TOKYO - A Canadian man who has been working in Tokyo's finance sector for nearly two decades is suing his employer Mitsubishi UFJ Morgan Stanley Securities for what is known in Japan as paternity harassment.

Mr Glen Wood, 47, who was the brokerage's head of global sales, is arguing that he has been unfairly sidelined by the company with a demotion and a hefty pay cut after the birth of his son, Alexander, two years ago.

Now a single father, he is fighting for his old job and salary back in the ongoing case before the Tokyo District Court. Mr Wood has been suspended without pay since Oct 18.

The lawsuit has wider implications for a nation that is struggling to cope with not only a demographic time bomb, but also with a severe lack of interest among top foreign talent which it is wooing by offering the world's quickest road to permanent residency.

The number of births recorded in Japan in 2016 fell below one million for the first time, despite generous childcare leave benefits. For one, the law grants fathers up to 52 weeks or an entire year of paid paternity leave.

But the Ministry of Health, Labour and Welfare said only about 3 per cent of new fathers took any or all of that benefit last year (2016). The government wants to raise this to 13 per cent by 2020.

Childcare is an issue that often incurs public furore. Last month (November), city lawmaker Yuka Ogata, 42, from Kumamoto on the south-west island of Kyushu was reprimanded with an official warning after she brought her seven-month-old son to an assembly session that was slated to last for 15 minutes.

Her colleagues, overwhelmingly male, promptly raised heckles. The session was postponed for 40 minutes, just so Ms Ogata could leave her child with a nanny.

A study this year, meanwhile, also found that most young fathers hoped to take paternity leave, but are not doing so out of social hurdles including peer pressure and fears that their colleagues would "think unfavourably" of them.

This issue of entrenched mindsets is amplified in monolithic, traditional Japanese corporations, Mr Wood told The Straits Times in a recent interview.

"In Japan, people are afraid to have children. This is why the birth rate is so low, they don't feel that they can have both children and a career and that is very sad. It is not a humane answer to the situation," said the Ontario, Canada, native, who holds a Masters in Business Administration from Wharton School of the University of Pennsylvania. He first came to Japan almost 30 years ago and is fluent in Japanese.

He has worked at Mizuho Securities, Deutsche Bank and Goldman Sachs, before joining MUFJ Morgan Stanley in September 2012.

According to the court filing seen by The Straits Times, Mr Wood said his demotion had been unjust, given that revenues have doubled between 2012 and 2015 as the company grew its base of institutional investors. Furthermore, he has consistently scored high reviews in internal company appraisals, the document said.

The company's in-house policy rulebook said that those applying for childcare leave must produce a Japanese document called a "maternity health record book" that is issued by a local municipality. But this would have been impossible for Mr Wood to obtain as his then non-Japanese partner had been warded in a Nepali hospital.

When MUFJ rejected his application, he then consulted experts and government offices who told him that paternity leave should still be granted, and that if the company insists, he could provide a DNA test as official proof after the baby was born.

"This isn't about a foreigner trying to go against the Japanese system. I follow all the rules, my e-mails are in Japanese, I do everything in Japanese," he stressed. "But I feel very strongly that large traditional corporations should not be allowed to operate above the law. If companies do not follow government policies, then they are useless, just a piece of paper."

"It is also about work-life balance. In Japan, historically, when you join a company, you are a soldier. It's like a battle, but if you get sick or have a baby then you are gone," he added, observing that it was par for the course for women in the brokerage to be harassed if they get married or pregnant.

In response to queries from The Straits Times, an MUFJ spokesman said, however, that the company "has set up a childcare leave system even before this incident, and we actively support our employees in applying for childcare leave regardless of their gender or nationality".

They added that about 42 per cent of new fathers who qualify for paternity leave applied in fiscal 2016, and that the company is on course for 100 per cent in the current fiscal year.

"We will never disadvantageously treat any employee's childcare leave application," the spokesman said, adding that the company is "sincerely working to resolve the issues surrounding Mr Wood's lawsuit and his continued employment".

Japan ranked last among 11 Asian nations in terms of appeal for top foreign talent, said a report released last month (Nov), behind such countries as Indonesia, Thailand, Malaysia and the Philippines. It was also ranked 51st out of 63 nations worldwide.

The IMD World Talent Ranking report cited language barrier and rigid business practices for Japan - despite being the third largest economy of the world - falling short.