Japan's economic success is clear evidence that purposeful investments in the educational quality of the work force pay major dividends in terms of enhanced productivity and increased competitiveness. The key elements of the Japanese system are, in fact, less than 40 years old. The current recession is a reminder of the transitory nature of economic trends. Within Japan, most discussions of the work force begin with the looming shortage of first-time workers and an expensive surplus of retirees. The Japanese have a relatively limited number of alternatives: increased use of female workers, greater use of older workers, increased number of guest workers, basic redistribution of workers from labor intensive sectors, and accelerated export of production jobs. The tightness of Japanese labor markets is a function of migration patterns that have yielded an economy and population increasingly concentrated in three areas: Tokyo, Osaka, and Nagoya. Side effects of educational competition include dwindling numbers of students in technical and vocational schools and increased costs of educating children that deter larger families and prolong the effects of the "baby bust." Changes for Japan may include a less rigid labor market, a shift to educational programs outside the firm, and an effort to apply the lessons of manufacturing efficiency to service sector industries. Numerous graphs and charts supplement the text. (YLB)