On February 20, 2026, Prime Minister Sanae Takaichi announced in her policy speech that the government would consider “reviewing the discretionary work system.”
Amid concerns over labor shortages due to a declining birthrate and aging population, as well as a decline in international competitiveness, the Japanese government aims to make expanding “autonomous and flexible work styles” a pillar of its growth strategy.
However, this expansion faces fierce opposition from both business and labor circles, with strong concerns raised by workers on the ground that it could be a means to evade overtime pay.
This article explains in detail the mechanism of the discretionary work system, the key points of the current debate, and the issues it has brought to light.
1. What Exactly Is the “Discretionary Work System”?
The discretionary work system is a system where wages are paid based on the assumption that an employee worked a predetermined number of hours (deemed working hours) agreed upon between labor and management, regardless of the actual hours worked.
- Advantages
By entrusting workers with discretion over how they proceed with tasks and allocate their time, they can finish work efficiently and leave early, potentially improving work-life balance. - Disadvantages
When workloads are excessive, employees may only receive pay for the “presumed hours” regardless of how long they work, creating a risk of fostering long working hours.
Currently, the system is limited to two types: the “specialized professional type” for specific roles like R&D and designers, and the “planning type” for corporate planning and strategy. Applicable workers remain below 2% of the total workforce.
2. Background and Aims of the Takai Administration’s “Review”
Prime Minister Takai’s timing for this review stems from Japan’s paramount goal of “improving labor productivity.”
Business Community Arguments: Strengthening International Competitiveness
Business groups, including Keidanren, point out that the current list of eligible occupations is too limited (currently 20 occupations + planning work).
They argue that “in today’s era of advancing DX (digital transformation) and globalization, uniform time management is unsuitable,” and seek a system that allows flexible expansion of eligible occupations with labor-management agreement.
Government’s aim: Promoting diverse work styles
The government aims to foster innovation by creating an environment where highly skilled workers can operate more freely and efficiently. This will be achieved by expanding systems that evaluate performance based on results rather than hours worked.
3. Concerns about “unlimited working hours”: Why labor opposes
Meanwhile, Yuko Yoshino, President of RENGO (Japanese Trade Union Confederation), has taken a firm stance, stating, “There is a risk of adversely affecting lives and health, and we firmly oppose it.”
The Gap Between “Presumed” and “Actual” Hours
According to a Ministry of Health, Labour and Welfare survey, the actual working hours of employees under the discretionary work system are, on average, about 50 minutes longer per day than the “presumed working hours.”
Overtime Pay Evasion and Health Risks
While the Labor Standards Act typically sets limits on overtime hours (principally 45 hours per month, with a maximum under 100 hours), under the discretionary work system, working beyond the “deemed hours” to complete tasks is often treated outside the scope of legal overtime regulations.
This is why it is derisively called “unlimited work for a fixed fee.”
4. Future Debate Focus: Three Key Points to Resolve
Following Prime Minister Takaichi’s policy direction, the Ministry of Health, Labour and Welfare’s advisory council is expected to engage in intense debate on the following points:
- Scope of Expanded Coverage
To what extent will the scope be expanded? Will it extend to positions such as clerical roles? - Effectiveness of Health Safeguards
Are there concrete safeguards in place to prevent death from overwork, such as mandatory rest periods between shifts (time off between the end of one shift and the start of the next)? - Worker Consent and Withdrawal
Will workers who refuse to participate in the system face disadvantageous treatment? Is the right to withdraw consent after initially agreeing guaranteed?
Summary: Will This Truly Be “Work Style Reform”?
While expanding discretionary work arrangements offers a tailwind for professionals seeking autonomy, it is a double-edged sword that could worsen working conditions if implemented poorly.
The Takaichi administration faces the challenge of reconciling the “economic logic” of boosting corporate productivity with the “welfare logic” of protecting worker health at a high level. We must keep a close eye on the future direction of the deliberative council.
