This paper studies the role of extensive and intensive margins of labor adjustment overbusiness cycle in Japan. We find that the intensive margin accounts for much of total hours worked variation, and its contribution to the fluctuation of total hours worked is about 77%. This result is in sharp contrast with those in the U.S. and European countries where the extensive margin mainly accounts for the overall variability in total hours worked. The implication of a recent rise in non-regular employment for firms' labor adjustment behavior is also discussed.
