Why Women Mean Business in Japan - Building Gender Balanced Business

Women are being underused in the Japanese economy, which can ill-afford to waste precious human talent, especially as the country reels from the impact of the global recession on its export market. In January 2009, Japan’s exports fell at their fastest rate in 50 years, with exports to the US falling by 52.9%. In the last three months of 2008, Japan’s GDP shrank by 3.3%, the largest fall for 35 years. In such a climate, the need to tap into the underutilized female talent pool is greater than ever.

According to OECD figures, only 67.4% of Japanese women in the age group 25-54 have a job, which is fifteen percentage points lower than such best performing OECD nations as Sweden, Norway, Denmark and Finland. But 93% of Japanese men in the same age group do have jobs, the highest such employment rate among OECD nations after Iceland and Mexico. And this underutilisation of women talent in Japan happens in a country where women are among the most highly educated in the OECD. Some 42.5% of women in Japan have a tertiary education qualification compared to the OECD average of 28.5%.

Women’s career paths follow an unusual M-Curve shape in Japan because there is a steady decline of women in the workforce from the age range of 25-29 through to 30-34, when many choose to leave work to raise families. Then some return to jobs in their late 30s and 40s, causing a slight increase in the numbers of women in the workforce. This time many women come back into part-time jobs. Finally, there is another decline in women in the workforce when they reach their 50s.

The under-use of women’s talent is also acute in the higher decision-making positions in business and public life, where the contribution of gender balance is known to radically improve organisational performance. The percentage of managers in Japan who are women was 6.6% in 1985, rose very slightly to 10.1% in 2005 and by 2007 had declined by a percentage point to 9.2%. In comparison, women in the US accounted for 51% of all workers in high-paying management, professional and related occupations in 2007.

Women’s plight in Japan is reflected again in a wide gender pay gap. A 2007 report called “Gender Equality in Japan” published by the Japanese Government looked at the pay of male and female salaried workers who worked full-time across the year, drawn from 2004 data. It found that 65.5% of the women workers earned ¥3 million (approximately US$30,000) or less compared to only 20% of the male salaried workers. Further, 16.4% of the women workers made ¥1 million (about US$10,000) or less and only 2.3% of the men were in this pay bracket. At the higher pay scale, only 3.4% of the women made more than ¥7 million (about US$70,000) while almost one quarter of the men did.

“The percentage of managers in Japan who are women was 6.6% in 1985, rose very slightly to 10.1% in 2005 5 and by 2007 had declined by a percentage point to 9.2%.”

Japan is failing to use half of its talent pool and realise a healthy gender balance in the management ranks of company life. This affects team performance and capability. There are many studies from Catalyst and McKinsey, for example, which have shown the correlation between gender balance at the top of organisations and their performance. In Japan, the situation is especially dire in this regard. Look at any leadership team on a Japanese corporate website and you are likely to see rows of male faces staring back at you.

Companies are trying to address this issue but the representation of women at senior levels remains low. For example, in one major Japanese electronics firm in 2008, only 170 managers out of 11,000 were women. In 2000, the number was a staggeringly low 24, so the trend was at least a positive one, thanks to the recognition from top management that something had to be done. But it still meant that after several years of diversity initiatives, only 1.5% of the company’s managers were women.

At Procter & Gamble (Japan), a 2007 company report called “Leveraging the Power of Diversity” showed that while 62% of the whole workforce was made up of women, only 33% of managers on the fast track were comprised of women managers. In other management ranks, this ratio declined further to 26% to 27%.

There are encouraging signs that Japanese executives have recognised the urgent need to attract and retain women talent. Aya Iinuma, a Principal at the Tokyo office of the global headhunting firm Heidrick & Struggles has spotted a trend in the last few years in which Japanese multinationals such as Toyota have become much keener to attract women into their executive teams. “Even in the current economic environment, we see many clients continuing to try to hire female executives, while they are imposing a hiring freeze in most other positions.” She says that Toyota plans to hire at least five women as General Managers in the next five years.

“…not all is necessarily doom and gloom if Japan can make better use of its most underutilized resource: its women.”

The second reason why the under-utilisation of female talent in Japan matters is related to the predicted shortage of labour as the country’s population starts to decline. The population of Japan is peaking at about 127 million and is predicted to start declining in the next decade, owing to consistently low birthrates. More Japanese women are choosing to remain single. The ratio of unmarried women between the age range of 24-29 more than doubled from 24% in 1980 to 54% in 2000. Current forecasts predict that the population will fall to 122 million by 2020, 115 million by 2030, and then drop further to 95 million by 2050.

The result is that the quantity of people of working age is shrinking. Within 30 years, there may be two workers in Japan for every retiree. There is an obvious answer to this problem. A Goldman Sachs report written in 2005 by the bank’s Chief Japan Equity Strategist Kathy Matsui calculated that Japan could lift its trend growth GDP from 1.2% to 1.5% if it brought increasing numbers of women into the workforce. “Conventional wisdom suggests that a shrinking population is unambiguously negative for economic growth, therefore, making Japan an unattractive destination for long-term equity investment. Yet, in our opinion, not all is necessarily doom and gloom if Japan can make better use of its most underutilized resource: its women.”

