1. Accounting（Source: “Keiei Zaimu Magazine” No. 3121）
In June 2013, Financial Services Agency published “the present policy on the application of IFRS”, suggesting the relaxation of requirements for voluntary applications to IFRS and the establishment of a Japanese IFRS, which is “endorsed IFRS” (J-IFRS). It adopts the standards after eliminating and carving out some standards of IFRS.
According to the work plan which ASBJ released in July, the endorsement system will be undertaken this autumn, with an aim towards completion by autumn 2014.
Japan will have four standards (J-GAAP, US-GAAP, Pure IFRS and J-IFRS) at the same time, so the number of companies applying to J-IFRS will depend on its contents.
2. Taxation
A political decision on whether to raise the consumption tax in Japan to 8% from the current 5% in April 2014 and then to 10% in October 2015 is a current topic.
Technically speaking, the increase in the consumption tax seems to have already been determined.
Nonetheless, according to the provision of Article 18 of the bill to raise the consumption tax called “the state of economy” clause, it states that “…..measures will be taken to implement or suspend the tax hike after considering the economic situation, etc. comprehensively”.
Therefore, it has been rumored that the consumption tax hike may be postponed, depending on economic conditions.
However, if this postponement does occur, the budget deficit measure will be further delayed. There is concern that this would result in the trigger of a mass default in Japanese government bonds since the government of Japan would be perceived by other countries as relinquishing the effort to maintain fiscal discipline.
3. Labor Management(Dismissing Employees for Incompetence – Risks and Avoidance)
Keeping incompetent employees is a difficult thing for companies of all sizes. It is not unusual in daily business operations that the management decides such employees have to be dismissed depending on the case. However, if an employer swiftly judges an employee to be incompetent and chooses to dismiss him/her, it may end up facing some difficult consequences – if the dismissed employee claims a wrongful dismissal and the court rules in his/her favor, the employer will have to pay settlement money, reinstate the employee to his/her former position, and even consider future treatment of the employee.
“Dismissal” means a unilateral termination of the employment agreement from the employer’s side. Although an employer is free, in principle, to dismiss an employee according to the Civil Code (Article 627-1), the Labor Contract Act clearly states that “A dismissal shall, if it lacks objectively reasonable grounds and is not considered to be appropriate in general societal terms, be treated as an abuse of rights and be invalid” (Article 16). As seen in many judicial precedents, severe restrictions are imposed on such dismissals.
To avoid a dismissal for incompetence, the important thing is effective communication between the employee and the employer during the hiring process. The employer needs to clearly explain to the employee what type of ability they are looking for, and the employee needs to give the employer accurate information about his/her ability and experience. In so doing, both sides can reach a mutual understanding. This process will eventually help the employer in a situation where it has to consider dismissing an employee for incompetence.
If an employee is suspected to be unfit for the job he/she actually does, the employer is required to make every professional effort to prevent the situation where there is no choice but dismissal; it must take necessary measures at once to eliminate the mismatches between the employee’s ability and the ability required for the job, such as by providing necessary job training to improve the employee’s ability, or by considering personnel relocation, etc. At the same time, the employer needs to be very careful when it carries out such measures because, for example, a superior’s arguably overbearing instruction may be regarded as “power harassment” (abuse of power) by the employee.
For more information, please contact our HR Consulting Group.
4. This Week’s Words of Wisdom (“Eggplant and Cucumber” O-Bon special edition)
The traditional Japanese event called “O-Bon,” during which we welcome back the spirits of our ancestors, is observed throughout Japan in July or August. Very familiar to us during O-Bon are animal figurines called “Syouryouuma” which are made out of eggplants and cucumbers representing cows and horses respectively.
We insert short chopsticks into eggplants and cucumbers, which are then used to decorate our Buddhist household altars. This symbolizes that we wish the spirits of our ancestors to come back to us on horseback as quickly as possible and ride slowly on a cow’s back on the return trip.