While Western countries use reference checks, Japan uses this system to secure financial indemnity.
Legal and Financial Implications
This document makes the guarantor "jointly and severally liable" for damages caused by the employee. If the employee embezzles money or causes significant destruction of property and cannot pay the damages themselves, the company can legally seek compensation from the guarantor. However, Japanese law (The Act on Personal Identity Guarantee) limits the duration of this guarantee (usually 3 to 5 years) and the maximum financial liability to protect guarantors from unlimited debt.
Usage
It is standard procedure for new hires, especially fresh graduates. It serves a dual purpose: financial security for the company, and a psychological pressure on the employee to behave well so as not to cause trouble for their family.