Facing a sluggish economy and increasing competition, Japanese companies want to reduce longstanding restrictions on dismissing full-time workers. (Ko Sasaki/The New York Times)

Shusaku Tani is employed at the Sony plant here, but he doesn't really work.For more than two years, he has come to a small room, taken a seat and then passed the time reading newspapers, browsing the Web and poring over engineering textbooks he dug up from his college days. He files a report on his activities at the end of each day.Sony Corp., Tani's employer of 32 years, consigned him to this room because they can't get rid of him. Sony had eliminated his position at the Sony Sendai Technology Center, which in better times produced magnetic tapes for videos and cassettes. But Tani, 51, refused to take an early retirement offer from Sony in late 2010 - his prerogative under Japanese labor law.So there he sits in what is called the "chasing-out room." He spends his days there, with about 40 other holdouts."I won't leave," Tani said. "Companies aren't supposed to act this way. It's inhumane."The standoff between workers and management at the Sendai factory underscores an intensifying battle over hiring and firing practices in Japan, where lifetime employment has long been the norm and where large-scale layoffs remain a social taboo, at least at Japan's largest corporations.Sony wants to change that, and so does Prime Minister Shinzo Abe. As Japan's economic recovery sputters, reducing the restraints on companies has become even more important to Abe's economic plans. He wants to loosen rigid rules on job terminations for full-time staff.Economists say bringing flexibility to the labor market in Japan would help struggling companies streamline bloated work forces to better compete in the global economy. Fewer restrictions on layoffs could make it easier for Sony to leave loss-ridden traditional businesses and concentrate resources on more innovative, promising ones."I have a single wish for Japan's electronics sector, and that's labor reform," said Atul Goyal, a technology analyst at Jefferies & Co.Sony said it was not doing anything wrong in placing employees in what it calls Career Design Rooms. Employees are given counseling to find new jobs in the Sony group, or at another company, it said. Sony also said that it offered workers early retirement packages that are generous by American standards: In 2010, it promised severance payments equivalent to as much as 54 months of pay. But the real point of the rooms is to make employees feel forgotten and worthless - and eventually so bored and shamed that they just quit.Labor practices in Japan contrast sharply with those in the United States, where companies are quick to lay off workers when demand slows or a product becomes obsolete. It is cruel to the worker, but it usually gives the overall economy agility. Some economists attribute the lack of a dynamic economy in Western Europe to labor laws similar to Japan's that restrict layoffs.New York City had "rubber rooms" where it put teachers who would sit - with full pay - while the city tried to fire them. The practice was ended in 2010. The United Auto Workers and automakers had created, under union contracts, places where idled workers were essentially warehoused.Sony, a sprawling company with more than 146,000 employees, is under pressure. It has been outmaneuvered by more nimble competitors and its executives are trying to remake the company. Fixing Sony is especially critical after it snubbed the American activist investor Daniel S. Loeb's push to spin off part of Sony's entertainment business. Its shares have fallen almost 10 percent since Sony rejected his proposal last week.Critics of labor changes say something more important is at stake. They warn that making it easier to cut jobs would destroy Japan's social fabric for the sake of corporate profits, causing mass unemployment and worsening income disparities.For a country that has long prided itself on stability and relatively equitable incomes, such a change would be unacceptable."That's not the kind of country Japan should aim to be," said Takaaki Matsuda, who leads theSendai chapter of Sony's labor union.It would be a radical change. A combination of lifetime employment, seniority-based pay and intense worker loyalty to the company was credited for Japan's postwar economic miracle, as stability and growth went hand in hand. But when the Japanese economy stumbled in the early 1990s, companies found that Japan's rigid labor practices made downsizing impractical.Instead, unneeded workers were left with little to do besides gaze out of the window, giving rise to the term "madogiwa zoku" or the "window seat tribe."Proponents of employment change point out that stiff protections for workers have prompted companies to make major cuts in hiring, shrinking opportunities for scores of youngerJapanese. Sony hired 160 fresh college graduates this fiscal year, compared with about 1,000 in 1991.Companies have also adjusted by using a secondary class of temporary or part-time workers they can more easily let go. "In reality, hidden inequalities already exist in Japan," said Fumio Ohtake an economist at Osaka University.Still, some fear that Abe's changes are not so much pro-market as just pro-business. A weaker yen has brought exporters like Sony windfall profits, yet no substantial increases in salary have followed, and many manufacturers continue to shift production overseas.The delicacy of labor changes has forced Abe to tread gingerly. He took the issue off the agenda when he focused on parliamentary elections in July. After a big win for his party, it is back. But the new plan would ease firing rules only in Japan's three biggest cities.Japan's biggest companies appear to be imitating Sony in its efforts to get workers to leave. Local media reports say many of them, including Panasonic Corp., NEC Corp. and Toshiba Corp., use the oidashibeya, or chase-out rooms, and similar tactics. In May, the Asahi Shimbun newspaper reported that an employee at a Panasonic unit was being required to spend his days in a room staring at monitors to catch any irregularities. Last year, a Tokyo court ordered Benesse Corp., an educational services company, to reinstate a worker who claimed she had been required to do demeaning, menial tasks after resisting pressure to leave.Panasonic could not be reached for comment over its summer holiday period. Benesse did not respond to written requests for comment.While details of the government plans are still being determined, Tani's managers at Sony are already upping the ante. Starting this month, the company has ordered him to work 12-hour shifts on an assembly line at a Sony plant in Toyosato, more than an hour's drive away. He says he will comply.For Miwako Sato, who joined Sony right out of high school in 1974, the changes are a betrayal of an accepted social contract in Japan. She put in 12-hour shifts at the Sendai factory, working with huge rolls of magnetic film, and watched Sony grow into a global electronics powerhouse.But technology moved on, and Sony was increasingly usurped by nimbler rivals. In 2003, the factory offered the first of many early retirement programs.Two years ago, a destructive tsunami swept through the factory, sending workers scrambling to the roof. The damage prompted Sony to move its battery and optical devices operations, and the company later sold its chemical products business, eliminating more jobs at the plant.In February, just two years shy of Sato's retirement, a manager had blunt news, "Your job no longer exists." She refused to quit, and was dispatched to the chase-out room. There she completed an online degree in nursing the elderly. But she didn't quit. Since last month, she has been assigned to do data entry.

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Sony's labor union estimates that the plant's workforce is half the size it was three years ago.Sato said that in the factory's heyday, workers called Sony the Sony Maru, or the Sony Ship."Everybody was on board, our fates tied together," she said. "Not anymore."