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Diverging economic inequality has become a common focus of economic debate in developed countries. In particular, the recent experience of Japan has started attracting international attention. We take advantage of a rich micro-level data set from the Basic Survey on Wage Structure (1989Structure ( -2003 to perform an in-depth analysis of the change in the inequality and distribution of the hourly wage. We observe that lower returns to education and years of tenure contribute to diminishing income disparity between groups for both sexes. A larger variance within a group contributes to the wage disparity for males, while an increased heterogeneity of workers' attributes contributes to the wage disparity for females. The Dinardo, Fortin, and Lemieux decomposition also confirms the basic findings from a parametric variance decomposition.

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Japan's traditional long-term employment practice, loosely termed "lifetime employ ment," once attracted much attention, but its fortunes have not been tracked since the 1990s. The authors use micro data from the Japanese government's Basic Survey on Wage Structure to estimate permanent full-time workers' tenure patterns in the years during and following Japan's decade-long recession. Mean tenure, they find, grew for both genders between 1990 and 2003. The main explanation for this trend was a chang ing relationship between tenure and the attributes of workers and firms, rather

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