A Surge in Women’s Employment Is Driving Japan’s Economy

Even after three years of trying, Japanese Prime Minister Shinzo Abe doesn’t seem able to get his economic program on the fast track. Just as one part of the economy looks better, another falls back into the decline that has dogged Japan for a quarter-century. Consider, for example, his April 2013 “womenomics” initiative — a part of his broader “Abenomics” program — designed to get more women into jobs in order to spur Japan’s moribund economy. One might argue it has been a success: According to the Organisation for Economic Co-operation and Development (OECD), which groups together the world’s developed economies, Japan’s female labor-participation rate has risen to 70.1 percent for working-age women, up from 62.7percent in 1997 – on par with the United States. IMF Managing Director Christine Lagarde has championed Abe’s focus on increasing the role of women in the workforce, and U.N. Women Executive Director Phumzile Mlambo-Ngcuka has praised the initiative.

But in Japan, no good deed goes unpunished. Even as the percentage of women in the workforce has risen, male labor participation has been declining, which acts as a brake on economic growth. According to the OECD data, the participation rate for men ages 25 to 64 has continued its steady slide of the past 20 years — falling to 92.9 percent in 2014 from 94.8 percent in 1997. The decline has been especially severe in the key 25-to-29-year-old age group, which has fallen to 93.6 percent in 2014, the most recent year for which data is available. “Especially for young males, the labor participation rate is weak. This reflects discouragement over finding a good job,” said Tokyo-based Deutsche Securities economist Kentaro Koyama. “Around 2000, companies wanted to protect older people and were hesitant to hire new graduates. This has continued to have an impact,” he said.

And even with the increase in female participation, the overall workforce continues its long-term slide as the population ages. The current total labor force of 66 million is actually smaller than it was in 1993 and is below the peak of 68 million reached in 1998. With productivity levels in Japan stagnant, fewer workers means less economic activity.

This issue shows how difficult it has been for Abe and Japan’s policymakers to get the economy moving again, 25 years after the famous bursting of the asset bubble in 1990. As one area seems to show promising signs, bad news comes from elsewhere. For example, the jobless rate is now just 3.1 percent, the lowest since July 1995. But wages remain stagnant, undercutting one of the key goals of the government and the central bank: ending years of deflation. Other indicators point to a continuation of Japan’s slow growth prospects ahead. According to recently released government data, average monthly income per worker’s household in October was down 0.9 percent in real terms from the previous year, while spending fell 2.3 percent over the same period after adjusting for inflation.

Despite the fanfare of Abenomics, the economy has done little more than lurch between growth and contraction since Abe took office in December 2012. Revised GDP figures of the third quarter showed a reasonable annual growth rate of 1.0 percent, but that followed a contraction of 0.5 percent the quarter before — again, one step forward, one step backward. That Japan is an aging country with a shrinking workforce will only exacerbate future economic weakness. In November, Tokyo said that if current trends continue, it expects the population to drop from 127 million today to 117 million in 2030 and the workforce to contract by 12.4 percent.

The government has a plan to push up the birthrate, which at 1.4 per couple is well below the replacement rate needed to keep the size of the population stable. There is even an office of Measures for Declining Birthrate (though its minister, Katsunobu Kato, carries no fewer than six other titles, including minister for Japanese citizens who were abducted by North Korea from 1977 to 1983). But by simple mathematics, a higher birthrate won’t be a meaningful contributor to the economy for at least 18 years. Some local governments have taken to sponsoring “meeting parties” for single young people, while other more practical measures include better access to child care and a reduction in the often punishing level of overtime for the average Japanese “salaryman.”

There’s a downside, however: More mothers would likely push female workforce participation back down. “There must be comprehensive support policies for child rearing because a high female labor participation rate carries the risk of a future decline in the birth rate if anything,” Deutsche Securities said in its research report.

Could immigration help? Unlikely. Tokyo implemented a few pilot plans, including a lackluster program to bring in nurses from Indonesia and the Philippines — but that was tripped up by stiff exams on medical knowledge and by the notoriously complex Japanese language. And Abe has all but ruled out any change in policy. When asked about immigration at a September news conference in New York, Abe instead switched the topic back to women in the workforce and the birthrate.

Jun Okumura, a visiting researcher at the Meiji Institute for Global Affairs, said that the tenor may change once Abe leaves office (which is required by September 2018 due to party term-limit rules). “I suspect that future leaders will be more amenable to a German-style guest worker program, with prospects for permanent resident status leading to citizenship drawing people from Indonesia, the Philippines, and perhaps China and even North Korea,” he said.

That is not to say that Abe isn’t still trying to kick-start the economy. He has now shot off two sets of “three arrows” promising economic growth; he has called on companies to raise wages; his government is planning yet another stimulus; and he is proposing an annual 3 percent rise in the minimum wage.

But some analysts have expressed disappointment and confusion over the new measures, saying that they appear to have swept away the original policies of strong monetary easing by the central bank — policies that have targeted fiscal spending and regulatory reform. “Not only is it suspect whether or not these promises can be fulfilled,” Keio University economics professor Masaru Kaneko has said, but “it is clear that they were made in order to avoid questioning of why the original three arrows ended in failure.”

Perhaps the one real potential bright spot in the economy of late came from Bank of Japan Gov. Haruhiko Kuroda, who surprised just about everyone with new measures on Dec. 18. While the steps were technical in nature, relating mainly to the length of the maturities of the bonds to be purchased and changes in eligible collateral for banks, the moves were enough to get the financial markets focused once again on his goal of increasing inflation to 2 percent. Whether Kuroda can finally deliver on his promise, originally targeted for the spring of 2014, will be one of the key questions for economic watchers in 2016. But with the way this economy is going, if Kuroda succeeds, some new problem will almost certainly emerge.

And despite the plaudits for the womenomics program, even that has not been smooth sailing for Abe. The government’s Gender Equality Bureau quietly rolled back the ambitious target he set on the proportion of senior-level jobs to be held by women. From the original goal of 30 percent by 2020 championed by Abe, the new five-year gender equality program published this month now targets a far more modest 15 percent for the private sector and 7 percent for national government bureaucrats. (That would be up from 9.2 percent and 3.5 percent, respectively, at present, according to the agency.) The bureau’s website sums up the challenges: Abe is pictured on the homepage with seven corporate award winners for promoting women at their companies — only one is a woman.

Photo by The Asahi Shimbun via Getty Images