Japan Trying to Cope With Worker Glut : Economy: Lifetime employment policies prevent large firms from laying off during hard times, so they’re seeking other solutions.

For half a decade, Japanese companies fearful of an impending labor shortage eagerly snapped up all the young college graduates they could get their hands on, courting them with Hawaiian vacations and promises of exciting careers.

Now, as Japan’s economy slows and corporate earnings tumble, companies are finding their expanded work forces a financial burden.

Such problems will be exacerbated by a rising yen, which makes Japanese labor costs high relative to other countries’.

In hopes of avoiding layoffs that would undermine a lifetime employment system that is the cornerstone of Japan’s peaceful labor-management relations, companies are searching for ways to make better use of their workers.

Matsushita Electrical Industrial Co., for example, has announced an innovative idea for redeploying its sales force to revitalize the sales effort.

In what the company is calling its “Visit All Customers to Win Love Campaign,” hundreds, perhaps thousands of Matsushita employees, paired with sales people from the 19,000 Matsushita-affiliated stores across the country, will visit each of 10 million Japanese households that have previously purchased Matsushita products.

Sales people will deliver a company catalogue that is normally mailed to customers and will carry with them a safety check list to help consumers spot potentially dangerous situations such as frayed wires. They will also ask customers what they want in the way of new products. Naturally, the sales people will recommend replacing aging appliances.

“Up to now, we just raced to improve the functions on products,” Matsushita Director Masahiko Hirata said. “Now, we want to know what the customer is looking for.” Matsushita hopes the effort will help earnings, which dropped 76% in the first quarter ended June 30.

Matsushita’s plan is a creative use of idle hands. But many Japanese companies are simply shuffling employees among their far-flung divisions.

At Fujitsu Ltd., 100 systems engineers involved in research and development are being reassigned to sales jobs. At Hitachi, 2,000 employees involved in consumer electronics will be shifted to the healthier heavy industries sector.

Executives say they don’t particularly like this game of musical chairs. Many wish they could impose layoffs to help restore profit.

Some predict that Japanese companies will soon be forced to make such a choice.

Ryuji Yasuda, a director at the McKinsey & Co. management consulting firm, predicted in a recent business publication that Japan’s unemployment rate will climb to over 5% from the current 2% as companies are forced to drastically cut costs to prop up profits.

There are indications that companies are preparing for just that. A confidential manual called “How to Fire,” published 10 years ago by the Nikkeiren, an employers’ association, is now being widely circulated, according to media reports. The manual is based on the experiences of shipbuilding companies that had to cut jobs during the deep recession of the mid-1970s.

For the time being, managers are taking a softer approach to avoid antagonizing company unions.

Japan Victor Co., which lost $168 million in the quarter that ended June 30 because of a slump in sales of videocassette recorders, plans to cut 3,000 jobs by March. The company is laying off 2,100 part-time workers, plans to move 300 employees to affiliated companies and expects to cut 500 jobs through attrition.

Downsizing is the word in Japan’s auto industry, where companies are laying off part-time employees and cutting back to one shift--from two or more in some factories--to deal with bloated inventories.

Companies are also beginning to consider early-retirement schemes.

TDK, the giant components and audiotape manufacturer, says it is studying a plan to allow 50-year-old employees to quit and still retain 90% of their salaries. It says the plan would reduce overhead but it is not sure it can guarantee salaries for the 10 years until employees reach official retirement at 60. Sanyo also recently announced an early retirement plan.

Many companies are taking advantage of the current slump to try to reduce working hours (and overtime payments) to comply with government guidelines for making Japan a “leisure” society.

Some guidelines are hardly relaxing by Western standards. Sumitomo Trust, for example, has ordered its employees not to appear in the office before 8 a.m. and to leave by 8 p.m. Many companies have simply informed employees that they will no longer be paid for extra work hours not approved by supervisors.

Meanwhile, a growing number of companies are using their current difficulties as an excuse to accelerate the switch from the traditional seniority-based pay system to one that focuses more on merit.

Although economists say companies are choking with “over-employment” in the face of the slowdown, even minor proposals for retrenchment face resistance.

A Hitachi plan to close factories two extra days a month, thus forcing employees to take two additional paid holidays each month, brought a storm of protest.

Naoyuki Kameyama, research director at the Japan Institute of Labor, says the measures corporations are taking to shrink labor costs will have little impact on Japan’s system of lifetime employment. Guarantees of job security have played a crucial role in Japanese corporations’ ability to hold down wage demands by company unions.

And while companies face a labor surplus in the context of today’s economic problems, Kameyama says the medium- to long-term outlook still is for a labor shortage.