“The government has also improved matters in favour of women by changing the tax code in 2004, eliminating special dependent exemption.”

So, what’s happening to change things in Japan today? Both government and corporations could do much more to attract women into the workforce and keep them there. The government has made some important changes. For example, it introduced the Equal Employment Opportunity Law in 1985 (effective from 1986), which prohibited discrimination against women in employment and urged employers to treat women equally in terms of recruitment, job assignment and promotion.

Some claim that the law lacks teeth in spite of some revisions. The OECD has said, for example, that discrimination plays a “significant” part in preventing women from progressing in the workforce. It says that the law needs to be improved to give women more help in building a strong case, particularly as it is up to the plaintiff to prove that there has been discrimination before the courts. In some OECD countries such as the US, equality bodies with strong investigative resources are allowed to help plaintiffs build a case. In Japan, the plaintiff is left to do this alone and must rely on the full co-operation of the company being acted against.

The government has also improved matters in favour of women by changing the tax code in 2004, eliminating a special dependent exemption. Previously, the head of a household could claim both a dependent exemption as well as a special dependent exemption for a wife as long as she earned an annual income of less than ¥1.03 million. After the special dependent exemption was eliminated, this disincentive to work was taken away.

The government can also help by making sure the nation provides good childcare facilities for working mothers. The Goldman Sachs report noted that the proportion of Japanese children at daycare centres stood at just 13% for children under the age of three and 34% for those between three years and the mandatory age for enrolment in school. The respective ratios in the US were 54% and 70%. Goldman Sachs also noted that the government could help by relaxing some of the immigration rules to enable foreign workers to enter Japan as nannies, a much more affordable option for most Japanese women than having to hire Japanese workers for the same role.

“Japan’s approach to the gender issue is reminiscent of approaches tried elsewhere. They focus very much on women, and neglect to focus equally on the corporate cultures and management mindsets that must evolve in parallel.”

Companies can also do a great deal by encouraging women through various standard gender diversity initiatives such as setting up women’s networks or providing flexible work options as well as child care facilities. But Japanese business leaders have to look into the negative impact of the ‘salaryman’ corporate culture of long hours at work and many evenings spent drinking with the boss if they seriously expect to encourage women to manage work and life.

Japan’s approach to the gender issue is reminiscent of approaches tried elsewhere. It focuses very much on women, and neglects to focus equally on the corporate cultures and management mindsets that must evolve in parallel. As elsewhere, the challenge is to convince companies and managers that it is in their own best business interests to have more gender balance in leadership.

For this to happen, long ingrained societal attitudes need to change too. The Japanese Government report, Gender Equality in Japan, referred to an opinion survey gathered in 2003-2004 which asked people to agree or disagree with the following statement, “The husband should be the breadwinner; the wife should stay at home”. Some 41.2% of respondents agreed with this statement (some strongly, some less so) compared with 18.1% in the US.

More encouragingly, the same report showed that attitudes in Japan were becoming more progressive. Men who supported uninterrupted work for women had risen from 20% to 40% between 1992 and 2007. At the same time, according to data collected in 2001, Japanese men seemed more averse to doing any work around the house than their counterparts in other countries, even when their wives were working. In a 24-hour period, Japanese men said they did 24 minutes of work in the house; American men said they did two hours’ worth.

Also, Japanese companies need to have more women role models, says Heidrick & Struggles’ Aya Iinuma. But she has concerns that many business leaders have not tied their diversity programmes firmly enough to their business strategy. “Therefore, the activities of some companies tend to be superficial, making it difficult for them to fully utilise the value of women executives.”

“…the activities of some companies tend to be superficial, making it difficult for them to fully utilise the value of women executives.”

Some people will argue that in the current economic mess, it is better for business leaders in Japan, and elsewhere, to focus on the immediate issues of how to survive and rebuild. Cutting jobs seems to be more of an issue that managing new talent. However, smarter leaders know that the real test of the current economic climate is shaping new answers to the old questions of building successful enterprises. There is no doubt that one of the new answers has to be the inclusion of much greater numbers of talented women at the top of companies to steer them onto to a fresh course.

This has to be an issue for Japanese corporations, which have so far been so overwhelmingly run by men. The OECD recently stated that Japan’s underemployment of women is a “considerable waste of valuable human resources, which needs to be addressed urgently”. Some progressive leaders such as Carlos Ghosn at Nissan are acting in positive ways, recognising that having women in their sales forces, for example, will make an impact on the bottom line. Indeed, the company has put a woman executive, Fumiko Hayashi, in charge of its auto sales in Japan. But more deep-seated change will require concerted action from more than a handful of leaders to really revolutionise things in Japan.

• Womenomics: Japan’s Hidden Asset (2005), Kathy Matsui, Goldman Sachs.
• Procter & Gamble report, Leveraging the Power of Diversity, Vol. 3, 2007.
• US Department of Labor.
• LABORSTA database, OECD.
• OECD Employment Outlook, 2008 – How Does Japan Compare?
• “Japan: The Glass Ceiling Stays Put”, Business Week, May 2, 2005.
• Japanese Ministry of Internal Affairs and Communications.
• Gender Equality in Japan, Gender Equality Bureau, Cabinet Office, Japan, 2007.