Think of Japan and what comes to mind? Trains that run on time and impeccable service standards; the unfailing politeness of service staff and their earnestness to serve customers. So when the employees of Seibu's Ikebukuro store went on strike this year on August 31, disrupting the daily opening of the departmental store, it caught the nation's attention and made headlines. It shocked a nation where workers hardly go on the streets demanding higher wages or better working conditions. 

The strike, involving as many as 900 workers, was held in protest against plans by the department store’s owner, Seven & i Holdings, Co., Ltd. (7&i Holdings), to sell the 10-store Sogo & Seibu chain to the US investment fund Fortress Investment Group.

The Seibu departmental store chain is a venerable name in Japanese retail and its flagship store in Ikebukuro, Tokyo occupies prime real estate right next to the very busy Ikebukuro station. In line with global changes to consumer trends and an increase in online sales, department store chains like Seibu have faced declining sales. According to the Financial Times, revenues at Seibu and Sogo department stores declined 45 per cent over the past decade to sales of ¥447bn ($3bn) in the year ending March 2022. 7&i Holdings was under pressure by its shareholders to divest its departmental stores. The 7&i portfolio includes the 7-11 convenience stores which is very profitable for it compared to its retail outlets of Seibu and Sogo. 

Fortress has a partnership with Yodobashi Camera, a prominent Japanese electronics retailer. The workers feared that the sale would involve combining the flagship Ikebukuro store with Yodobashi Camera or that Fortress would eventually sell off the prized real estate. Either way, it would ultimately cost them their jobs.

In recent years in Japan, the Japanese government has been promoting corporate governance reform. The focus of that reform is the:

1. Corporate Governance Code (Code)

This is a code of principles that requires listed companies to promote initiatives to increase mid- to long-term corporate value by appropriately cooperating with a wide range of stakeholders, including employees. It is stated in the Code that the board and management should exercise their leadership in establishing a corporate culture where the rights and positions of stakeholders are respected and sound business ethics are ensured. Its General Principle states that companies should fully recognize that their sustainable growth and the creation of mid- to long-term corporate values are brought about as a result of provision of resources and contributions made by a range of stakeholders, including employees. It encourages companies to endeavour to appropriately cooperate with these stakeholders.  

1. Stewardship Code

This is a code of principles that requires institutional investors (pension funds, trust banks, life insurance companies, etc.) to promote the sustainable growth of their investee companies through constructive engagement with companies from a mid- to long-term perspective.

In the case of Seibu, despite the strike and the Code, 7&i Holdings went ahead with the sale on September 1 to Fortress at an estimated actual transfer price of 85 million yen (US$582,000) after accounting for debts. The announcement by 7&i Holdings placed the enterprise value of Seibu and Sogo at 220 billion yen.     

Strikes are rare in modern Japan. Even though corporate Japan has been transitioning away from the iron rice bowl for the last 30 years with restructurings and lay-offs, and there have been headlines of unpaid overtime by Japanese companies as well as systemically enforced overwork, none of these have led to strikes. However, the tide may be changing with a greater focus now on sustainable development goals and ESG, including engagement with employees for a company's mid- to long term corporate value. Employees may feel more empowered, especially with the increasing labour shortage in Japan.

Could this strike be the harbinger of change to come in Japan?