RIETI Report May 2015

Making Japan a place where women can shine

Economic growth in Japan has been limited due to a labor shortage and low productivity growth. The average economic growth rate in the total economy was 0.94% per annum for the period 1990-2011, a substantial decline from 4.53% per annum in the period 1970-1990, and was caused mainly by a negative labor service input growth and a sharp decline in total factor productivity growth. In the May issue of the RIETI Report, we present the column "Making Japan a place where women can shine" by Faculty Fellow Tomohiro Inui, Makiko Nakamura (Keio University), Kazuma Edamura (NISTEP), and Junko Ozawa (Cabinet Office), and originally posted on the VoxEU.org website.

Inui et al. look at the Abenomics policy, of which a major component is "Womenomics" which has the goal of increasing the female labor participation and boosting the percentage of women in leadership positions to 30% by 2020. Achieving sustainable economic growth requires more efficient use of Japan's labor force, and a problem that the country faces is an insufficient effort in utilizing the abilities of its highly educated female workers in particular. Looking at studies from other countries, there is a positive relationship with an open culture toward diversity and innovative performance, among other findings. However, new studies from Japan suggest that board diversity is not associated with innovation across firms in general, but that if the firm already has the management skills, then diversity helps it become more innovative. Finally, Inui et al. discuss the Japanese government's effort to attract foreign firms, especially from countries with less gender bias, which may contribute to increasing the chance for Japanese firms to learn diverse management techniques and increase innovative performance through management spillover.

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This month's featured article

Making Japan a place where women can shine

EDAMURA Kazuma Research Fellow, NISTEP

INUI TomohikoFaculty Fellow, RIETI

NAKAMURO Makiko Associate Professor, Keio University

OZAWA Junko Cabinet Office

"Japan is becoming a super-ageing society, even as the number of children is falling. You might find yourself asking, ‘In such a country, where will you find those innovative and creative human resources?’ Ariana Huffington once said that if Lehman Brothers had been ‘Lehman Brothers and Sisters,’ the firm would have survived. Japan's corporate culture, by contrast, is still one of pinstripes and button-downs. After all, the female labour force in Japan is the most under-utilised resource. Japan must become a place where women shine. By 2020 we will make 30% of leading positions to be occupied by women."

—Shinzo Abe, Prime Minister of Japan, World Economic Forum Annual Meeting Speech, 22 January, 2014

The recent bottleneck facing Japanese economic growth is the labour shortage and low productivity growth. According to the growth accounting results from the Japan Industrial Productivity Database for 2014 by the Research Institute of Economy, Trade and Industry, average economic growth rate in the total economy (excluding housing and activities not classified elsewhere) was 0.94% per annum for the period 1990-2011, a substantial decline from 4.53% per annum in the period 1970-1990. This large decline in economic growth over the recent two decades was caused mainly by the negative labour service input growth and the sharp decline in total factor productivity (TFP) growth. The average labour service input growth rate was 1.17% per annum during 1970-1990, and -0.04% per annum during 1990-2011. With regard to TFP, the average growth rate slowed from 1.76% per annum during 1970-1990 to 0.20% per annum during 1990-2011.

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