by Jeff Allan
Aside from his comprehensive economic initiatives, Japanese Prime Minister Shinzo Abe is known for his sometimes hawkish and conservative views. It might then be surprising to learn that he is also the new champion of gender equality in Japan. As part of the larger Abenomics reforms, the prime minister is also backing several initiatives which have the potential to promote a greater balance for women in Japan’s workplace.
Under the motto of “Japan must be a place where women shine,” Abe is encouraging the corporate sector to introduce changes that boost women’s participation in Japan’s workforce. Chief among these reforms is the promotion of women to more senior positions, the appointment of more women to board positions of Japanese companies, a significant increase of childcare facilities, and extended maternity leave policies. For his part, Abe has pledged to increase the percentage of women hired for national government positions to 30 percent.
Why Japan Needs Womenomics
Despite Japan’s position as the world’s third largest economy, it lags far behind its global peers in terms of gender equality. The latest World Economic Forum Global Gender Gap Report ranks Japan at 105th out of 136 countries. Compared to its closest economic rivals in China and the United States, ranked 69th and 23rd respectively, Japan is closer to Saudi Arabia and South Korea near the bottom of the list.
Only 63 percent of Japanese females currently participate in the workforce, compared to 81 percent of Japanese males. Of those employed, 35 percent are only working part-time. Women in Japan also make 30 percent less than their male counterparts for the same job. Meanwhile, only a meager 1.1 percent of Japanese executives are female. Aside from the obvious social issues of inequality, the situation also presents massive economic implications that Abe hopes to resolve with these initiatives.
In Economic Terms
More Japanese women in the workforce will go far to address several issues currently plaguing Japan. Foremost of these is Japan’s rapidly aging population, and the resulting population shrink, which analysts say will hit 30 percent by 2060. As noted in a recent Goldman Sachs report, the number of registered cats and dogs in Japan, presently outnumbers the total number of children under the age of 15. Japan’s newly recovering economy is in no position to face the impending labor shortages that will result from its graying population.
Notwithstanding the aging workforce, more Japanese women in the labor pool will also yield other very tangible benefits to the country’s overall economic health. In the same Goldman Sachs report, analysts note that if an equal number of females enter the workforce to match the male workforce’s current 81 percent participation rate, it would have the effect of boosting the Japanese GDP by up to 12.5 percent.
It is by no means an easy road that lies ahead for Japanese women. In spite of Prime Minister Abe’s encouraging talk, there is still a deep-seated male chauvinism that permeates within Japanese government and business institutions. For proof, one need only look to the heckling incident that took place at the Tokyo metropolitan assembly in June of this year. As Assemblywoman Ayaka Shiomura attempted to address the assembly?on the topic of working mothers and infertility?she was heckled by several male members of the assembly who hurled sexist remarks to demean the assemblywoman and the topics she addressed.
Abe himself, has called on his countrymen to change their “pervasive male-oriented thinking.” The fact that the incident at the Tokyo assembly gained so much domestic attention and outrage points to a subtle change in the collective Japanese attitude. The population recognizes this type of thinking and behavior as unacceptable. A shift in gender equality might be difficult for the old guard to accept, but it is inevitable.
The investment implications of womenomics are broad. The effect of more women going to work will be felt on several levels across the Japanese economy. The most obvious and immediate effect of more women in the workplace is higher household income levels. These higher income levels will lead to increased spending across consumer sectors. Since women in Japan control approximately 63 percent of all spending decisions, it is possible to predict where?at least some of?this spending will go.
Specifically, analysts point to likely gains across a variety of sectors that are expected to see direct and indirect benefits from more women in the workforce. Increases in childcare, eldercare, ecommerce, apparel, and beauty are projected to be the most immediate and visible of these gains. Indeed, part of Abe’s womenomics plan calls for the opening of 400,000 new daycare centers by 2017, as an example of a sector that stands to see enormous gains.
Beyond sectors that cater expressly to women in the workforce, there are also other factors at play that investors need to take into consideration. As noted by BNY Mellon, companies that make better use of women in the workforce tend to see better mid- to long-term results. Goldman states in their research that companies who rank in the top 25 percent of female employers had three year ROE above 10 percent. Not surprisingly, firms that ranked in the bottom 25 percent of female employers had low to negative ROEs.
To that end, the Japanese government and the Tokyo Stock Exchange have taken the initiative to create the Nadeshiko Brand, to highlight companies that “are exceptional in encouraging women’s success in the workplace.” The 26 companies on the list are judged by the exceptional career support they provide for women and their superior financial returns. Some institutions, like BNY Mellon and SMBC are using the Nadeshiko Brand as a basis for creating new funds that are promoting a greater role for women in the Japanese workplace.