How Japan has avoided the gaming industry’s persistent layoffs

Typically, layoff season arrives around Christmas: a flurry of pink slips, empty desks, the anxieties of the newly unemployed, all so companies can cut costs and fatten up bottom lines just before the calendar year ends. But for those plying their trade in video games, it has been layoff season for the entirety of the last three years. The approximate number of workers let go globally in 2022 was 8,500; last year, in 2023, that number was 10,500. According to the latest data, the total for the first six months alone of 2024 is 10,800. In the US, some experts believe the unemployment rate in the video game industry is as high as 9 percent, over double the national average. 

Amid the video game industry’s cruel fire sale of highly skilled workers, one region remains notably untouched: Japan. (Excluding Tango Gameworks, which was shuttered at the direction of its US owner, Microsoft.) On the contrary, recent years have seen many of the country’s firms commit to workers rather than cut them: Sega raised salaries by 33 percent, Koei Tecmo upped wages by 23 percent, employees at Persona-maker Atlus saw their incomes jump by 15 percent, and Nintendo gave its employees a 10 percent raise. Most recently, Capcom increased graduate salaries by 27.7 percent, describing it as an “investment in the people who support the future of the company.” 

The recent words of FromSoftware president Hidetaka Miyazaki back up these ostensible labor wins for Japanese workers. Of the mass layoffs that are happening in the US and elsewhere, Miyazaki said, “as long as this company is my responsibility, that’s something I would not let happen.” But more so than the personal benevolence of leaders like Miyazaki, it is the country’s robust labor regulations that most protect workers.

“Japanese employment law is, for certain, what protects employees in terms of stability and contract continuity,” says Peter Matanle, an expert on Japanese employment at the University of Sheffield in Britain.

Matanle outlines a historic picture not of innate employment rights but one in which Japanese courts, at key moments, such as 1975’s Nihon Shokuen Seizō case, ruled in favor of workers and unions. As a result, one of the key provisions of the country’s employment law, specifically on the “doctrine of abusive dismissal,” is that “employers can’t just shed employees.” They can only do so, says Matanle, “when the employer can prove that the organization would go bust.” 

Should a Japanese company be found to break the law by, say, reducing its workforce to cynically juice the numbers of a quarterly report, dismissed employees are liable to be reinstated. “You can imagine the relationship problems,” says Matanle, “of staff who have won a court case against the organization for aggressive dismissal.”

If the lack of Japanese layoffs can be explained in terms of law, then the proliferation of US layoffs can be explained in precisely the same way (alongside conventional wisdom that companies overexpanded during the covid-19 pandemic and the contention of analyst Matthew Ball that gaming revenues are shrinking). The US operates what is commonly known as “at-will” employment, a legal doctrine that some scholars date back to the Reconstruction era. Back then, it was argued that if workers had a “right to quit” without restrictions, employers should have a “right to fire.” The doctrine made its way to the Supreme Court in the early 1900s, thereby enshrining in law a boss’s power to fire an employee for no reason at all.

Beyond the labor law they must adhere to, Matanle notes a divergence between Japanese bosses and their Western peers in terms of “ethical accountability.” Japanese organizations, he suggests, tend to be run with longer-term horizons and are less fixated on pleasing shareholders than their actual employees. Executives are often recruited under “long-term employment systems,” arriving as fresh-faced graduates in their early 20s before rising through the corporate ranks. Compare this to the US, where executives are often outsiders to their respective industries, the product of a culture where it is commonplace — and even advantageous — to switch jobs every few years. 

In the light of Japanese labor law, the much-mythologized personal pay cuts of former Nintendo president Satoru Iwata in 2011 and 2014 appear a touch less selfless. (Although there certainly were other options on the table in terms of savings, like voluntary redundancies, which Japanese studio Gumi recently asked around 80 employees to accept.) It’s worth stressing that when Japanese companies are able to make cuts, particularly those operating internationally, they tend to do so. Case in point: Nintendo, which laid off 320 employees at Nintendo of Europe just a few months after Iwata and other executives took pay cuts in 2014. More recently, Square Enix laid off an unspecified number of workers across its US and European offices. These examples speak to Matanle’s key point: it is Japanese labor law that protects the country’s workers. 

