While the Western gaming industry is mired in a wave of layoffs, game developers in Japan and other Asian countries are still receiving pay raises. Alanah Pearce, former writer for God of War, explores the reasons behind this phenomenon in her latest video—the answer is neither surprising nor as simple as it appears on the surface.
Pearce points out in the video that Japanese companies are similarly affected by market conditions, but they respond to these challenges in markedly different ways—driven both by legal constraints and deep-seated cultural factors.
Japanese law sets extremely strict thresholds for dismissing employees, making it nearly impossible for companies to legally fire permanent staff unless specific conditions are met. To adjust personnel without violating the law, Japanese companies typically rely more on contract workers who are easier to dismiss, or adopt a “forced resignation” strategy—stripping employees of all work assignments without terminating their employment, leaving them with nothing to do until they eventually quit voluntarily.
The video cites Pearce's interview with former Sony Interactive Entertainment president Shuhei Yoshida. Yoshida admitted that employees subjected to such treatment are “not assigned any tasks and encouraged to seek new jobs outside the company,” yet they continue to receive their salaries during this period.
Of course, Japanese companies do lay off staff, but these actions often occur within their overseas branches. In 2024, Nintendo restructured its product testing department, terminating contracts for some temporary employees; that same year, Square Enix cut over 100 jobs across its UK and US offices. Sony has also implemented multiple rounds of layoffs over the past two years.
Pearce also highlights the unique leadership style of executives in Japan's gaming industry. Former Nintendo president Satoru Iwata voluntarily cut his own salary after the 3DS failed to meet sales expectations, and did so again following the Wii U's market failure—a top-down sense of accountability rarely seen among Western executives.
Meanwhile, as Western developers lose their jobs, Japanese developers are seeing pay increases: Nintendo gave all employees a 10% raise in 2023, while Capcom raised average company salaries by 5% in 2024 and increased starting salaries for new graduates by 28%.
Pearce emphasizes that this isn't because Japan is some “game development utopia,” but rather due to practical economic pressures. Japan's continuously shrinking population has created a tighter labor market than in the West, forcing companies to compete fiercely to retain employees, with higher salaries being the most direct incentive.
Additionally, Japan still maintains the corporate culture tradition of “lifetime employment”—where employees tend to stay with one company until retirement—an ideal that largely disappeared in the US when its manufacturing sector declined 40 to 50 years ago.
The tight labor market means Japanese developers must keep employees on board for as long as possible, building their business models around this principle. The ripple effects of this approach are surprising: in the long run, these companies actually achieve stronger profitability.
A prime example is Final Fantasy VII Rebirth's sequel, Final Fantasy VII Ever Crisis—which is set to release just three years after Rebirth. Bloomberg reports that Square Enix achieved such efficient development precisely by retaining its core development team. Employee retention leads to faster development and higher-quality games, better games mean higher revenue, and higher revenue satisfies shareholders—it's a virtuous cycle.
In contrast, Pearce argues that the West (especially the US) is too entrenched in capitalist logic, dominated by corporate management teams “eager to replace all employees with AI,” making it difficult to implement the employee protection mechanisms found in Japan. However, she also notes that unions are working toward gradual change, which might prevent the Western gaming industry from remaining the “graveyard” it is today.