TOKYO, Japan: Faced with a shrinking workforce and fierce competition for young staff, more Japanese companies are easing long-standing appearance rules from hair colour to nail art in an effort to attract and retain workers who want greater freedom on the job.

For 22-year-old Hinako Mori, that flexibility was a deciding factor when she moved to Tokyo last year and chose part-time work at Don Quijote, a significant discount retailer known for its relaxed approach to employee appearance. With ash blonde hair streaked in light and dark blue, Mori said she now dyes her hair every six weeks, a stark contrast to her previous job at a convenience store that mandated black or dark brown hair.

"One time, I dared to dye my hair blonde. But the next day, I was told to either wear a wig or use spray-on colour," she said. "It was very stressful."

More companies are following Don Quijote's lead as labour shortages deepen. The retailer, part of Pan Pacific International, loosened its rules on hair and nail polish three years ago. Today, nearly a quarter of its workforce has brightly dyed hair, and when brown is included, 55 percent of employees have non-black hair.

Other businesses have begun eliminating restrictive policies as well. Drugstore chain Fuji Yakuhin now allows any hair colour, nail art, heavy makeup, and all kinds of rings, a broad shift from earlier rules that allowed only wedding bands. Tokyu Store, which operates supermarkets, has also relaxed restrictions on hair colour, accessories, nail polish, and piercings.

Japan Inc has gradually softened dress expectations over the past two decades, spurred by the Environment Ministry's 2005 "Cool Biz" campaign encouraging lighter summer attire to reduce air-conditioning. Since then, uniforms have been dropped at many department stores, and taxi drivers are no longer required to wear white gloves.

This year, several larger listed companies also made updates. Japan Airlines recently allowed staff to wear sneakers, joining Tokyo Metro and budget carrier Skymark Airlines.

Japan's ageing demographics have reduced the working-age population by 16 percent since its 1995 peak, according to OECD data. The result is intense competition for workers and rising pressure on employers. Two-thirds of Japanese firms say labour shortages are causing serious business problems, and the squeeze has contributed to the highest level of first-half corporate bankruptcies in 12 years, Tokyo Shoko Research found.

Younger workers in particular are pushing back. A Mynavi survey in April found that two-thirds of students believe they should be free to choose their appearance in part-time jobs, and one-third have withdrawn applications because of restrictive dress codes.

"Students aren't just looking for work experience or to earn money; they seem to be seeking something more in their jobs – a sense of freedom or comfort," said Shota Miyamoto of Mynavi. He noted that expectations differ for full-time work.

Still, limits remain. Multiple or facial piercings, common in Western workplaces, are still frowned upon, and tattoos, long associated with the yakuza, generally must be covered to avoid alarming customers. Many traditional companies also maintain unwritten expectations: Sumitomo Mitsui Banking Corp says it has no explicit rules on hair or nail polish, but employees understand that their appearance "shouldn't create waves."