OECD Employment Outlook 2025: Japan
Table of contents
These country notes provide an overview of the labour market situation in each country based on data from OECD Employment Outlook 2025. This edition has a special focus on how population and workforce ageing will affect the labour market and workers’ jobs.
The OECD unemployment rate remains at 4.9% in May 2025 – the same as one year ago. However, there are signs of weakening, with employment growth decelerating and labour market tightness falling back to pre‑COVID‑19 levels in many countries.
The Japanese labour market has remained stable. In the 12 months to May 2025, the unemployment rate edged down to 2.5% and is projected to hold steady in 2025 and 2026. The overall employment rate improved by 0.8 percentage points to 62.3%, while the female employment rate grew by one percentage point to reach a record high of 55.1%.
Since the COVID‑19 pandemic, labour market tightness has worsened in Japan. As of Q2 2025, the Bank of Japan’s Tankan survey reports that the diffusion index for employment conditions – a net balance of firms reporting excess labour supply – fell to ‑35 across all industries. It was one of the lowest points over the last three decades, indicating widespread labour shortages.
To promote the uptake of paternity leave and reduce the burden on working mothers, the Birth-Time Childcare Leave Benefit was introduced from October 2022. Following the introduction of this benefit, which allows for an additional short-term parental leave, the share of fathers taking parental leave increased significantly from 17.1% in fiscal year 2022 to 30.1% in fiscal year 2023. To further encourage fathers’ participation in early childcare, the Post-Birth Leave Support Benefit has been in place since April 2025, aiming to help close the gap between fathers’ regular earnings and the income received during parental leave.
Real wages are growing in virtually all OECD countries, but in half of them, they are still below the levels of early 2021 – just before the inflation surge that followed the pandemic.
After experiencing a few decades of wage stagnation, Japan has displayed consistent nominal wage growth over the last couple of years. In April 2025, nominal hourly wages rose by 3.5% on a year-on-year basis and had been rising for the previous 26 consecutive months. Given the 2025 negotiated wage rate is estimated at 5.26% according to the Japan Trade Union Confederation (Rengo), this growth trend is expected to continue in the near term.
High inflation has prevented nominal wage growth from translating into real hourly wage growth since 2022. As of May 2025, Japan’s headline inflation amounted to 3.5% and was the second highest of all G7 countries after the United Kingdom, driven in particular by food prices. From Q1 2021 to Q1 2025, real wages cumulatively declined by 2% but have recently stabilised at 0% on a year-on-year basis (see figure below).
As of 2024, Japan’s statutory minimum wage was the fifth lowest among 30 OECD countries when measured against the gross median wage of full-time workers (47%, compared to the OECD average of 57%). In 2024, regional minimum wages in Japan were raised by an average of 5% to 1 055 yen – the largest increase in two decades. A similar level of increase is expected in 2025, as the 2025 Basic Policies for Economic and Fiscal Management and Reform (Big-Boned Policy) revised the target of reaching 1 500 yen from “by the mid‑2030s” to “within the 2020s”.
According to the OECD Gender Dashboard, Japan’s gender pay gap slightly widened from 21.3% in 2022 to 22% in 2023, while the OECD average stabilised around 11%. As a result, Japan ranks 35th out of 36 OECD countries. As part of the Japanese Government’s ongoing efforts to address gender disparities in the labour market, an amendment to the Act on the Promotion of Women’s Active Engagement in Professional Life was passed in June. From April 2026, the Act will require firms with 101 or more regularly employed employees to disclose their gender pay gap, as well as their share of women in managerial positions.
People around the world are living longer and healthier lives than ever before. This remarkable achievement has been accompanied by declining fertility, leading to significant demographic shifts. The number of old-age people per working-age person will rise by 67% by 2060 across the OECD. The share of people employed in the population will fall unless policies change, slowing down annual GDP per capita growth by 0.4 percentage points.
Japan’s working-age population has been in constant decline, falling 16% from a peak of 87.3 million in 1995 to 73.7 million in 2024, and its old-age dependency ratio more than doubled from 21% to 49% at the same time. As its working-age population is projected to decline by 31% from 2023 to 2060, Japan’s old-age dependency ratio will rise to 74%. On the other hand, foreign population increased 10% on a year-on-year basis in December 2024, now representing nearly 3% of the total population.
Over the last decade, employment-to-population ratios have increased notably among senior workers. As of 2023, employment rates for those aged 45‑54, 55‑59, 60‑64, and 65‑69 were among the highest in the G7. Following the gradual increase in the statutory pension age from 60 to 65 (to be completed in 2025 for men and in 2030 for women), alongside the mandatory retention of employees aged under age 65 under the Act on Stabilisation of Employment of Elderly Persons, the employment ratio of those aged 55‑64 increased by 10.5 points to 79.2% from 2014 to 2024. Given these already high employment rates among senior workers, a change in the employment-to-population ratio is projected to be limited to ‑0.8% between 2023 and 2060 (see figure on the projected employment-to-population ratios).
There are already signs that population ageing is adversely affecting Japan’s economic growth. Between 1990 and 2022, Japan’s real GDP grew at an annualised rate of 0.8% – the second lowest among the G7 countries – while its working-age population concurrently declined by 0.46%.
To sustain growth in the face of demographic pressures, it is worth considering a combination of labour mobilisation with productivity revival. According to OECD projections, mobilising untapped labour resources – closing the gender gap in employment and increasing migration by two‑thirds – could raise annual GDP per capita growth to 0.33% (see figure on mobilising labour sources).
The nature of work is changing, offering older workers a chance to stay productive for longer, but these benefits may be offset by a decline in skills as the workforce ages. To address this, there is an urgent need to shift from the current model where only a third of 55‑65 year‑olds participate in training, to one where people learn throughout life.
Japanese workers aged 55‑65 scored 9% higher in literacy – one of the information-processing skills assessed in the PIAAC survey – than the OECD average for the same age group, while those aged 25‑44 scored 11% above the OECD averages. The score gap between prime‑age workers and senior workers was 12%, slightly above the OECD average of 10%. Additionally, the training participation rate of workers aged 55‑65 stood at 29%, slightly below the OECD average of 35% (see figure below).
The forthcoming OECD analysis of the JILPT worker survey on the impact of AI on the workforce reveals that older workers are less likely to participate in AI-related reskilling or upskilling programmes, whether through employer-provided or publicly supported training. For example, among AI users, 25% of those aged 50 and over reported joining corporate training, compared to 37% of those under 35 and 32% of those aged 35‑49.
The same survey also highlights the underuse of public training benefits, particularly by older workers. Among workers who participated in AI-related reskilling or upskilling, only 46.7% of those aged 55 and over reported accessing Educational Training Benefits, compared to 57.6% of employees aged 15‑34 and 53.2% of employees aged 35‑54.
The 2025 Big-Boned Policy highlights the Japanese Government’s commitment to expanding the list of training programmes eligible for Educational Training Benefits, including those focussed on digital and AI-related skills, as well as enabling online participation in training programmes for workers on non-regular employment contracts.
Contact
Satoshi ARAKI (✉ satoshi.araki@oecd.org)
Glenda QUINTINI (✉ glenda.quintini@oecd.org)
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The full book is available in English: OECD (2025), OECD Employment Outlook 2025: Can We Get Through the Demographic Crunch?, OECD Publishing, Paris, https://doi.org/10.1787/194a947b-en.
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