The truth is that there are no laws or contracts preventing companies from laying off its workers en masse, yet the individual deludes himself into thinking that there is some concrete social contract exists. The thing is, when the economy was growing at 5% a year, companies could uphold this (ephemeral) social contract by employing people for a lifetime and guaranteeing a great pension.
I personally know CEOs of smaller companies in Japan who vowed to not lay off a single person during the tough times of 2008-2010. The C-suite guys took zero salary for at least 2008, and all other employees took a temporary 30% pay cut. However, this is not the norm. While outright firings may be more rare, things go on underneath the surface. Fulltime employment slots replaced with contract workers in factories, significant amounts of employment moving overseas to SE Asia, etc.
Layoffs aren't as common as the US, but that's actually not necessarily a good thing. Hiring of new grads has gone down significantly (the last graduating class with decent job prospects was the class of 2008), while the older workers (even those who underperform) are kept on board. Like kalleboo says, Japan is about "family". They are kind towards members of their family, and strikingly cold to those who are not. Those who are part of the company are "family", and are protected. New grads who cannot find work are not part of the family, and don't receive the same empathy. Even those who can find work, even at the best and brightest companies, are faced with a situation where their lifetime earnings will be significantly lower than those of the boomers. (on the order of $2.5MM vs $3~4MM lifetime)
There are no good figures about the employment rate of college graduates, but if you discount students who have gone onto become 'part time / contract' workers, the employment rate may be around 60%. (The problem is that all the stats are wildly skewed - for instance, employment rates that include 'underemployed' new grads, or only counting graduates from mid-tier colleges and above) No one really knows how bad the true youth unemployment situation is in Japan.
College students are very risk averse, particularly in the turmoil following the financial crisis. I recall that a poll among college students back in 2011 declared that they wanted to become public workers above all other options (public workers cannot be fired, afaik).
Japan's leaders are very talented at keeping a sinking ship afloat. But they can't avoid the inevitable. Like the country's debt problem, there will come a moment when things catastrophically implode.
For many many years it has been. People'd get picked up fresh from college and they'd be part of the companies "family". Nowadays, especially after the financial crisis... not so much. Companies now only hire part-timers so they can fire them at will. Youth unemployment is skyrocketing as in many other countries.
