a foreign professional or adapting your organization’s practices for the Japanese market requires cultural expertise. Contact Scaling Your Company to discuss how to balance productivity with sustainable work practices in your Japanese operations.

How Can Japanese Management Help You Grow Your Business?

If you’re curious to see how the previously mentioned principles can contribute to the growth of your business, this section is just for you. The following paragraphs are brief stories from companies that have implemented certain principles of Japanese management into their operations. Upon reading this, we encourage you to conceptualize ways to implement these principles in your unique ways as well!

Success Stories From Companies Adopting Japanese Management

GCash is a digital wallet for Philippine residents. The app allows its users to send and receive money, pay their bills, make donations, and shop online through convenient digital payments. GCash was not always able to serve so many functions. Its CEO and founder Martha Sazon believes that so long as there are Filipinos who struggle with accessible financial services, GCash will continue to make innovations to address this problem. This parallels the concept of kaizen as the company’s improvements are dedicated to making changes for the betterment, convenience, and accessibility of financial transactions in the Philippines.

Startups are also great examples of nemawashi as relatively smaller teams allow more intimate discussions. For example, Kotozna is a startup dedicated to addressing the issue of language barriers. With just over 20 members, Kotozna was established in 2016 in Japan. Just six years later, in 2022, Kotozna Singapore was born. A close-knit team of 27 members allows Kotozna’s team to closely observe and attend to each others’ needs, performance, and opinions. This kind of close collaboration will let a team learn more about what kind of management strategy and chain of command works best for everybody. Ultimately, business operations will run much smoother after seeing to it that all members of the team are on the same page.

In an article by the Harvard Business Review, readers learn about the story of Swisscom which is Switzerland’s leading mobile telephony company. The story explains how the company used a unique strategy to build consensus among a team. They called this the “walk the line” technique which involved sticking pieces of tape on the floor. Each piece of tape represented a certain stand or position on an issue. Then, the individuals are asked to stand by the piece of tape that holds the position they agree with. This created an immersive experience that allowed everybody to have more ‘robust’ discussions about the issue at hand.

What Does the Future of Japanese Management Look Like?

apanese management stands at a crossroads. The principles that drove Japan’s post-war economic miracle now coexist uneasily with demographic challenges, technological disruption, and evolving employee expectations. The future won’t be a simple choice between preserving tradition or adopting Western practices, but rather a sophisticated evolution integrating the best of both.

From Job Security to Skills Security

The traditional lifetime employment model is transforming into what might be called “employability assurance.” Rather than guaranteeing a single job until retirement, progressive Japanese companies are ensuring employees remain competitive in the labor market through continuous skill development.

One key point is long-term management. This aspect calls on managers to consider the long-term value and contributions that their personnel can make, and how they can maximize the team’s potential. By acknowledging each individual’s strengths and enabling them to be open about their contributions, employees are also likely to show heightened loyalty to a company that supports their growth.

A second key point is the importance of building a relationship of trust between executives and employees. As mentioned earlier in the paragraph about omikoshi management, there must still be an intermediary between higher and lower levels. The paper by the Japan Association of Corporate Executives suggests that a closer and stronger relationship of trust between the two levels would aid strongly in optimizing the utilization of personnel.

Lastly, a critical point for the future of Japanese management is fostering a global mindset in executives. With the continuous rise of globalization, companies and businesses need to promote a diverse work environment and open up to perspectives coming from various cultural backgrounds. The paper proposes that fostering a global mindset in executives will enable corporations to attract not only outstanding foreign employees but consumers as well.

Final Thoughts

To summarize this article, the Japanese management style is a unique approach with an emphasis on principles that are rooted deeply in Japanese culture. In one of the previous parts, we provided three stories of companies that integrated certain principles into their operations and how they led to success. We hope that these stories have inspired you to try implementing Japanese management strategies in your own business as well. In short, we were able to tackle kaizen (continuous improvement), nemawashi (digging around the roots), and consensus-building which all contribute to the betterment of a company’s employees and overall growth. Which one was your favorite?

Exploring ventures with Japanese companies can be challenging, especially if you’re foreign and unfamiliar with Japanese management style and culture. Scaling Your Company can help you:

• Grow as a leader in Japan
• Help you locate issues in management, leadership, hiring, company strategy, or direction
• Create a business that you want but also one that people want to work for