This is another of an occasional series from The Globe and Mail's Brian Milner, who visited Japan to assess the results of dramatic efforts to revitalize the world's third-largest economy.
As Japanese Prime Minister Shinzo Abe affirms his determination to get more women into the work force and the decision-making levels of business and government, including his own cabinet, Kathy Matsui finally sees some light at the end of a long, dark tunnel. Goldman Sachs' chief Japan strategist coined the term "womenomics" 15 years ago to highlight the importance of putting more women to work to counter the effects of an aging, shrinking population, and reckons that closing the gender gap could boost GDP by as much as 13 per cent. For her efforts, Ms. Matsui, 49, an American who has worked in Japan for more than 24 years, was recently included on Bloomberg Markets' list of the 50 most influential people in the world of finance, investing and economics.
You have been talking about the critical issue of women in the labour force for a long time. Mr. Abe seems to get it, even citing your research on womenomics.
It is really the first time that we've seen the Japanese government elevate this issue to a level of national priority. I think it's because the demographic realities are very real. … The reality of the job market has propelled the government to say: 'What can we do to alleviate these demographic headwinds?' Which is, I think, why they've decided to at least discuss ways to improve female labour participation.
What is the female participation rate?
It's about 63 per cent. It's actually climbed in recent months. But note that a lot of these women are working in part-time jobs, so there's quite a disparity in terms of wages earned and benefits.
In terms of getting more women into the work force, what specifically do you like about the government's latest moves?
The old stuff is pretty much the same, like expanding daycare, stuff like that.
So what's new?
There's a distortion in the current tax regime. Let's say you're the head of household for a typical Japanese family. The income tax structure is such that if your spouse earns more than roughly $10,000 (U.S.) equivalent per annum, the husband can no longer deduct her for his income tax purposes. This government finally said: Is this a system that is discouraging married women from working full-time? Which, they've now discovered, it is. So why don't we make the system more neutral? So whether you decide to be a stay-at-home mother or work outside the home full-time, you're not going to get penalized by the tax regime. Now, this is not a 100 per cent done deal. But at least the government is now working very hard to try to neutralize the system.
Anything else?
We know female representation in positions of leadership is very small. But it's also, frankly, very hard to measure, because the statistics are hard to find. Prime Minister Abe decided this is unacceptable. So starting next April, they will require public companies to disclose at least the general representation of their boards. Given that women only make up 1 per cent of all the directors in this country, it will take about five minutes for most companies to fill out that form. But at least this is a start.
What's your assessment of the government's record in other areas?
We think that Abenomics is mainly working. Although there is enormous skepticism about the so-called third arrow [of structural reforms], there are elements of their reform agenda that have been underappreciated. They have started to overhaul what we view to be quite a distorted and inefficient tax system.
You have also cited governance reforms as critical for investors.
The fact that the [stock] market is cheap doesn't matter if companies don't care about shareholder value, which has been a long-standing issue for many investors. But now that it has become part, almost, of the national growth agenda to improve corporate governance, to improve capital efficiency, to lift RoEs, that makes this a very interesting story for investors globally.
It's important, because Japanese institutional investors have been the silent majority. And now they're being told by the government: "You can't stay silent any more."