2025 OECD Japan Employment Outlook
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.