Women are critical to Japan’s economic success

August 11, 2015 / By  

Japan has regained some of its lost momentum under “Abenomics”, a three-pronged set of policies aimed at rejuvenating and reforming the Japanese economy. While consumer sentiment has remained fragile over the past few years, corporate profits have continued to rise and the unemployment rate has declined to 3.3%, the lowest level in 18 years. Should private consumption recover along with rising real wages, the stagnation that has characterised Japan’s economy since the “Lost Decade” might at last be giving way.

There is a blip on this bright horizon, however. Japan’s declining birth rate and rapidly ageing population threatens the working capacity of its labour force, and therefore the long-term viability of the nation’s growth. Fertility rates are below replacement level, and over one-fourth of Japan’s current population is over the age of 65. Current demographic predictions by Japan’s Health Ministry put the Japanese labour force at 55 million by 2050, down 10 million from this year. Without a consistent supply of labour, Abenomics cannot succeed, and so to forestall this damaging shortfall, Abe has turned to a chronically underutilised demographic – Japan’s women.

Figure 1: Female labour force participation rates, top 25 countries 2014


Source: OECD Employment Outlook 2015

Table 1: Japan female labour force participation rates


Source: OECD Employment Outlook 2015

Japanese women are among the most highly educated in the world, but female participation in the Japanese workforce ranks among the lowest in OECD countries, especially in the late 20s to early 30s age bracket, when most women have their first child. The reason for this lies in the entrenched corporate mind-set, which penalises maternity leave, prioritises long hours and ultimately clashes with sociocultural expectations for Japanese motherhood. In addition, restrictive Japanese labour laws, low numbers of women in managerial positions, a lack of childcare facilities, and the spousal tax deduction, which incentivises a sole-breadwinner household, all stand in the way of women’s participation in the labour force.

The Abenomics structural reform strategy aims to encourage a radical change in this paradigm and establish woman-positive corporate environments and policies. The most recent results are encouraging; already female employment has increased by 820,000 workers since Abe took office in 2012. Given Japan’s tradition of “lifetime employment”, which limits re-entry of workers into well-paid, permanent positions, much of the new female workforce has been relegated to low-benefit, low-wage, temporary positions with little to no chance of advancement. Furthermore, there is still a wealth of untapped potential; according to a 2013 survey by the Ministry of Internal Affairs, as many as 3.15 million currently unemployed women could return to work if given the opportunity. The economic effect of such a change is nothing to sneeze at; closing the workforce gender gap could boost Japan’s GDP by as much as 12.5%, according to a report by Goldman Sachs.

For Japan to truly see returns from an influx of women in the workforce, it’s critical that initiatives are put in place to incentivise women to return to work and furthermore, remain employed throughout their childbearing years. Revising antiquated legislation, building day care facilities, and promoting a culture that promotes, rather than demeans, women’s empowerment, will be instrumental in deciding the future of both the gender gap and the country as a whole. The extraordinary growth potential of Japanese women is already there – it is just a question of providing the right environment for them to flourish. This is also an important driver of demand within Japan’s real estate markets which should reap the benefits of a revitalised labour force along with other structural reforms.

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