Introducing Japan's IT Industry to Chinese Programmers
To understand Japan's IT industry, one must first grasp the country's social system, how it allocates social benefits, and how it manages labor relations.
Japan's Labor Standards Act stipulates:
- Weekly working hours should not exceed 40 hours, and daily working hours should not exceed 8 hours. Overtime must be compensated, with minimum overtime pay explicitly stated in the law.
- Companies cannot arbitrarily dismiss employees; even in cases of business difficulties, they must prove that all other measures have been taken and that layoffs are unavoidable.
- A minimum wage is enforced. For example, in 2023, the minimum hourly wage in Tokyo is 1,113 yen.
In Japan, employment types mainly consist of regular employees and contract employees. Regular employees have no contract term, while contract employees have a defined contract period. The Labor Standards Act does not differentiate between regular and contract employees, referring to both as "workers." However, generally speaking, regular employees enjoy better benefits. A friend working in IT at Nomura Securities receives a housing allowance of over 100,000 yen per month, which continues until they turn 35 or buy a house.
This system is quite favorable to workers compared to China. However, there is no such thing as a free lunch; the market economy is highly competitive, and companies should have the right to reduce costs through layoffs in response to changing market conditions. As mentioned earlier, the law states that companies cannot dismiss employees arbitrarily, even in cases of business difficulties, and must prove that all other measures have been taken to avoid layoffs. In Japan, this proof is quite challenging. For instance, if a company is still hiring, it cannot be considered to have taken all other measures.
Companies will adopt different strategies depending on their industry. Ultimately, they may choose to hire contract employees (if they want to cut costs, they simply do not renew contracts when they expire) or hire dispatched employees.
This leads us to the first characteristic of Japan's IT industry, which differs significantly from the IT sectors in China and the U.S.: a large number of software engineers are engaged in dispatch work.
Dispatched Employees
Dispatched employees do not have a legal status but describe an employment relationship. A dispatched employee is someone whose workplace and employment relationship are separate. For example, if I am employed by Company A and receive a salary from Company A but work daily at Company B, fulfilling Company B's needs, I am a dispatched employee. However, I may still be a regular or contract employee at Company A, enjoying its benefits. Why does Japan's IT industry have so many dispatched employees?
First, as mentioned earlier, it is difficult for Japanese companies to lay off employees, but the IT industry is fast-changing and demand is elastic. This makes many companies reluctant to hire fixed regular employees. Therefore, the risks of market fluctuations are shared among many dispatch companies, which support their IT employees through regular or contract employees. If a company has no business and cannot dispatch its employees, the dispatch company will survive by only paying "standby fees," which are generally about half of the full salary, with significant differences between dispatch companies.
Second, Japan's entire IT industry is not as independent as in China or the U.S., where there are many internet companies that account for a high proportion of GDP or market value (China's stock market has few internet companies; here, we refer to U.S. listed Chinese companies). The vast majority of IT projects are actually aimed at serving traditional industries. For example, if we want to convert the rental guarantee documents of our excavator company from paper to electronic format, or if we want to digitize the registration forms for our baseball club while also managing the roster, these paperless demands do not pose significant technical challenges. Having a group of in-house IT engineers is beneficial for accumulating specialized know-how within the team, but due to the primitive nature of these IT project demands, the benefits of this knowledge accumulation are not very apparent.
Third, Japan is a credit society with a well-developed outsourcing industry, and many companies are accustomed to hiring others to complete part of their work. In Japan, outsourcing does not imply low quality; on the contrary, it often signifies high quality. The extensive outsourcing in the IT industry reflects this business practice.
Of course, in addition to dispatched employees, Japan's IT industry also has internet companies that hire their own programmers; there are outsourcing companies that do not just contract manpower but directly undertake entire projects, known as "SES companies" (System Engineering Service). Working at an SES does not require being dispatched to various sites but allows employees to work at their own company.
The reality is more complex: a large company may employ some of its own regular IT employees to plan and design projects, write documentation, and then outsource the project to an SES. If that SES is short-staffed, it may then seek a few engineers from Chinese dispatch companies. Such situations are common. On Japanese IT job websites, you often see the term "upstream engineering," which does not refer to the scale of the project but indicates that the company is at the upper level of the entire outsourcing chain, engaging in more project design work.
It is common to hear complaints from junior or returning programmers that Japan's IT scene is focused on Excel programming, which is the second characteristic of Japan's IT industry. The cumbersome documentation is, in fact, a product of the dispatch system.
Cumbersome Documentation
If you are unaware of how cumbersome documentation is in Japan's IT industry, you can Google search for the three key terms: "要件定義書 サンプル," "基本設計書 サンプル," and "詳細設計書 サンプル" to get a sense of it. Since this article is about introducing Japan's IT industry and not about IT training in Japan, I won't spend time explaining what these three documents are for or what they contain. I can generally describe that with these three documents, even someone with no experience in the IT industry, such as a literature major graduate, can complete daily development work. These documents cover every detail, even specifying how many methods a class has, what the input and output values of each method are, and what the types of those values are. Why is it like this? I believe there are three reasons.
