Global Opportunities: Japan

Japan's 'womenomics' plans are driving change in the country

Key Points
  • Japan's investments to bring more women into the workforce appears to be working.
  • The workforce participation rate for women between the ages of 15 and 64 rose to a record 69.4 percent in 2017, according to reports.
  • But the country needs to do more to address challenges like a perennial shortage in child care services.
A woman works in a small tofu factory in Ochiai, Miyoshi, Japan.
Carl Court | Getty Images

There's an in-house babysitting service for employees of one of Japan's largest staffing and talent agencies.

It's not just a perk: It's essential for helping working mothers make an easier transition back into the workforce.

That's because the country has a perennial shortage of child care services. It's so bad that even if a woman wants to return to work after giving birth, she often can't until the next April when day care facilities admit new children, according to Scott Sato, president and chief operating officer at Pasona.

"To address this, what we did was we have an in-house child care facility," he told CNBC. "We were the first organization in Japan, or a public company, to have a babysitting facility in Japan."

Sato explained that there aren't enough "baby care teachers" in the country at the moment. The job applicant ratio is skewed such that there are about six jobs available per candidate, he said.

A report last year said that the number of children on public day care waiting lists grew for the third consecutive year.

The shortage in child care facilities in Japan is due to an underdevelopment in that area over time, according to Kohei Iwahara, a Japan-based economist at investment bank Natixis. He explained to CNBC that women were traditionally expected to raise children instead of working in Japanese culture.

In fact, he said, plotting women's labor force participation in the country against an age range produced an M-shaped line — where participation rose when women were in their early-20s, it declined between late-20s and the 30s, rose again in the 40s when they returned to the workforce and then fell at retirement age.

Recent reports have suggested, however, that more Japanese women are working immediately after childbirth and that the government's efforts to keep them in the work force are starting to pay off.

The Nikkei business daily reported in February that the rate of working women aged 30 to 34 rose to 75.2 percent last year, up from about 50 percent three decades ago. The workforce participation rate for women between the ages of 15 and 64 rose to a record 69.4 percent in 2017, the Nikkei said, citing government data.

Those numbers indicate the M-shaped line may be flattening.

Prime Minister Shinzo Abe has pushed for more women to return to work to tackle the country's shrinking labor force. A subsection of his policy initiatives — referred to as "Abenomics" — is called "Womenomics," dedicated to measures that would make it easier for women to re-join the workforce.

Investing in 'Womenomics'

Japan is investing to build more child care facilities so women can reenter the workforce. Last year, the country announced fresh plans to create day care centers for 320,000 children by the end of fiscal 2022, according to local media reports.

"We are aiming for a large-scale increase of day care centers," Keiko Takegawa, director general at Japan's Gender Equality Bureau, told CNBC. "By 2020, we aim to increase day care centers to a level where 80 percent of women between the ages of 25 and 44 can continue to work, even with children.'

The government also said last year that it was setting aside 800 billion yen to provide free day care for children between 3 and 5 years old and free child care for low income families with children up to 2 years old starting in Apr. 2019, according to Reuters and local media reports.

Corporations are also taking steps to rehire women who left their jobs to raise children.

Microsoft Japan created a paid internship of about six months to help women prepare to return to the workforce, according to a November report from the Nikkei. It noted that those interns would be allowed to decide on their work days and hours in order to physically and mentally prepare themselves for full-time work.

In a post last month, Microsoft said it will conduct programs — including career-readiness sessions conducted by LinkedIn — that would encourage women in Japan to return to work through "telework opportunities." Telework, which allows people to do their jobs remotely, is still a new concept in Japan where corporate culture still emphasizes fixed working hours at an office.

Sompo Japan, an insurance company, also announced plans to re-hire women in positions similar to the ones they were in before they left, according to Nikkei.

There are benefits to including more women in the workforce, both at a macro level and at a company-level, experts say.

"For every one percentage point in the (women's) participation rate, you are boosting Japanese GDP by about half a percentage points," Jesper Koll, head of WisdomTree Japan, an ETF-provider, told CNBC. He explained that, while the economy is currently growing at a rate of around 1.5 to 2 percent, without the improvement in women's participation in the labor force, Japan would've grown at around 1 to 1.5 percent.

Koll also pointed out that many studies have concluded that diversity is profitable for companies — in Japan and around the world. He explained that companies with more female workers in senior managerial positions experience higher returns and enjoy better productivity.

Still, the consensus among experts is that Japan has to do more to make its corporate culture more conducive for women — including closing the gender pay gap, providing incentives for women to take up more full-time work in growth areas and chart paths for them to climb up the corporate ladder.

Iwahara explained that many women either take up part-time jobs or work in sectors that have low productivity. To fully realize the economic benefits of having more women in the labor force, Japan needs to provide incentives for women to seek out more full-time work in high growth areas, he said.

Women also see limited career prospects at work and do not receive adequate mentoring and experience, according to Jeffrey Kingston, director of Asian Studies at Temple University Japan.

Both Kingston and Iwahara said that the government needs to do more to invest in its aim of having more women in the work force — that includes passing laws and making companies follow them.

Still, the state of women in the workplace is shifting, according to the Gender Equality Bureau's Takegawa.

"As the government, we aim to promote full-time work for women and their moving up to managerial positions and corporate directors," she said.