When I first started working full-time at my former company (a Japanese office job that involved textbook making as well as teaching via correspondence), I was informed through indirect channels that the president had a policy with the foreign employees which was essentially "three years and you're out." At the time, I thought this was a plan built around the idea that they'd have to pay us more if we stayed around too long or a frivolous desire for fresh blood. To this day, I can't be sure that that wasn't the case, but something I learned about working in Japan awhile back has made me reconsider my original thinking.
The lion's share of Japanese employees can be roughly divided into two categories. First, there are salaried employees who have all the benefits that one would expect. They get twice yearly bonuses, salary raises each year, the possibility to be promoted, health insurance payments are subsidized by the company, and there is the possibility of a company pension and a housing allowance. Salaried workers are also hard to fire and have better job security. On the down side, they often live the classic life of the overworked in Japan and work overtime, particularly if they are male. These days, overtime is often paid though most employees generally don't claim all the hours they work and are in fact told not to claim more than a certain amount of overtime hours no matter how much they work.
The other class of workers are "temporary" workers. In the U.S., a temp. usually means a person who is relatively short-term and whose work at a particular location is measured in months. In Japan, it essentially means a contract employee who works according to the terms of a one-year contract which may or may not be renewed at the end of the year. The hope tends to be that the employee will renew though rather than they won't be renewed. Of course, at times, the contract employees don't make it past a probationary period, but the same sometimes happens with salaried workers who don't work out.
In contrast to salaried workers, contract (or "temporary") workers don't get a company pension, their insurance isn't augmented in many cases, and usually don't get bonuses or tend to get smaller or less frequent ones. I've never known one to get subsidized housing or company housing. Generally speaking, a lot of contract employees are female and single or married and working to augment the family income until they decide to have children. That's not to say there are no male contract workers, but just the vast majority are female. The benefits of being a contract employee are that every hour must be paid so there's no unpaid overtime and the hourly wages tend to be a bit higher than salaried workers when you don't factor in bonus payments. Also, the responsibilities of such employees are often spelled out in their contracts so work can't be heaped on them in some cases.
Something I learned within the last year or so about contract employees, of which I was one at my former company, is that there is a law in Japan which says that such employees can only serve three years at their current position and then, by law, must be offered a chance to be a salaried worker. Of course, the companies can simply not renew the contracts of such workers after the third year, but generally, they would prefer to keep experienced workers. You can see why I started to question my conclusions about the "three years and you're out" rule for foreign employees at my former company. It's possible they were trying to adhere to the law in this regard.
I can only speculate as to the motivation behind such a law. If I had to guess, I'd think it has to do with making sure people who are good and well-suited to a job have security and are rewarded for their efforts to apply themselves to a job. While I'm generally cynical about the laws made to protect employees, I can't see how this one necessarily benefits employers since they view contract employees as being cheaper to employ than salaried workers. In fact, one of my students recently told me that she was concerned because her type of work was almost entirely populated by this class of worker and she was afraid that, as a rare salaried employee working as support staff, she'd be forced to take a different job or accept a change in her status which would carry a lower wage and none of the benefits she currently enjoys.
More recently, I've learned that companies are finding loopholes in this law. They are circumventing the nature of it by shuffling contract employees to different sections. Apparently, the law only says that you must be offered a salaried position only if you're staying on for a fourth year in the same position. If this sounds like a bit of a sneaky way of avoiding hiring people on in better positions, I regret to say that it gets even worse. Some companies are not satisfied to shuffle such workers to avoid offering them better jobs in accord with the law. They weasel out of compliance by leaving the employees in the same position doing the same job, but rename the section so it appears as though they have been transferred.
Apparently, there has been a court case recently which directly relates to the attempts on the part of some companies to get around the law and Canon has been on the hot seat for having done this. It's relatively rare though that an employee stands up for his or her rights though so I doubt that any sort of precedent will be set even if Canon should lose. Also, the truth is that a lot of contract workers prefer to stay where they are and refuse salaried positions when they are offered. This is probably because the biggest benefit of being such a worker as compared to a salaried worker is that you can walk away with far less guilt and with no sense of "betrayal" of company loyalty as such loyalty is not expected from them.