By Miyuki Kashima, Head of Japanese Equities, BNY Mellon Asset Management Japan Limited | 8 November 2018
Japan is quietly changing dramatically. And What It Means For Investors. “Womenomics,” a core part of Abenomic’s growth strategy, is a term used to describe the diminishing of barriers to full-time female employment after childrearing. To date, the initiative has led to 2.38 million women joining the workforce.
Woman labor participation has quietly taken a sharp move up since the start of Abenomics at the end of 2012. This is an important part of Japan’s Prime Minister Shinzo Abe’s five-year-old “Abenomics” achievement, a program designed to re-ignite the nation’s economy after nearly 20 years of decline.
Miyuki Kashima, Head of Japanese Equities, BNY Mellon Asset Management Japan shares her insights into what this new shift means for business where the opportunities lie. Sherah Beckley, Editor Thomson Reuters Sustainability.
For the Prime Minister’s broadly ambitious strategy to be successful, Abe recognized that the country could not rely solely on monetary and fiscal policies, but needed to break down walls to unlock the economic potential of Japan’s human resources. In short, Japan could better leverage non-working women.
“Womenomics,” a core part of Abenomic’s growth strategy, is a term used to describe the diminishing of barriers to full-time female employment after childrearing. To date, the initiative has led to 2.38 million women joining the workforce.
A note on how this program relates to trade concerns.
Although some may argue that the current trade war will have a negative dent on the nation’s positive growth story, the traditional image of the Japanese economy being dominated by exporting industries does not stand up to scrutiny. With a relatively low export ratio of 16 percent, Japan produces the fewest exports of all Asian economies.
Japan’s recovery story, therefore, is largely dependent upon a turnaround in the domestic economy, especially consumption, which requires more equal employment and compensation between genders, and for both sexes to contribute earnings to the economy.
While some have voiced skepticism that Abe’s policy is little more than a method to prop up a growing labor shortage through deployment of a cheap female workforce rather than a program intended to espouse true gender equality, the success of the movement to-date has been notable.
Japan has seen an activation of an infrastructure plan to roll-out more than 500,000 new job openings in childcare facilities, a provision of free pre-school education, and support or re-employment through recurrent education for women who took time off work for childrearing. Yet there still remains room for improvement to increase women’s economic power.
For example, only 44 percent of female workers are full-time employees. According to the National Tax Agency, full-time workers make more than twice the annual salary of non-full timers. And while it may come as a surprise that Japan has one of the highest wage gaps in the developed world, recent labor reform has begun to promote equal pay and benefits for equal work, regardless of part-time status.
It also limits the maximum amount of overtime one person can work, indirectly encouraging employers incrementally to hire more workers. These reforms should not only create new part-time and full-time jobs for women looking to reenter the labor market, but also encourage a traditionally male-dominated workforce to share in leisure or care-giving activities as well as more equal promotion opportunities for women —significant socio-economic shifts that promise to create new spending patterns .
If one steps back and looks at what the Japanese government hoped for the economy, and what it’s actually achieved, the results are impressive. Even so, we are still only halfway to the government’s nominal Growth Domestic Product (GDP) target of over 600 trillion yen (5.3 trillion USD) which offers a potentially attractive opportunity for investors.
Companies with internal goals to hire and promote women to senior leadership are likely to continue to outperform – the number of companies are still limited, but we believe that the investment opportunities will only increase from now on.
Female consumption related sectors also present interesting opportunities as female consumption in single households is consistently higher than single male households across all income levels.
In recent years, it might have been easy for investors to overlook Japan’s vibrant domestic economy, given the last two decades of economic stagnation, as well as structural headwinds the nation faces due to an aging population and shrinking labor force (27 percent of the country’s population is over 65).
We see return opportunities for investors to take advantage of the Womenomics initiative.
For example, with women rejoining the workforce industries that stand to benefit include service companies such as home security. With women working both full and part-time jobs on-site at companies, there is the risk of a home break-in with no one watching over the home. A second example would be the construction industry where the use of technology and automation in aiding the development of buildings and homes opens new possibilities for Japanese women.
Previously, construction was a male dominated industry requiring significant physical strength to move construction materials and equipment. Also, with an increase of 67 percent more Japanese working women entering the workforce in the last five years, the economy stands to benefit as female consumers of products and services spend their wages.
The country is supporting a growth path and investors often forget about the sheer size of the Japanese economy and the opening for improvement in the workforce gender gap.
This quiet but dramatic change in Japan isn’t just moving the country in the right direction, societally and demographically, but it also might present a compelling vision for investors, especially those who are looking at responsible investing and want to allocate portfolio assets to a distinctive opportunity for growth, supported by government action that is currently not available in any other industrialized nation.