As Abe Takes Japan's Reins, Focus on the Women: William Pesek

As Abe Takes Japan's Reins, Focus on the Women: William Pesek
By William Pesek

Sept. 29 (Bloomberg) -- Hearing Japan's new leader, Shinzo Abe, say he would like to build on his predecessor's economic successes was music to investors' ears.

``Some people say it would be better to give the reform a rest or modify it, but I'd like to accelerate and reinforce it,'' Abe said this week, as he succeeded Junichiro Koizumi as prime minister of the world's No. 2 economy.

The bad news is that Abe, 52, offered no specifics on how he would do that. Nor did he mention which of Koizumi's policies he views as vital to lick deflation once and for all. Abe also remained vague about which of Koizumi's neglected upgrades he plans to tackle.

Japan is surely back from the crises of the 1990s, and Koizumi, 64, deserves some credit. Thanks also to China's boom and private-sector restructuring, the economy is more competitive, incomes are rising and companies are hiring again.

Yet Abe's to-do list is a daunting one that will require considerable attention. It includes reducing Japan's mountain of debt, increasing productivity, boosting entrepreneurship, shoring up the pension system and better utilizing the female workforce.

This last task -- empowering women -- is a bigger issue than meets the eye as Abe takes the reins. While feminists may be miffed that Abe's Cabinet includes just two women, they may be cheered by the importance of the two positions he has entrusted to women.

Take Hiroko Ota, 52, is assuming many of the responsibilities performed by Heizo Takenaka as economy czar. While much attention has been paid to Abe's selection of Koji Omi as finance minister, Takenaka's work as state minister in charge of economic and fiscal policy gets far more credit for Japan's current growth than officials at the Finance Ministry.

`Takenaka II'

Ota's appointment ``looks like a Takenaka II role, as she is an academic with a specialization in public policy,'' said Richard Jerram, chief Japan economist at Macquarie Securities Ltd. in Tokyo. While Ota faces an uphill climb, she is a non- ideological economist untainted by years of political maneuvering.

Abe named Sanae Takaichi, 45, as state minister for a variety of areas, including innovation, the declining birthrate and gender equality. She is a member of Japan's lower house and was a vice minister of economy and industry in the Koizumi administration.

As Japan struggles to bring its long-awaited recovery to the next level, Ota and Takaichi may be Abe's key Cabinet choices.

Ota, like Takenaka before her, is charged with zeroing in on impediments to Japan's growth potential. Whether it be prodding regional banks to dispose of bad loans as aggressively as large ones, encouraging companies to boost productivity or mulling how to close the gap between rich and poor, Ota's work is pivotal.

Empowering Women

Takaichi also will address issues at the core of why Japan isn't growing faster than the annual 1 percent seen in the second quarter or why stocks aren't skyrocketing. While there's plenty of innovation at companies, Japan lacks a thriving, entrepreneurial spirit. Stimulating it requires a major push in the private and public sectors.

An equally important focus must be on working harder to tap the vast female workforce. While women have made great strides since laws were passed in 1986 to protect them in the workplace, Japan still has one of the lowest rates of female participation in politics among developed nations.

What's more, corporate Japan's failure to fully utilize one half of the workforce holds back growth.

Deeper Pool

In the 1990s, the ruling Liberal Democratic Party tried building roads, bridges, dams and just about anything else to stimulate growth. Politicians bailed out loads of deadbeat companies and pumped countless amounts of yen into banks that supported profitless ventures. All of this was financed with government debt.

Japan has been slow to try something that many international economists say might do far more to boost growth: letting more women into the executive suite, or at least allowing them to climb higher on the corporate ladder. Picking from a deeper and more diverse labor pool could boost growth and productivity.

Again, things are improving. Companies such as Daiei Inc. and Sanyo Electric Co. are now run by women, and Japan Inc.'s concrete ceiling has been replaced with something closer to glass. Even so, how often does the Organization for Economic Cooperation and Development urge a developed nation to provide women with more opportunities to boost growth? In recent years, the OECD has done just that with Japan.

Sexism's Costs

Sexism also worsens Japan's demographics. Thanks to a declining birthrate, Japan's population actually fell in 2005. A continuation of the trend would complicate efforts to fund the national pension system and may lead to even more government-debt issuance.

One reason for Japan's low birthrate is the corporate culture. For all too many well-educated, ambitious Japanese women, having children remains a career-ending decision.

Delaying childbirth may be considered a form of rebellion by career-minded women against societal expectations to have kids and become housewives. With investments, tax initiatives and some fresh thinking, Japan could reduce the cost of daycare and childrearing, and reverse the trend.

And so, investors wondering when the economy will reach its full potential might be wise to keep their eyes on Japan's women -- especially the two Abe chose.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

Last Updated: September 28, 2006 15:35 EDT