But even if there is no danger of the layoff season arriving in Japan, the country is hardly a proletariat utopia. When Liam Edwards, co-founder of Kyoto-based studio Denkiworks, started working at Q-Games, the studio founded by Star Fox lead developer Dylan Cuthbert, he encountered a tough working environment. It was one he was acutely well prepared for, having often worked “12 hour days, 6 days a week” at Rockstar Lincoln. “I heard a lot of staff [at Q-Games] complain about overtime, the hours, and expectation [of work],” he says, “never really from Japanese staff, because they were used to it, but certainly from other foreign staff.”

Historically, the country’s game makers have produced some of the most innovative, playful video games under such grueling conditions. Jake Kazdal, co-founder of the 15-person Kyoto studio 17-Bit, worked at Sega in the late ’90s and early 2000s under the stewardship of Rez creator Tetsuya Mizuguchi. “My only real complaint with those years was that I was just working all the time,” he says. “That’s just the normal state of things at Japanese studios.” 

Japanese studios also rely on contract and temporary labor, which has the effect of creating a kind of two-tier labor system similar to that which exists in the US. Job security is reserved for those who are permanently employed, i.e., seishain. Those employed on temporary contracts are called keiyakushain, and if cuts are to be made, it tends to come in the form of their contracts not getting renewed. Finally, there are haken, dispatch workers or “hired guns,” says Colin Williamson, lead tech artist at 17-Bit who has worked in Japan for 15 years including a stint at Square Enix in the aughts. In his experience, haken tend to be brought in for short periods of time to do “low-level graphics engineering” and other “hardcore stuff.” 

Haken aren’t employed by studios themselves but by outsourcing firms such as Creek & River (which has contributed landscape modeling, character modeling, and texture to the likes of The Legend of Zelda: Tears of the Kingdom and Pokémon Scarlet and Violet). For the time they spend at the studio, Williamson says haken are “honorary team members… in the trenches with everybody else.” But ultimately, their tenure is short-lived. “The stability isn’t there,” continues Edwards. “Imagine going to work somewhere for six months, making a life for yourself with new colleagues, all to go away as soon as you leave. That must be tough.”

Still, if video game workers anywhere in the world are safe from the interminable layoffs, then it is those who are permanently employed in Japan. Serkan Toto, a veteran analyst of the Japanese games industry based in Tokyo, points to the country’s long-term shrinking population (down 837,000 in 2024) as an additional factor that could theoretically benefit workers by pushing up demand for their services. The Japanese language, spoken by relatively few people outside of the country (compared to the world’s de facto lingua franca, English) might also prove itself a boon to workers, making their roles less susceptible to outsourcing in a country with lower wages. These are idiosyncratic quirks of a country that, stresses Toto, “has its own game culture, its own business culture, its own insular ecosystem of game companies.” It’s one that is able to, and often does, march to the beat of its own drum. 

Yet Kazdal and Edwards, expats in Japan with deep connections to Europe and the US, find themselves at the mercy of a currently merciless global video game economy. “Most of our contacts are with western publishers,” says Kazdal. “We’re in the same boat [as Western studios], having to get our next deal signed, competing with everybody else in a funding landscape that is more challenging than ever.” The mantra Kazdal says he and his colleagues who run independent studios are chanting is “survive ‘till 2025.” 

For all the current stresses, 17-Bit is in better shape than it perhaps would have been following an acquisition deal with Embracer, the former conglomerate that, in June 2023, began a cost-saving exercise that resulted in some 4,532 workers losing their jobs. Multiple meetings were held and numbers were being pushed around, reveals Kazdal, but in the end, negotiations stalled. “Thank God we didn’t go through with it,” he says. “They’re just trashing stuff, throwing people out left and right. It’s a disaster.” 

The actions of Embracer’s C-suite and those at video game companies couldn’t stand in sharper relief to the famous words of Nintendo’s Iwata who, just over a decade ago, said, “I sincerely doubt employees who fear that they may be laid off will be able to develop software titles that could impress people around the world.” These are the words Miyazaki was referencing when he spoke about avoiding layoffs at FromSoftware: it is not just the angst, nervousness, and worries of an endemic layoff culture that affects work but also the practicalities of securing alternative employment, drawing focus away from the task at hand.

For the employees of Nintendo, this is simply not a concern, nor will it be barring changes in legislation. One can speculate whether it was personal conviction or Japanese labor law that ultimately dissuaded Iwata from enacting layoffs (maybe it was both!), but that doesn’t mean his words ring any less true.