Is “Abenomics” Helping to Increase Female Labor Participation in Japan?

Shinzo Abe has been in power in Japan since the end of 2012, giving us a reasonable time frame within which to review the impact of his economic policies, popularly known as “Abenomics.”

Soon after taking office, Abe initiated reforms that included a large fiscal stimulus, monetary easing and structural reforms, some of which have aimed to improve the country’s historically low female employment rates and labor force participation.[i]

The recent trends in the activity rate (labor force participation) and the employment rate of Japanese women in the age group 15 to 64, have indeed received positive media attention, with analysts comparing the female labor force participation of Japan with that of the US.

As demonstrated by the graphs above, Japan’s female labor force participation has been growing steadily since 1975, with a sharp increase in growth after 2012. The employment rate, which had been flat between 1992 and 2002, started growing for the following ten years, recording a sharp increase in growth after 2012.

The corresponding numbers for males in Japan show high activity and employment rates, though the latter has shown a slightly downward trend for some time. Both male trends show the effects of business cycles, conspicuously absent for female workers.

As the employment and activity rates for men are already quite high in Japan, there is limited scope to further increase the number of men participating in the economy. So in order to significantly increase the total size of Japan’s workforce, there must be an increase in women’s participation in the labor force.

The increase in monetary supply combined with positive sentiment appears to have led to growth in businesses and increased job creation – which in this case is drawing more women into the labor force.

All this is happening at just the right time, since rapidly aging Japan needs a sharp and sustained increase in its workforce to support its rapidly ageing population.

It looks like there is something to be said for the monetary easing put in place by Shinzo Abe. But while the signs are positive, it’s still too early to say if Abenomics can drag Japan out of its two decades of economic problems.

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[i] More on Abenomics: http://lexicon.ft.com/Term?term=abenomics

[ii] OECD, “Main Economic Indicators – complete database”, Main Economic Indicators (database),http://dx.doi.org/10.1787/data-00052-en (Accessed on 09/10/2015)Copyright, 2014, OECD. Reprinted with permission.
Source: Organization for Economic Co-operation and Development
Release: Main Economic Indicators

[iii] OECD, “Main Economic Indicators – complete database”, Main Economic Indicators (database),http://dx.doi.org/10.1787/data-00052-en (Accessed on 09/10/2015)Copyright, 2014, OECD. Reprinted with permission.
Source: Organization for Economic Co-operation and Development
Release: Main Economic Indicators