Japan's labour market holds lesson for the Fed: Women can surprise

Shift in policies, social norms sees female employment rising and bigger labour force

Japan’s economy has rocketed into the headlines in 2024 as inflation returns for the first time in decades, workers win wage gains and the Bank of Japan raises interest rates for the first time in 17 years.

But there is another, longer-running trend happening in the Japanese economy that could prove interesting for policymakers in the United States: Female employment has been steadily rising.

Working-age Japanese women have been joining the labour market for years, a trend that has continued strongly in recent months as a tight labour market prods companies to work to attract new employees.

The jump in female participation has happened partly by design. Since about 2013, the Japanese government has tried to make both public policies and corporate culture more friendly to women in the workforce. The goal was to attract a new source of talent at a time when the world’s fourth-largest economy faces an ageing and shrinking labour market.

“Where Japan did well over the recent decade is putting the care infrastructure in place for working parents,” Ms Nobuko Kobayashi, a partner at EY-Parthenon in Japan, wrote in an e-mail.

Still, even some who were around when the “womenomics” policies were designed have been caught off guard by just how many Japanese women are now choosing to work thanks to the policy changes and to shifting social norms.

“We all underestimated it,” said Dr Adam Posen, president of the Peterson Institute for International Economics, who advised the Japanese government while it was instituting the policies meant to bring on more female workers.

Dr Posen thought at the time that they might be able to get perhaps 800,000 women into the labour market, far fewer than the roughly three million who have actually joined (albeit many of them are part-time).