First, due to the common practice of multi-layer subcontracting in Japan's IT industry, a project may start from a large company, go through several layers, and finally reach a dispatch company, or a project may be worked on by one group of people for the first six months and then switched to another group for the next six months. To accommodate the needs of large-scale inter-company collaboration, detailed documentation has emerged.
Second, there is a large number of low-level engineers, or the IT dispatch industry does not require highly skilled engineers, so documentation must be detailed; otherwise, they cannot perform their jobs competently.
Third, it facilitates accountability. If software issues arise, it is easy to identify which part did not follow the design document or if the design document itself was incorrect.
Engineer Salaries
Within the entire outsourcing chain, the higher up you go, the higher the salaries. The engineers doing the actual work earn the least. This is unimaginable in the IT industries of China and the U.S. In Silicon Valley, it is common for engineers to earn more than management personnel. In the software industry, a top engineer can produce outputs that are 100 times greater than those of an average engineer, but the Japanese IT industry completely disregards this. This phenomenon is partly due to the dispatch system and partly due to Japan's overall social system. Since most positions in Japan's IT industry are outsourced and dispatched, those who are closer to the client and can communicate needs effectively can earn more money. Additionally, many industries in Japan operate on a seniority-based system, where an individual's salary and benefits are tied to their tenure at the company. In such a social atmosphere, it is nearly impossible for dispatched employees to earn high salaries.
To illustrate this, let me give you an example: the Chinese system. Japan's entire social medical security and labor system is comparable to that of the Chinese system. Large companies in Japan with money and projects are akin to local governments in China. The first layer of outsourcing companies is like engineering firms in China bidding for projects. The final layers of subcontracting lead down to dispatched employees, similar to migrant workers in Chinese construction teams. This analogy may not be entirely accurate, but if we compare Japanese society to the Chinese system, it is a system that encompasses everyone in the country. However, through this analogy, one can understand why engineers' salaries are low. The "Chinese system" also explains the operational methods in many Japanese companies, where avoiding problems is prioritized over efficiently completing work, and it is best to avoid any personal responsibility!
Currently, most engineers in the outsourcing industry earn monthly salaries between 300,000 and 600,000 yen, while entry-level trainees earn around 200,000 yen. In the outsourcing industry, if salaries are higher, they typically belong to those who do not write code. Interested readers can check Japanese job websites for more information.
Other IT Companies
Japan also has internet startups in the TMT sector that are developing healthily, but they are still relatively small and in a nascent stage. For example, there is "食べログ," which is similar to Dianping, and "Luup," which offers shared battery rental services.
There are few giants in the TMT sector; a few examples include Japan's largest electronic payment service, PayPay, which is actually a subsidiary of SoftBank. After merchants apply, they can directly use Alipay to scan and pay, indicating that they are using Alibaba's system. Pixiv, known in the Chinese ACG community as P Station. DMM, which started by selling adult content, has since diversified into various fields, recently venturing into charging stations. Additionally, Yahoo Japan remains vibrant, and Rakuten operates as both an e-commerce site and a telecom operator. Line is a popular chat app in Japan.
Most of the companies mentioned here do not typically employ dispatched employees. PayPay might, but it is also working on its own business, which falls within the normal scope of large company outsourcing.
The IT companies in these fields are more similar to those in China and the U.S. They use Slack for communication, Markdown for requirements, and Figma for design drafts instead of Excel. In contrast, to respond to market changes and maintain competitiveness, there are more contract employees. Large companies, with their strong risk resistance, may hire more regular employees.
Many engineering positions in the companies mentioned here do not require high Japanese language proficiency but rather English. This is quite different from the dispatched jobs that dominate Japan's IT sector. Aside from the gaming industry, the companies discussed in this chapter offer higher salaries than the dispatch industry. To enter these companies, one can use LinkedIn to connect with recruiters or submit English resumes on JapanDev.
Conclusion
To understand Japan's IT industry, one must first understand Japan's social system. The balance between fairness and efficiency is an eternal theme in human social development. Overall, Japan has successfully sacrificed some efficiency for a degree of fairness. Working in IT in Japan is quite relaxed: eight-hour workdays, everyone enjoys weekends off, and there is no need to worry about illness or layoffs. Even in dispatch companies, when there is no work on-site, there are standby fees to receive. As a trade-off, even the most talented graduates from the University of Tokyo must start as trainees with a monthly salary of 200,000 yen. In the U.S., engineers of equivalent skill levels earn significantly more.
When complaining about low salaries for engineers in Japan or the focus on Excel-based development, one should first ask themselves what kind of society they desire. After examining Japan's example, each Chinese person can also reflect on what kind of society we truly want.
I have spent over a year in Japan, attempting to explain Japan's IT industry based on my observations from the perspectives of institutional design, social culture, and path dependence. I believe I do not need to stay in Japan for twenty years to summarize its IT industry, just as Dr. Feng Junqi does not need to be a county party secretary to write "Zhongxian Cadres." However, I am acutely aware of my limited knowledge, and if there are any inaccuracies in this article, I welcome readers' corrections.